Attachment 4: Figure of Merit - Cost of Energy 2026

Attachment No. 4

FIGURE OF MERIT – COST OF ENERGY

Distributed Wind Turbine Competitiveness Improvement Project 9/16/2026
This attachment describes the method and assumptions that shall be used to define and support economic figures of merit for wind turbines used in distributed applications, behind the meter. The figure of merit is levelized cost of energy (LCOE), calculated using National Laboratory of the Rockies (NLR) assumptions for conditions at a reference site. This figure of merit will be used to evaluate an improvement in technology; as such, costs not associated with the manufacturing of the wind turbine component/installation (i.e., profit, training, dealer fees) shall not be included in individual component costs, but rather in the “other” categories as defined below. There is an accompanying spreadsheet with all of these calculations embedded. Assumptions
NLR has made several assumptions to differentiate the LCOE for distributed wind turbines (DWT) from the basis of comparison used for large-scale utility wind plants as the typical wind resources, financing structure, and tax treatments are quite different. These assumptions shall be used for the reference site. Calculations that are made using other assumptions must clearly show which assumptions have been changed and their new values. 1.
2.

Annual average wind speed at hub height of 6.0 m/s with a Rayleigh distribution. Economic parameters: constant January 2026 dollars, Fixed Charge Rate (FCR) = 6.7%

Levelized Cost of Energy
The primary figure-of-merit is the LCOE, which is to be provided in constant, January 2026 dollars. LCOE is calculated for a wind power plant (or an individual turbine installation), using the following equation:

LCOE =

where:

LCOE

FCR
ICC
AEPnet
AOE
O&M
LRC

=
=
=
=
=
=
=
=

(FCR x ICC) + AOE

AEPnet
Levelized Cost of Energy ($/kWh)
Fixed Charge Rate = (0.067)
Installed Capital Cost ($)
Net Annual Energy Production (kWh/yr)
Annual Operating Expenses ($/kWh)

O&M + LRC

Levelized O&M Cost ($/kWh)
Levelized Replacement/Overhaul Cost ($/kWh)

Fixed Charge Rate
A fixed charge rate (FCR) allows LCOE estimates by relying on a single coefficient. For wind turbines in distributed applications the FCR is calculated to produce the annual cost to the owner assuming a 20-year loan at a typical interest rate. The resulting fixed charge rate is 6.7%, as was assumed in NLR’s Cost of Wind Energy Review: 2024 Edition1. This is taken as the cost of capital for homeowner investments in energy generation and the cost for other