The levelized revenue represents the monetary value of a front-of-meter project with a power purchase agreement (PPA) over its life. It is the present value of the project's PPA revenue expressed in cents per kilowatt-hour of electricity generated by the system.
The project's PPA revenue is revenue from electricity sales at the PPA price with an optional annual escalation rate. The PPA price may be fixed, or it may come with a set of time of delivery factors to adjust it based on time of day and year. (PPA revenue does not include salvage value or production-based incentives.)
In general, the levelized nominal PPA price should be greater than the levelized nominal cost for a financially feasible project. As with the other financial metrics, always evaluate the metrics as a group: A financially feasible project should also have a positive net present value (NPV), and reasonable debt size, PPA price, and internal rate of return.
Equations for Levelized Revenue Calculations
SAM uses the real and nominal discount rates from the Financial Parameters page to calculate the present value of future annual revenue values.
Notes.
For a brief discussion of when to use nominal and real levelized values, see Real and Nominal Levelized Cost.
The energy term in the denominator of the equations below appears to be discounted because of the algebraic solution of the definition of the levelized price. See Levelized Cost Equations for details.
For the nominal levelized revenue, the nominal discount rate appears in the total energy output term:
Similarly, for the real levelized revenue (available on the Data page, under Single Values), the real discount rate appears in the denominator's total energy output term:
Where,
Qn (kWh) |
Electricity delivered by the system to the grid in year n.The first year output is reported in the Metrics table on the Summary page and in the year one column of the project cash flow. Year two and subsequent output is the first year output reduced by the amount specified for the degradation rate on the Degradation page. |
N |
Analysis period in years as defined on the Financial Parameters page. |
Rn |
PPA revenue from electricity sales in year n as defined above. |
dreal |
The real discount rate defined on the Financial Parameters page. This is the discount rate without inflation. See LCOE Definition for an explanation of discount rates in the levelized cost and PPA price calculation. |
dnominal |
The nominal discount rate shown on the Financial Parameters page. This is the discount rate with inflation. |
