Landed cost

Landed cost adds up everything between the generator's price and the buyer's meter, per MWh delivered. In symbols, LC = P / (1 − L) + W + S + T. P is the energy price at the generator, in $/MWh. L is the share of energy lost in transmission and distribution. W is the wheeling and transmission charge, S the surcharges and T the duties and taxes, each per MWh delivered. The loss term is a division because the generator must inject 1 / (1 − L) MWh for each MWh that arrives.

Some charges are set per MW of capacity per month. Converted to a per-MWh figure, they depend on how much energy flows through that capacity. A solar supply with a low CUF therefore carries a higher wheeling charge per MWh than round-the-clock supply on the same line. Banking charges, deviation charges and the cost of firming an intermittent supply also belong in the sum where they apply. The landed cost is then compared with the part of the grid tariff the supply actually replaces, for the same hours.

Generators quote a price at their own connection point, but the buyer pays for power at its meter. The charges between the two can be a large share of the total. An offer that looks cheaper at the generator can be dearer once losses and charges are added, especially across state or network boundaries. Buyers comparing offers, or comparing a PPA with grid supply, need every option on the same landed basis. Developers use it to decide which buyers and regions to sell into.

In India, open-access buyers pay a stack of charges set by the state regulator, including wheeling, transmission, cross-subsidy and additional surcharges, electricity duty and banking charges. They vary widely by state. In the US, most corporate buyers sign virtual PPAs and keep buying from their utility, so the comparison is retail cost plus the PPA settlement. In Europe, a physical PPA is often delivered through a supplier for a sleeving fee, on top of network charges and national levies.