Levelized Cost of Energy — LCOE
Technical
LCOE, or Levelized Cost of Energy, is the weighted-average cost to produce one kilowatt-hour of electricity over a system's economic life, in units of Rp/kWh or USD/kWh [NREL, LCOE Methodology, 2023]. Its basic formula: LCOE = (CAPEX + Σ OPEX yr_n / (1+r)^n) ÷ (Σ Energy yr_n / (1+r)^n), where r is the discount rate and n is the operating year.
LCOE is the primary metric for comparing the production cost of electricity across technologies — PLTS versus PLN, PLTS versus a diesel genset, or rooftop PLTS versus industrial PLTS — on an equivalent basis.
The strength of LCOE as a metric lies in its ability to consolidate all costs into a single per-kWh figure that can be compared directly with the electricity tariff. For Indonesian residential on-grid PLTS, LCOE is calculated from three main components: (1) upfront CAPEX — panels, inverter, mounting, installation, permitting; (2) annual OPEX — operation and maintenance (O&M) plus inverter replacement in years 10 to 12; and (3) the total energy produced over the service life, discounted to present value.
Based on SolarPlanner methodology data — residential CapEx of Rp 11-15 million/kWp, O&M at 1% of CapEx/year, a performance ratio of 0.80, a default PSH of 4.5 kWh/m²/day, a discount rate of 7%, and a 25-year system life — the LCOE of Indonesian residential rooftop solar is in the Rp 900-1,250/kWh range. This range is consistent with the IRENA Renewable Power Generation Costs 2023, which records a global utility-scale solar LCOE of USD 0.044/kWh (roughly Rp 735/kWh) rising to a higher residential range due to smaller scale and proportionally larger BOS cost [IRENA, 2024].
For comparison, the non-subsidized PLN R-1 tariff for Q1 2026 was set at Rp 1,444.70/kWh [PLN tariff adjustment Q1 2026] — above the upper end of the residential PLTS LCOE range. This gap is the basis for electricity bill savings over the system's life.
Indonesian PLTS Application Example
A textile manufacturing facility in Surabaya (PSH 4.9 kWh/m²/day [NASA POWER 1984-2023]) installing a 200 kWp PLTS system with CapEx of Rp 9-12 million/kWp (industrial scale) and more efficient O&M can reach an LCOE in the Rp 670-900/kWh range — below the PLN I-2 tariff (Rp 972/kWh) and well below the I-3 medium-voltage off-peak rate (Rp 1,035.78/kWh) [PLN tariff adjustment Q1 2026]. Under a PPA or BOO scheme, this LCOE value becomes the basis for negotiating the electricity sale tariff between the provider and the tenant.
Sources & References
- NREL, Levelized Cost of Energy (LCOE) Methodology, nrel.gov, 2023 (2023)
- IRENA, Renewable Power Generation Costs in 2023, irena.org, 2024 (2024)
- PT PLN (Persero), Tariff Adjustment Q1 2026 (2026)
- NASA POWER LARC, Surface meteorology and Solar Energy, climatology 1984-2023 (1984-2023)
See Also
Performance Ratio
(PR)Performance Ratio, or PR, is the ratio between the actual electricity produced by a solar PV (PLTS) system and the theoretical energy it should produce at STC conditions with the same irradiance. PR is a system-quality indicator commonly used by EPCs and IPP developers to monitor PLTS performance over its operating life.
Derating Factor
The derating factor is a reduction factor that makes a solar PV (PLTS) system's actual output lower than its nominal STC capacity. Derating covers cell-temperature losses, surface soiling, module mismatch, DC and AC cabling, and inverter efficiency. For Indonesia's tropical climate, the combined derating is usually in the 80-85% range.
PPA
(Power Purchase Agreement)PPA, or Power Purchase Agreement, is a long-term electricity sale-and-purchase agreement between a solar PV (PLTS) developer (developer/IPP) and an electricity user (off-taker), in which the off-taker pays a per-kWh tariff for the electricity consumed — rather than buying or owning the solar panel system.