Definition and Solar Context
Levelized Cost of Energy (LCOE) is a standardized measure of the average net present cost of electricity generation for a generating plant over its operational life. In residential solar analysis, LCOE represents the all-in cost of a solar system per kilowatt-hour produced.
GetSunScore applies LCOE as a central metric in the SunScore™ Projection Engine to allow for direct economic comparison between solar generation and grid-supplied power.
What Does LCOE Mean?
LCOE is calculated by dividing the cumulative lifecycle costs of an energy system (including capital, installation, operation, and maintenance) by its total estimated energy output. The result is expressed as a cost per unit of energy (Typically cents/kWh).
By normalizing costs across the systems' lifetime, LCOE provides a metric for evaluating energy projects with divergent cost structures — such as solar (high upfront capital, low operating cost) versus traditional grid power.
Why LCOE Matters in Modeling
LCOE is the primary metric for assessing long-term solar value within the SunScore™ Projection Engine. The framework uses LCOE to determine the effective rate a homeowner pays for solar power compared to their current Utility Rate Structure.
This metric accounts for variables such as the Federal ITC, Solar Degradation Rate, and georeferenced irradiance. A lower estimated LCOE reflects a more favorable economic scenario for solar adoption over the modeled 20-year period.
How LCOE Applies in Texas
In Texas, achieving a favorable solar LCOE is supported by high annual solar irradiance and a competitive installation market. The SunScore™ Projection Engine calculates territory-specific LCOE across Texas by applying localized irradiation data to benchmark installation costs.
When the modeled solar LCOE drops below the retail rate offered by Texas REPs, the territory is considered to have surpassed the Grid Parity threshold. LCOE analysis is a core pillar of the institutional data provided on this platform.
Frequently Asked Questions
LCOE represents the per-kilowatt-hour cost of electricity generation over a system's life. It allows for direct cost comparison between different energy technologies, such as solar versus grid-supplied electricity.
The SunScore™ Projection Engine calculates LCOE by dividing total system costs (net of incentives) by estimated total energy output over a 20-year operational period. Output estimates account for the Solar Degradation Rate.
LCOE for residential solar in Texas varies based on installation cost, system size, and local irradiance. High-irradiance areas in Western Texas Typically achieve lower modeled LCOE figures than areas with less annual sunlight.
Yes. The Federal ITC reduces the net cost of the system, which lowers the LCOE. SunScore™ models apply the ITC as a cost-reduction variable to produce a more accurate estimated LCOE scenario.
Grid parity is achieved when the solar LCOE equals the retail electricity rate. Achieving an LCOE below the retail rate indicates that solar generation is effectively cheaper than grid-purchased power over the modeled period.
LCOE figures represent modeled net present value estimates based on publicly available data (reference year: 2024). Results are non-binding projections.