ToolFusion
📋 Case Study

Levelized Cost of Energy (LCOE) Analysis in Large-Scale Industrial Projects

Accurately comparing the true long-term economic viability of multiple energy supply options (on-site CCGT, solar PV, and grid procurement) under volatile natural gas prices, evolving carbon regulations, and site-specific intermittency constraints—while ensuring reliability for continuous-process metallurgical operations.

🏗️ Project Overview

A 250 MW integrated steel manufacturing plant in Gary, Indiana, incorporating a 120 MW on-site combined-cycle gas turbine (CCGT) power plant and 30 MW of rooftop solar PV to meet 78% of its annual electricity demand; project lifetime: 30 years, operational since Q2 2022.

🎯 Challenge

Accurately comparing the true long-term economic viability of multiple energy supply options (on-site CCGT, solar PV, and grid procurement) under volatile natural gas prices, evolving carbon regulations, and site-specific intermittency constraints—while ensuring reliability for continuous-process metallurgical operations.

🔧 Design Approach

Bottom-up LCOE modeling using probabilistic sensitivity analysis (Monte Carlo simulation over 10,000 iterations), incorporating O&M escalation, capacity factor degradation (solar), fuel price volatility (Henry Hub + transport premium), carbon compliance costs ($45/ton CO₂e by Year 10), and grid-avoided cost attribution for self-consumed generation. All cash flows discounted at WACC = 7.2%.

📐 Design Diagram

LCOE Analysis Framework Bottom-Up LCOE Modeling Monte Carlo (10,000 runs) CCGT $42.30/MWh PV $38.70/MWh Grid $61.90/MWh WACC = 7.2% Carbon: $45/t Degradation: 0.5%/yr Volatility & Reliability LCOE Comparison Ranked by Economic Viability Site-Specific Constraints Probabilistic Sensitivity

AI-generated project design illustration

📐 Key Calculations

LCOE for On-Site CCGT

LCOE = (Σ(CapEx_t + OpEx_t + FuelCost_t + CarbonCost_t) / (1+r)^t) / Σ(AnnualGeneration_t / (1+r)^t)
Result: $42.30/MWh
Establishes baseline dispatchable generation cost; sensitive to natural gas price uncertainty—±15% fuel cost swing alters LCOE by ±$6.80/MWh.

LCOE for Rooftop Solar PV

LCOE = (CapEx + Σ(O&M_t + DegradationLoss_t) / (1+r)^t) / Σ(AnnualGeneration_t × (1−DegradationRate)^t / (1+r)^t)
Result: $38.70/MWh
Highlights value of zero-fuel-cost generation despite lower capacity factor (18.5%); degradation and shading losses reduced effective yield by 12.3%, elevating LCOE by $4.10/MWh vs. ideal conditions.

Grid-Avoided Cost Attribution

AvoidedCost = Σ(AnnualSelfConsumption_t × AvoidedRetailTariff_t × (1−TransmissionLoss)) / Σ(AnnualSelfConsumption_t)
Result: $61.90/MWh
Demonstrates strategic value of self-generation: on-site generation displaces high-tariff, demand-charged grid power—making even higher-LCOE assets economically justified within the industrial load profile.

📊 Results

Metrics: LCOE CCGT: $42.30/MWh, LCOE Solar PV: $38.70/MWh, Hybrid System LCOE (weighted): $40.10/MWh, Net Present Value (NPV) of Energy Portfolio vs. Grid-Only: +$214M
The hybrid energy system reduced average energy cost by 23% versus full grid reliance over 30 years, with solar PV delivering the lowest marginal LCOE and CCGT providing critical baseload resilience—validating a diversified, dispatchable+renewable strategy aligned with both economics and operational continuity requirements.

💡 Lessons Learned

  • •LCOE alone is insufficient without context-aware avoided cost analysis for industrial off-takers
  • •Fuel price volatility dominates CCGT LCOE uncertainty—hedging strategies must be modeled explicitly
  • •Site-specific shading, roof structural limits, and maintenance access significantly impact solar LCOE more than nameplate efficiency assumptions

✅ Key Takeaways

  • 1For continuous-process industries, LCOE must be evaluated alongside reliability-weighted value streams—not just generation cost—making hybrid systems with dispatchable backup often superior to lowest-LCOE-only solutions.