This paper discusses the technical, financial, and economic principles underlying the levelized cost method of computing the cost of solar electricity. Topics include the levelized cost method, solar radiation, solar panel efficiency, depreciation, cost of capital, fixed and variable operating and maintenance costs, and taxes. The paper includes the Worksheet, "Levelized Cost Worksheet for a 1 kW Solar Electric Generating Plant." Its benchmark values are for a model solar plant located in Chicago, IL. The paper discusses these benchmark values as it analyzes the worksheet's constants (capacity-1 kW 8,760 hr/yr), independent variables (capital cost-$/kW cost of capital-%, physical life-yr standard sun hours, fixed and variable O & M expense), and dependent variables (capital amortization expense, capacity-factor cost of solar electricity).