Deciphering LCOE: The Path to Wise Solar Energy Choices

In a market more and more competitive, in which the offer of solutions to customers becomes very diverse from the perspective of equipment options, topologies and services, a question becomes increasingly recurring: How to decide which is the best option?

I have already mentioned on other occasions that the process de sales has giant emotional background, however, seeking “rational” indicators that serve as a guide for decision-making is extremely important and, in this context, the LCOE presents itself as a “hardware” indicator viability and also as a comparative basis between “apple x banana”.

But before we talk about this, it is important to emphasize that the analytical aspectss that I will present consider the acquisition of a photovoltaic system as a investment, disregarding other factors that in themselves would make you “sign the contract” today, such as gain more autonomy for the generation and consumption of energy and take part a world every time more connected in which electrical energy is the basic input for almost 100% of our daily activities.

In addition to participating in a necessary and irreversible process de change our energy matrix, in which clean and renewable sources are gaining more and more relevance, and decrease os environmental impacts growing energy consumption or even increase the value of your assets by installing a solar energy system.

And, speaking of investment, it is necessary to know that the best investment is the one who deliver higher revenues, with lower costs and lower risks, as represented below:

But after all, what is LCOE? From the English Livelized Cost Of Energy, LCOE is the acronym to represent the levelized cost of energy or, in other words, the value of each kWh over the period in which an energy generating system is in operation.

To arrive at this value, simply consider all the costs that will arise over time divided by the amount of energy that will be produced in that same period. And when we talk about all the costs, we must consider all the values ​​involved in the acquisition and commissioning of the system (CAPEX) and everything that will be used over the years for operation and maintenance (OPEX).

In a hypothetical example, you decide to invest in a photovoltaic solar energy system that will cost R$10.000,00 already installed. This same system has a projection of operating costs of 0,5% per year which, over the next 25 years, will represent R$1.250,00. The total cost of this system will be R$11.250,00. Installed on your roof, this system will produce the equivalent of 18.000 kWh over 25 years.

The LCOE of this system will be calculated as follows:

LCOE= R$ 11.250 / 18.000 = R$ 0,62/kWh

In other words, each kWh generated by your hypothetical photovoltaic system will cost R$0,62. If we create a comparative scenario, considering that the value of kWh you pay on your electricity bill is R$0,89, in this hypothetical example, each kWh generated by your photovoltaic system costs 30% less than the amount paid to the distributor of energy, in present value.

If you understand what LCOE is and how it is used to analyze the viability of the investment, it will be simple to understand which factors impact to make the kWh of your photovoltaic system increasingly cheaper, generating the best cost-benefit ratio for your investment. , which will allow you to make the best decision given the various options that will be presented to you.

Below, I list the main considerations you should make to make the best decision, based on your system's LCOE:

1. Look for the best equipment, not the cheapest

Paying cheaper up front does not mean paying cheaper over time. Low quality equipment has higher operating costs and lower energy generation capacity, which will make your kWh more expensive and bring you less savings.

2. The quality of services is a key factor in the success of your investment

There will be no point in purchasing good equipment if the design and installation of your system are not of high quality and do not meet technical and safety standards. Always look for companies with qualified professionals, with a good portfolio of facilities or good marketing references and that work with partner companies with an excellent reputation and high added value.

Good quality services generate a significant reduction in the operating cost of your system and make it perform better, generating more energy.

3. Equipment warranty makes all the difference

If your photovoltaic system will last at least 25 years producing energy, the longer the equipment warranty, the lower your expenses will be over that period. In addition to solar s, count on the best guarantees for inverters / microinverters / optimizers of power is essential for the profitability of your investment.

And of course, in addition to a long warranty, it is essential that the installation company that will serve you has a distributor that offers a local warranty, as is the case with Ecori with APsystems microinverters, which is fully serviced here in Brazil. . Can you imagine 10 years from now needing to the manufacturer of your equipment somewhere in the world to request the warranty? It's better not to imagine and take precautions so that this isn't necessary.

4. Better technology = Greater profitability

Always look for equipment that features high technology, such as APsystems microinverters or SolarEdge power optimizers, which will not become obsolete quickly. With the rapid technological development of this frequently expanding market, relying on high technology is synonymous with cost reduction and increased revenue, all with less risk.

5. Always look for a company that offers you consultative sales

Currently, everyone already knows that investing in a solar energy system is extremely viable. What perhaps not everyone knows is that solar energy is not all the same and there are countless possibilities for your system to be the best possible for your needs.

In this context, it is necessary that you look for companies that will not simply make you a sale, but, far beyond that, will identify your needs, your pains, to present you with the best solution.

The best and most profitable solution is the one that meets your needs and not always the one that the seller says is the best without any justification.

6. Treat security as a non-negotiable value

Are you willing to take on huge liabilities and put your investment at high risk? I believe not and that is why I categorically state that, for an energy generating system, as is the case with photovoltaic systems, safety cannot be negotiated.

Since you intend to make your generated kWh as cheap as possible, it is not acceptable to increase your risks and operational costs due to a lack of electrical, technological and/or regulatory security.

A high level of security and compatibility with current standards represents, in practice, a better LCOE. You will come across countless proposals for installing your solar energy system and knowing how to decide in a conscious and rational way, using the LCOE to define which is the best among all the options, will make your choice an easier, more assertive and safe.