levelized cost of energy (LCOE) is the lifetime cost of building, financing, operating, and fueling a power plant divided by the total electricity it produces over its life — the standard dollars-per-megawatt-hour yardstick for comparing generation sources.
The metric's usefulness is compression: every cost a plant will ever incur, discounted to present value, folded into a single number per unit of energy sold. Which costs dominate varies by technology — capital expenditure for nuclear, wind, and solar; fuel for gas — and the output side is just as decisive: the same plant run at half the 📝capacity factor sells half the megawatt-hours against the same fixed costs, roughly doubling its LCOE.
LCOE measures cost, not value — its most common misreading. The metric says nothing about when electricity arrives or whether it can be dispatched on demand, so a firm source and an intermittent one with identical LCOE are not worth the same to a grid, and system-level comparisons increasingly supplement it with measures of firmness and storage cost. For 📝fusion, the calculation has a distinctive shape: fuel is a negligible line item — 📝deuterium comes from seawater and 📝tritium is bred on site — so fusion's LCOE is set almost entirely by capital cost, plant lifetime, and capacity factor, which is why compact machines and high uptime are economic arguments, not just engineering ones.