[RE-wrenches] Cost per kWh

[Joel Davidson]

Wrenches,

Matt is right to point out that the biggest underlying factors are the assumed Service Life of the System in Years and the O&M costs during that period. Solar subsidies and to whom they go (utility industry or end user) and the value that society puts on pollution and clean energy are important, but that's another story.

Let's use Matt's formulas for my system plus a little history. In March 1998, California became the first state to have residential, grid-connected, rebate subsidized, PV systems. In 1998, about 30 systems per month were installed. About 25% of the early grid-tied systems had reliable, battery-based SW-series inverters, but many had other brands. A lot of early grid-tied systems were installed by do-it-yourselfers that included experienced PV designers and contractors but also included people with no electrical installation experience. It wasn't until May 2001, when the incentive went from $3/W to $4.50/W that the California PV boom started, the number of skilled installers and inverter choices began to grow. There is no record of the number of systems that are still in operation or have had modules and/or inverters replaced. The verdict is out how long systems (not modules) will last and what O&M costs will be. It looks like well-designed and properly installed grid-tie systems will last more than 20 years, but inverters and batteries will require replacement during that period. It may make economic sense to upgrade from an SW-series inverter to a non-battery inverter or to donate an old system to a charity.

My net-metered system was installed June 1998 and has been operating continuously for 103,000 hours. The 32 Siemens M70 modules and Trace SW4048 are still performing like-new. I replaced the operational Trace C40 charge controller with an Outback MX60 to squeeze more power out of the array (no improvement, waste of time and $450). The 4 Johnson Control 86 AH Dynasty batteries lasted 90 months and had to be replaced November 2006. The new batteries are 3-year old Dynasty UPS12-475s that I got for free. I spend less than 1 hour per year on maintenance to visually inspect the system monthly when I record meter readings manually and hose off the array 2 or 3 times in the summer.

I paid $22,450 retail for my system - $5,835 solar rebate - $4,153 state and federal tax credits = $12,462 total system price ($5.563/W DC) divided by 30,000 kWh (2,500 kWh/year x 12 years) = $0.415/kWh and counting. Electric savings at $0.18/kWh x = $5,400 and counting.

Using Matt's 25-year formulas, my system cost $0.199/kWh. If 2,500 kWh/year production x $0.18/kWh = $450 x 20 (American Appraisal Institute multiplier) = $9,000 added property value, then my system's net value is $0.124/kWh.

If your net-metered system has been in operation for over 10 years, please share your economic analysis. Thanks in advance.

Joel Davidson

  ----- Original Message ----- 
  From: Matt Lafferty 
  To: 'RE-wrenches' 
  Sent: Saturday, March 06, 2010 4:28 PM
  Subject: Re: [RE-wrenches] Cost per kWh


  Holt says: Can't put my hands on the equation for determining cost per kWh of a system

  Holt,

  Are you looking to calculate Cost or Value of the system? Both calculations are important.

  The simple $/kWh COST for a residential PV System is calculated as follows:
  Lifetime $/kWh Cost = (Purchase $ after incentives + Finance Charge $ + Lifetime O&M $) / Lifetime kWh Generated
  Example: A system that has a capital cost of $20,000 including finance charges generates 150,000 kWh over its 25 year life. The O&M costs over the same period total $5,000, for a Total Cost of $25,000. The Lifetime Cost of the electricity generated = $25,000/150,000 kWh = $0.1667/kWh.

  The Net $/kWh VALUE for a PV System includes some other factors, which will vary on a system-by-system basis. The driving element here is the $/kWh of the Offset Utility Energy. This is, after all, the comparative value of the energy in the first place. I also believe that the net-change in value of the property is valid to consider. I don't like all the BS mumbo jumbo about NPVs and wild-ass guesstimates about the cost of money at arbitrary points in the future and whether or not the inflation rates of electric rates will be higher or lower than $ deflation rates in a given time period and only if the customer turns 65 during the life of the system and due to divorce in Year 11 the customer's effective tax rate changes and...... Screw that. My crystal ball ain't that good. It is what it is. 

  Calculate the VALUE of the PV System in $/kWh as follows:
  Net $/kWh Value = ((Offset Utility Energy $ + Net Change Property Value $) - Total Cost) / Lifetime kWh Generated
  Example: A system generates 150,000 kWh over its 25 year life. The Offset Utility Energy $ is $27,000 and the Net Change in Property Value is $10,000. The system has a Total Cost of $25,000. The Net Value of the electricity generated = (($27,000 + $10,000) - $25,000) = $12,000. The The Net $/kWh Value = $12,000 / 150,000 kWh = $0.08/kWh.

  Two of the biggest underlying factors are the assumed Service Life of the System in Years and the O&M costs during that period. Like I said, my crystal ball ain't that good. I can share that 

  Hope this is helpful,

  Matt Lafferty

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