According to the IEA and Our World in Data, among other sources, one way to calculate the per unit cost of solar power generation is to use the Levelized Cost of Electricity (LCOE). LCOE is the average cost per unit of energy generated across the lifetime of a new power plant. It considers the initial investment, operation, and maintenance costs, fuel costs, and expected lifetime of the plant.

To calculate the LCOE of a solar power plant, one needs to estimate the following parameters:

• The plant's capital cost (CC) is the total cost of building and installing solar panels, inverters, batteries, and other components.
• The plant's annual fixed operation and maintenance cost (FOM) is the cost of running and maintaining the plant, such as labor, insurance, taxes, and fees.
• The plant's annual variable operation and maintenance cost (VOM) is the cost of replacing or repairing parts, such as batteries, inverters, and panels.
• The plant's annual fuel cost (FC) is the cost of purchasing or producing the fuel needed to generate electricity, such as natural gas, coal, or biomass. For solar power plants, this cost is usually zero or negligible.
• The plant's annual electricity generation (EG) is the amount of electricity produced in a year, measured in kilowatt-hours. This depends on the plant's capacity factor (CF), which is the ratio of actual output to maximum possible output. The CF of a solar power plant varies depending on the location, weather, season, and time of day.
• The discount rate of the plant is the interest rate used to calculate the present value of future cash flows. This reflects the opportunity cost of investing in the plant versus other alternatives.
• The plant's economic lifetime (n) is the number of years that the plant is expected to operate.

Using these parameters, one can calculate the LCOE of a solar power plant using the following well-known formula:

For example, suppose a solar power plant has a capital cost of USD 1 million, a fixed operation and maintenance cost of USD 20,000 per year, a variable operation and maintenance cost of USD 5,000 per year, a fuel cost of zero, an electricity generation of 1.5 million kWh per year (assuming a capacity factor of 20%), a discount rate of 5%, and an economic lifetime of 25 years. Then, its LCOE would be USD 0.078 /kWh. This means that, on average, it costs USD 0.078 to generate one kWh of electricity from this solar power plant over its lifetime.

The LCOE can be used to compare different sources of electricity generation based on their costs and performance. However, it does not capture all aspects of electricity generation, such as environmental impacts, social benefits, system integration costs, or market dynamics. Therefore, other metrics and indicators may also be needed to evaluate different electricity generation options' overall value and competitiveness.

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