The concept of levelized costs is simply the rate at which you have to meter your product to recover your total costs over some timeline (usually the lifetime of your production facility).

Note that in the industry parlance for levelized costs is "Cost of Electricity" or COE.

All industry goals are to get down to at least 5 cents per KWH for a levelized cost so that particular technology can become competitive.

Levelized costs have three basic components:

• Capital costs land acquisition, manufacturing of devices, installation of devices. The generic ballpark is to achieve a capital cost of 1 dollar per 1 watt (e.g. 1 million dollars per megawatt).

• Fixed costs this is usually operational expenses and annual maintenance ( It is usually unclear if operational costs adequately factor in labor costs/benefits ).

• Variable costs this is usually related to various distribution costs if you have to import your fuel or energy source.

As you can see, the relative values of these 3 costs varies significantly with energy source. Some technologies can have an apparently low levelized cost if their production timescale is very long (e.g. coal).

No two credible sources usually give the same exact values for levelized costs for various technologies because the calculations are all done in a slightly different manner. However, usually the relative values (e.g. solar vs wind) are what one should look it. Below are some examples:

Often times, an assumed change in technology will occur to change the projection. This is usually done in the area of solar power where assumed efficiency gains can be achieved. While this is true in the lab, its unclear if this is true in the real world. By doing this, one can make solar appear competitive with wind.

But wind is somewhat difficult to do because there is an important potential dependence on transmission line costs - as those costs rise, so do the levelized costs. However, the same concern could be held about solar farms in remote locations.

Overall, wind does look very promising in terms of COE. This is because of the economy of scale associate with higher output turbines. Solar can't really compete with that in terms of significant increases in efficieny - at best there is about a 50% gain from current yields; unlike the factors of 5-10 gain in wind.

As a result, realistic projects of COE for solar do not approach those of wind but do approach reasonable values in absolute terms (e.g. about 10 cents per KWH).