Environmental Engineering Reference
In-Depth Information
Wind
PV
Solar thermal
100
90
80
70
60
50
40
30
20
10
0
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
FIGURE 12.2 Cost of energy for generation of electricity: wind, photovoltaic, and solar thermal ($ 2008).
A cash flow analysis for a business with $0.02/kWh tax credit on electric production and depre-
ciation of the installed costs would give a different answer. Also, all operating expenses are a busi-
ness expense. The economic utilization factor is calculated from the ratio of the costs of electricity
used at the site to that of the electricity sold to the utility.
The core of the RETScreen tools [6] consists of a standardized and integrated renewable energy
project analysis software that can be used to evaluate the energy production, life cycle costs, and
greenhouse gas emission reductions for the following renewable energy technologies: wind, small
hydro, PV, passive solar heating, solar air heating, solar water heating, biomass heating, and ground-
source heat pumps. The Hybrid2 software package [7] includes economic analysis. The cost of energy
for wind, photovaltic, and solar thermal have decreased dramatically since 1980 (Figure 12.2).
12.5 PRESENT WORTH AND LEVELIZED COSTS
Money increases or decreases with time, depending on interest rates for borrowing or saving and
inflation. Many people assume energy costs in the future will increase faster than inflation. The
same mechanism of determining future value of a given amount of money can be used to move
money backward in time. If each cost and benefit over the lifetime of the system were brought back
to the present and then summed, the present worth can be determined:
(cost total for year
S
)
(financial benefit total for year
S
)
PW
(12.9)
M
1
d
where cost total negative cash low, S specific year in the wind system lifetime, M years from
the present to year S , and d discount rate.
The discount rate determines how the money increases or decreases with time. Therefore, the
proper discount rate for any life cycle cost calculation must be chosen with care. Sometimes the cost
of capital (interest paid to the bank, or alternately, lost opportunity cost) is appropriate. Possibly
the rate of return on a given investment perceived as desirable by an individual may be used as the
 
 
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