Thursday, 14 July 2011

Solar costs

On Monday, I looked at the costs of installing a 5kw solar system and an 84MW system. What I didn't get around to calculating was a lifetime cost per kw/h. After all, my current power bill is based on how many kilowatt hours we consume each quarter, and we currently pay about 19 cents per kw/h.

kw/h per month in Sydney with 5kw solar system

I did a calculation based on the above graph of actual results and determined that a 5kw system will generate an average of 679kw/h per month, or 8148kw/h per year. That gives it an average efficiency of 18.8%. ie, the nameplate capacity is 5kw, but you only get 18.8% of that over the course of the year due to things like night time, cloud cover and the lower angle of the sun in winter.

Let's assume this installation lasts for 30 years (the warranty goes for 25) and that there are no importation or installation costs and no maintenance costs over the life of the unit. There are also no financing costs (ie, interest on the money you borrowed to buy it). Those are all unrealistic assumptions, but they provide a base cost.

You can currently buy a 5kw system in China for $US49,260 - let's make that $AUS50,000 for ease of calculations.

We know our system will produce 8148 kw/h per year, or 244,440 kw/h over 30 years (and I'm also assuming that the panels don't degrade and lose efficiency - which they do in reality).

If we divide $50,000 by 244,440 kw/h, we get an average price of 20.4 cents per kw/h. That's not much more than what I'm paying now.

So on those numbers, you'd think, "Hey, solar is price competitive!"

Not so fast. Like I said, I assumed away lots of costs and also assumed no drop in efficiency. The brochure for a good panel that I looked at specifically tells you that efficiency degrades by about 0.8% each year, so that after 25 years, you've lost 20% of your original capacity.

If we assume a 0.8% degradation in performance each year, then our 30 year total output drops to 218,000 kw/h. That puts the price up slightly to 22.9 cents - still in the ball park.

Now, if solar is this competitive with coal and gas, why was the solar feed-in tariff in NSW set at such ridiculous levels (60 cents I think)?

Let's assume no installation, importation or maintenance costs, but assume that you had to take out a mortgage to buy the system. Using the Westpac mortgage calculator and an interest rate of 7.86% on a 30 year loan, we get monthly repayments of $363. Over 30 years, that comes to a total of $130,680.

Now if we do our kw/h costing again, we find that the cost per kw/h is now 59.9 cents. Of course this cost drops if you go with a shorter repayment period. If you can pay it off in 10 years, the monthly repayments are $603, giving a total cost of $72,360, or a cost per kw/h of 33 cents.

I don't know what the installation and importation costs are, but I'm guessing those will set you back at least $10,000. You can run the numbers any way you like - it's still significantly more expensive than what we're paying now.

And the big kicker here is this - where does your power come from when the sun goes down? If you are 100% reliant on solar, you also need to buy storage capacity and install it, and that also means buying replacement batteries every few years. When you factor that in, the cost explodes.

Here's what annoys me about the Carbon Tax - it's claimed the tax will make renewables "more competitive". That's crap use of the English language. What it will do is make non-renewables less competitive. In racing terms, it's a handicap placed on the best performer to make the poor performers look good.

One reason I don't mind Bjorn Lomburg is that he proposes a massive R&D program to truly make renewables "more competitive". By that, he means investing in research that will bring the manufacturing and installation and running costs of renewables down to match that of coal and gas. Reducing the manufacturing cost of a 5kw system from $49,260 to say $20,000 through better wafer production techniques or the substitution of cheaper input materials etc will make solar "more competitive". Everything the government is doing at the moment is designed at making good energy production systems less competitive. If you want to win a team event (like a relay), you don't win by slowing down your fastest runners. You win by boosting the speed of your slowest runners.


Anonymous said...

I was on one of the aerial photo/GIS type sites the other day that show recent photos of the suburban areas and noted that in a senior lifestyle village the takeup of solar panels was in the order of 50%, where it would struggle to make 10% in wealthy western suburbs of Perth. Interesting to think about the demographics and marketing opportunities being applied here.


Anonymous said...

Rather than an abscure Chinese trade website why not have a look at some reputable Australian Renewable energy websites
For example

You'll find contrary to your "quote" of $49,260 you can actually purchase a 5kw system delivered and installed for $14,999. How about repeating your calculations with some real world numbers based on a real world system price in Sydney today. Then don't forget the fact that electricity prices have been rising and are fairly likely to continue to rise at somewhere around 5-10% annually, why not factor that in to the calculations and workout the price per Kwh for the real world solar system versus the average price per kwh grid supply WITH ongoing price rises factored in.