The Levelized Cost of Energy- Bargains can Break You!

How can one compare the available renewable energy technologies with the current energy mix?

It’s not that easy.

After honing our skills as “bargain hunters” we learn that some bargains are not at all what they appear to be!

An example of this is the low cost of ink jet printers. They seem like such a “bargain” if you only look at the initial price tag. You can’t help but be happy with yourself for getting such a great deal!

Unfortunately, as soon as you begin to print  you realize that the ink cartridges wear out at a rate of about one per month. One can easily be reduced to bankruptcy trying to keep the ink jet printer supplied with “filled” cartridges.  (which by the way, are usually only half empty, but the printer forces you to replace the cartridge anyway).

On the other hand, a laser printer is much more expensive initially, and the toner cartridges are also more expensive, but in the long term they actually save you money (if you do enough printing).

 So it is with solar energy.  The initial cost is not the only thing that needs to be considered.

This all-in way of looking at an expense is used by businesses all the time. For instance, if a business is researching which vehicle to use in their fleet they will make a spreadsheet and compare a few different metrics. These will include…

  • the initial cost of the vehicle,
  • fuel economy of the vehicle,
  • maintenance/repair expenses of the vehicle,
  • reliability, dependability of the vehicle,
  • public perception of the vehicle,
  • depreciation of the vehicle,
  • life span of the vehicle,
  • resale value of the vehicle,

Once ALL of these expenses are factored in then you can compare between different vehicles. It makes no sense to compare vehicles on simply one factor (initial expense). There are in fact other factors that enter into the purchasing decision as well- Style, speed, image. Why else would the sales of “sports cars” continue at such a high rate?

In the very same way we must compare energy production sources. We should include…

  1. Material (fuel) sourcing- ie scarcity, price of coal, uranium, petroleum, solar, hydro, geo-thermal, etc.
  2. transportation (fuel)- trucking costs, pipeline costs, accident costs, infrastructure costs, etc.
  3. Investment (long term projections, supply/demand,
  4. Operations and Maintenance- (political stability, locations, security, risks, lifespan, damage caused by the system to individuals, to the environment, health risks to workers & bystanders, regulatory uncertainty, intermittent properties, time of generation, etc.)
  5. Distribution (grid)- costs, upgrades, efficiency, transportation problems
  6. Disposal (fly ash, nuclear waste, solar panels, lifespan)
  7. Dismantling (recycling solar panels, de-contaminating nuclear reactors, etc.)

 Our energy production systems must be analyzed in a matrix that includes ALL of these factors. The current price per kWh on the wholesale level is almost a distraction from the whole lifecycle cost of energy.

 Let us not allow ourselves to think that solar is expensive simply because we must pay our one time fee on the front end rather than paying it over our whole lives.

 As banks and finance companies realize the incredible savings that can be realized with solar energy there will be many more financing options available for you and I to install solar. Once solar financing offers the the same types of loans that are offered for cars then the tide will turn. Think about it… If everyone had to pay cash up front for every car… there would be many fewer cars on the road!

 A solar system is a “slightly” depreciating asset (warrantied at 25 years, but the useful lifespan is more like 40 years)- which may in fact be appreciating (when you factor in the continually rising cost of energy).

 I would not be buying stock in traditional utilities at the moment. Clean, decentralized energy systems are quietly revolutionizing how we get our energy.  

 Solar energy makes sense, and with the dropping prices of solar systems the current “solar trickle” is threatening to become a “solar flood.”

The utility company would love to keep you “on the tit” for the rest of your life!  Just as the ink jet printer manufacturers make all of their money by selling you the damn cartridges.

 Keep moving forward,

 

 

 

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