Levelized PPA price (LPPA)
==========================

The levelized revenue represents the monetary value of a front-of-meter project with a power purchase agreement (PPA) over its life. It is the present value of the project's PPA revenue expressed in cents per kilowatt-hour of electricity generated by the system.

The project's PPA revenue is revenue from electricity sales at the :doc:`PPA price <mtf_ppa_price>` with an optional :doc:`annual escalation rate <mtf_ppa_escalation>`. The PPA price may be fixed, or it may come with a set of :ref:`time of delivery factors <revenue-ppa-tod>` to adjust it based on time of day and year. (PPA revenue does not include salvage value or production-based incentives.)

In general, the levelized nominal PPA price should be greater than the levelized nominal cost for a financially feasible project. As with the other financial metrics, always evaluate the metrics as a group: A financially feasible project should also have a positive :doc:`net present value (NPV) <mtf_npv>`, and reasonable :doc:`debt size <mtf_debt_and_equity>`, :doc:`PPA price <mtf_ppa_price>`, and :doc:`internal rate of return <mtf_irr>`.

Equations for Levelized Revenue Calculations
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

SAM uses the real and nominal discount rates from the :doc:`Financial Parameters <../financial-parameters/fin_overview>` page to calculate the present value of future annual revenue values.

 


.. note:: For a brief discussion of when to use nominal and real levelized values, see :ref:`Real and Nominal Levelized Cost <realnom>`. 


.. note:: The energy term in the denominator of the equations below appears to be discounted because of the algebraic solution of the definition of the levelized price. See :ref:`Levelized Cost Equations <lcoedefinition>` for details.

For the nominal levelized revenue, the nominal discount rate appears in the total energy output term:

.. image:: ../images/EQ_LPPA-nominal.png
   :align: center
   :alt: EQ_LPPA-nominal.png

Similarly, for the real levelized revenue (available on the :doc:`Data <../results/data>` page, under **Single Values**), the real discount rate appears in the denominator's total energy output term:

.. image:: ../images/EQ_LPPA-real.png
   :align: center
   :alt: EQ_LPPA-real.png

Where,

.. list-table::
   :width: 100%
   :align: center

   * - *Q*\ :sub:`n`\  (kWh)
     - Electricity delivered by the system to the grid in year *n.* The first year output is reported in the Metrics table on the :doc:`Summary <../results/summary>` page and in the year one column of the project :doc:`cash flow <../results/cashflow>`. Year two and subsequent output is the first year output reduced by the amount specified for the **degradation rate** on the :doc:`Degradation <../degradation/degradation>` page.
   * - *N*
     - Analysis period in years as defined on the :doc:`Financial Parameters <../financial-parameters/fin_overview>` page.
   * - *R*\ :sub:`n`\ 
     - PPA revenue from electricity sales in year *n* as defined above.
   * - *d*\ :sub:`real`\ 
     - The real discount rate defined on the :doc:`Financial Parameters <../financial-parameters/fin_overview>` page. This is the discount rate without inflation. See :ref:`LCOE Definition <lcoedefinition>` for an explanation of discount rates in the levelized cost and PPA price calculation.
   * - *d*\ :sub:`nominal`\ 
     - The nominal discount rate shown on the Financial Parameters page. This is the discount rate with inflation.