Annual Equivalency Analysis

• Annual equivalence analysis is one of the methods used to assess the financial viability of energy projects. It can help decision makers understand the cost structure of different energy generation technologies to make informed energy investment decisions.

• A method of converting cash flows at different points in time into equivalent annual flows to make it easier to compare the economic benefits of different investment projects.

Levelized cost of energy (LCOE)

• Levelized energy cost is one of the common metrics used to assess the financial viability of energy projects. It is defined as the price of energy at which the net present value of the investment is zero.

• Calculation of LCOE: Calculated by discounting capital and operating costs and dividing by electricity generation. This can help policymakers compare the cost-effectiveness of different energy technologies.

The difference between capital costs and operating costs

• The cost structures of different energy generation technologies vary. Some energy categories are dominated by fixed costs, while others are driven primarily by operating costs.