Economics - Understanding Renewable Energy Systems - page 236

Table 6.1 Consumer Price Index (CPI ) for the US, Reference Year 1967
(1967 = 100)

Year 1800 1825 1850 1875 1900 1910 1920 1930 1940 1945 1950 1955

CPI 51 34 25 33 25 28 60 50 42 53.9 72.1 80.2

Year 1960 1965 1967 1970 1975 1980 1982 1984 1986 1988 1990 1991

CPI 88.7 94.5 100.0 116.3 161.2 246.8 289.1 311.1 328.4 354.3 391.4 408.0

Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

CPI 420.3 432.7 440.0 456.5 469.9 480.8 488.3 499.0 516.0 530.4 538.8 550.3

Source: Federal Reserve Bank of Minneapolis, 2003

price estimation (e.g.

€ 1995 /kWh). Table 6.1 shows the consumer price index
for the US over the past two centuries. However, price increase may be
different for other countries. Besides general price increases, prices of
conventional energy resources can vary significantly, as the oil crises of the
1970s have shown beyond any possible doubt. Therefore, cost calculations for
conventional energy systems have relatively high uncertainty and high
economic risks, which are often ignored. Since renewable energy sources such
as solar and wind energy are free, no change in fuel prices can affect the costs
of renewable energy systems.

C LASSICAL E CONOMIC C ALCULATIONS

Calculations without return on capital
In classical economic calculations the investor expects a payment of interest
for his invested capital. The interest rate depends mainly on the risk, followed
by other factors. However, in this section, economic calculation reference
values are estimated without return on capital (see also the section headed
'Critical View of Economic Calculations', p254).
The estimation of the cost for one unit of energy without considering
return on capital is relatively easy. All costs over the whole lifetime of the
energy system are added and then divided by the operating period. The result
is the total annual cost. Dividing this cost by the annual generated units of
energy of the system provides the cost per unit of energy.
The total cost C tot consists of the investment cost , i.e. payment A 0 for year
zero for the system installation, and payments A i for every operational year i ,
respectively, for n years. Operating cost could be the cost of maintenance,
repair, insurance and for some systems, fuel costs. These costs may vary from
year to year. For an operating period of n years, the total cost becomes:

(6.1)