According to Wikipedia, the levelized cost of electricity is a measure of the average net present cost of electricity generation for a generating plant over its lifetime. According to the formula given, the LCOE is calculated as the ratio between all the discounted costs over the lifetime of a electricity generating plant divided by a discounted sum of the actual energy amounts delivered.

$$LCOE=\frac{\sum\limits_t\frac{\text{cost in year }t}{(1+r)^t}}{\sum\limits_t\frac{\text{electricity produced in year }t}{(1+r)^t}} $$

While I can understand the need to discount the cost to bring the cost to net present value, it does not make sense why the amount of electricity should also be discounted. This is amount to saying that if it costs $1 today to make the unit electricity, the average cost is lower when the electricity is produced today rather than tomorrow. Is there an economic reason for doing the discounting for the denominator?


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