Currently available technologies incorporated into renewable energy technology solutions (RETS) whether as hybrid systems involving both wind energy and solar energy, or deployments of just wind or solar energy systems involve a relatively significant initial capital investment to which must be added some degree of annual costs to cover operations, inspections and maintenance of the RETS deployed. Most, if not all RETS deployed are not entirely operations and maintenance cost free, and as todays popular electronic devices and applicances do periodically fail, the RETS user must also plan for the possibility of RETS component failure. Component failure to consider could include one or more battery failures, damaged photovoltaic cell(s) as a result of being struck by hail or falling debris, a damaged wind turbine rotor having been struck with flying debris, and periodic maintenance costs. We encourage that some contingency planning be factored into the cost expectations in order to prepare the client to accomodate un-expected costs. It is impossible to account for every possible situation, but through intelligent modelling, the client should be able to feel relatively comfortable with the cost models created which should encourage a RETS deployment enabling the client to experience the pleasure and long-term independence derived from relatively maintenance-free renewable energy generation.

A. Anticipated cost of Energy

All indications appear to support an expected rate of energy cost increases to hover around 10% annually. Given the cost per KWh is approximately $0.14 today (all in, taxes, transmission fees, and other assorted fees found on the utility bill), and given the average household consumes approximately 10,000 to 12,000 KWh/year (assuming that heat is generated from natural gas or other non-electrical source), the energy cost for year 1 is approximately $1,836.83. Over the elapse time of 15 years, in the 15th year, the cost of energy for the year will be approximately $6,975.36 having accumulated to an outstanding amount of $58,361 barring any unexpected energy or oil crisis, or high rate of inflation along the way!

This model, generally called the "simple payback" approach, is a straightforward measure of the number of years it would take to having the annual energy savings pay for the initial and annual costs of the installation and operation of the RETS deployment. This method does not take into account inflation rate (except for the anticipated cost of energy increase of 10%), nor does it take into account the net present value. The formula employed for the calculation of the plot on the right is:

payback (years) = net installed cost / net annual energy savings

This sample model is based on a RETS configuration which may generate approximately 20 - 30% of the household renewable energy requirements, assuming an annual energy consumption of 12,000 KWh. This sample system is composed of the following components:

1. 1KW wind turbine
2. wind turbine tower of approximately 15m in height
3. 4 x 80W photovoltaic modules (the solar array)
4. solar array framing
5. 8 x 220AH deep-cycle lead-acid batteries
6. balance of system (BOS)
    

The use of NPV calculations aid in determining whether or not a potential RETS deployment makes economic sense. NPV determines how much funds needs to be put aside today in order to pay for the startup and operating costs of the project over its lifetime. Another way to look at this, is the determination of the funds required to bank today in order to have $1,000 in the bank five years from now at an interest rate of 5%.

The table below illustrates how NPV has been applied to four possible energy scenarios: wind energy system with battery array; photovoltaic system with battery array; an extension to the grid; and a diesel generator with battery array. It clearly demonstrates that despite the fact that the wind energy system does not have the lowest initial cost, over time, its cost is the lowest of the four options presented.

Table sourced from "Stand-Alone Wind Energy Systems - A Buyer's Guide", Natural Resources Canada

As part of the quote package provided to the potential RETS client, SOLAR WIND Canada calculates the economic implications of a RETS purchase and deployment through charts illustrating simple payback and net present values.

Myth: low cost RETS

Frequently, people have the perception that given one can purchase a 1KW wind turbine at a cost of $2,800 will result in a low cost solution, however, when one considers the rest of the components needed for a viable deployment of RETS, such as the energy storage component and the balance of system or BOS and tower and its installation, it becomes clear that the initial capital investment must be carefully assessed to ensure that an economically viable solution is configured and deployed.

Myth: selling energy back to the utility

This is a common misconception. Power utilities are in the business to make money and one should not expect to receive a cheque in the mail for the energy produced by the RETS. It would not make their investors happy to know that the power utilities are giving up the farm to private power generation through RETS deployments. RETS users can in fact, redirect surplus energy generated to the grid by executing an agreement known as net metering. This policy limits the utility to only offer energy credits for the RETS user for the amount of surplus energy redirected to the grid, with the limitation that the surplus energy redirected cannot exceed the RETS user's power consumption from the grid over the annual life-span of the contract. The average household consumes approximately 1,000 to 1,200 KWh/month. If the RETS deployed covers roughly 80% of the energy consumed, the household would only draw roughly 200 - 240 KWh/month from the grid. If the RETS is generating more energy than can be consumed, this energy can be redirected to the grid, but it cannot exceed 200 - 240 KWh/month. However, net metering does provide the option to carry forward surplus energy credits into the next month, for up to a year. At the anniversary of the net metering contract, the excess is simply zeroed out. Click net metering for more details.

References

1. Natural Resources Canada: Stand-alone Wind Energy Systems: Buyer's Guide. 2002-06-26
2. Independent Electricity System Operator. "Ontario Wholesale Electricity Demand and Price Information". IESO.
3. Ontario Ministry of Energy. Renewable Energy - Net Metering
4. Hydro One Networks. Renewable technologies. 2004.