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Sunrise -- 
Wake up every day to....

20 Years, 
What's your cost? 

It's not just a number,
 it's a ratio!

The 20 year figure 

Has its basis in the lifetime that is used to compute the cost of energy that can be achieved from various generating technologies.  For the traditional systems like coal, oil, or gas fired plants the capital cost of the system is usually dwarfed by the fuel cost over even a modest number of years.  Most of us learned this lesson as kids.  The first hurdle was a nice turntable, and by time we had even a modest collection of albums the stereo was only a fraction of the value of our collection.

Renewable Energy Systems

Are invariable based on the collection and capture of low density energy, a breeze the flow of water, and of course sunshine.  So when we contrast renewable energy equipment to fuel fired machinery the cost of the former is significantly greater than the latter.

How we compute the magic number

The computation is actually quite simple:

Price of S&T in $/W installed ($3/W)
Life in years (20y) X 
Days of sunshine per year (240d/y) X
Hours of sunshine per day (8h/d) X 0.001(kW/W)

That simplifies to: 

S&T @ $3/W
20y X 240d/y X 8h/d X .001kW/W

And the cost of the of energy is:

$0.078125/kWh for S&T electricity

Based on the arbitrary 20 years, and an assumed (yes, I know) 240 days per year of sunshine.  We also assume that the system can capture 8 hours per day of sunshine. which is reasonable because we employ single axis tracking parabolic troughs. 

That's it.  Granted it takes 20 years, but we are talking about capital investments.  You do believe you'll be using electricity 20 years from now. don't you?

Why the huge differences

Between S&T and the average PV estimate?  That's easy, PV has 2 numbers that are far less attractive then S&T.  Let me show you.

PV @ $8.50/W
20 X 240 X 4 X .001

Works out to:

$0.446875/kWh for PV electricity

And that's simply because the the price is almost triple, and the most common PV system uses fixed flat panels.  We kept the years and the days of sunshine the same, but since the sun is off axis to the panels for most of the day the output of non-tracking PV falls off as 1-cosine() of the solar angle before and after solar noon. The other problem with PV is the efficiency is known to fall off at 2% per year as the silicon ages and degrades, and the current generation of inverters is only rated for 10 years of life.  I only mention this in passing, this calculation ignores those factors.

What about a faster ROI

This is the most common question we get.  Businesses want to depreciate the system is as little as 5 years and expect to break even in as little as 2 to 3 years.  There is no simple answer to that.  Your accountant is the only one that can answer those questions based on your business situation.

What we've shown here is the simplest example, no interest, no depreciation, no opportunity cost, and no incentives.  All of these variables will effect the final number.  All I can say here is that those variables will effect both S&T and PV in a similar way.

Suppose you cut the economic lifetime to 10 years for both systems.  The cost of each unit of energy will simply double for both:  That pushes the cost of S&T electricity to $0.15625/kWh -- almost as high as residential power here in New England.  But look at the PV if jumps to a whopping $0.89375/kWh that's 5.5 times my residential rate.  No wonder nobody's buying...

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Updated: 09/11/10 19:34