Levelized Cost of Energy (LCOE)

Levelized Cost of Energy (LCOE) is the average cost of generating one kilowatt-hour of electricity over the entire lifetime of a solar system, accounting for all costs including installation, financing, maintenance, and panel degradation. It is the most widely used metric for comparing the cost of different energy sources.

LCOE is calculated by dividing the total lifetime cost of the system by the total lifetime energy production. For residential solar in the US, LCOE typically ranges from $0.04 to $0.08 per kWh (after the federal tax credit), which is significantly lower than the average retail electricity rate of $0.16/kWh. This means solar electricity is 50–75% cheaper than grid electricity in most markets — the fundamental economic driver behind solar adoption. LCOE allows an apples-to-apples comparison between solar, wind, natural gas, coal, and other energy sources. As of 2026, utility-scale solar has the lowest LCOE of any new electricity generation source in the US. For homeowners, your personal LCOE depends on your system cost, financing terms, local sun hours, and system lifespan. A lower LCOE means a better long-term investment.