chapter  2
22 Pages

Economics of Energy Generation and Conservation Systems

The source of energy in renewable energy (RE) systems, such as wind turbines and solar collectors is essentially free, but so are oil, coal, and gas in the current economic system

that only requires purchase of mineral rights and a small royalty on mining as the price of access to fossil resources. The costs for energy prospecting, extraction, refining, and generation are largely associated with the equipment purchased and the fuels or electricity used [1]. Neglecting interest charges on capital and operating costs, the unit cost of energy produced by a system, Cs dollars, with initial construction and installation cost, C0 dollars, over the life of the system, t years, and annual energy production, Q units of energy, is given by


C Q t

s = ⋅ o


For example, consider a Solartech 40 W solar PV panel with a list price of $167 for a 0.38 m2 panel ($440/m2). The panel has a 10-year warranty for 90% of nominal power output and a 25-year warranty for 80% power output. The performance specifications are measured at standard test conditions (25°C, 1000 W/m2) giving conversion efficiency of 10.5%, and the  panel is installed in a location where the mean horizontal surface irradiance is 200 W/m2. The electricity production can be estimated for a year as Q = 0.2 (kW/m2) × 10.5% × 8760 (h/year) = 184 (kWh/year/m2). The cost of solar electricity can be estimated by using Equation 2.1:

Cs =

⋅ × × + × =

440 184 0 9 10 0 8 15

0 11 2

($ ) ( ) ( . .