Making Sense of Levelized Costs

Levelized costs are a convenient way to compare the costs of various forms of future electrical generation. Similar to a mortgage payment, levelized costs represent the present value of the total cost of building and operating a generating plant over its financial life, converted to equal annual payments. These data are most useful in comparing technologies that can produce electricity at any time of the day or night and can supply that power continuously, like coal-fired, natural gas combined cycle, and nuclear power plants. Levelized costs are less useful for comparing intermittent forms of electrical generation such as wind and solar, overstating their value compared to more reliable sources of generation.