Levelized Costs of New Generation Resources in the Annual Energy Outlook 2025

This paper presents average values of levelized costs for electric generating technologies entering service in 2030 as represented in the National Energy Modeling System (NEMS) for the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2025 (AEO2025) Reference case. Levelized cost of electricity (LCOE) is the estimate of the revenue required to build and operate a generator over a specified cost recovery period, and levelized avoided cost of electricity (LACE) is the revenue available to that generator during the same period. The paper also includes estimates for the levelized cost of storage (LCOS) in addition to LCOE and LACE. All three values estimate the factors contributing to the capacity expansion decisions we modeled, which also consider policy, technology, and geographic characteristics that are not easily captured in a single metric.

The build decisions in the real world and as modeled in AEO2025, however, are more complex than a simple LACE-to-LCOE/S comparison presented in the paper because they include factors such as policy and non-economic drivers. Nevertheless, the value-cost ratio (the ratio of LACE-to-LCOE/S) provides a more intuitive framework for understanding economic competitiveness between generation technologies in the capacity expansion decisions than is possible using either LCOE/S or LACE metric individually.

Both a capacity-weighted average based on projected capacity additions and a simple average (unweighted) of the regional values across the 25 U.S. supply regions of the NEMS Electricity Market Module (EMM)1 are provided, together with the range of regional values.

Footnotes

1The map of EMM regions is available at https://www.eia.gov/outlooks/aeo/pdf/nerc_map.pdf.