Re: silicon photovoltaics

Ron Kean (ronkean@juno.com)
Wed, 16 Jun 1999 23:15:01 -0400

On Mon, 14 Jun 1999 12:45:35 -0400 "Michael S. Lorrey" <mike@lorrey.com> writes:

>
>You need to amortize the intitial investment in the panel, as well as
>incidental>expenses to install and wire up the panels, over the period
of use,
>involving>your discount rate, the inflation rate, etc... You need to use
this
>discounting>method in order to properly compare it with a pay-as-you-go
grid based >service.
>
>I used to do the reverse with the exit sign retrofit kit I developed,
>to show>that the rate of return on investment was so high they'd have to
have
>had stock>in Microsoft to get a better return.
>
>Essentially, you figure out your own discount rate, then you subtract
>inflation>for that year from your discount rate for that year to get
your
>adjusted>discount rate, plus you need to discount the cell output
degradation.
>Here's an>example:
>
>Solar panels: 1000 watts total peak
>Hours of operation per annum: 4000 hours
>Avg. output: 500 watts.
>Total annual output: 2 million watthours or 2000 kwh per annum*
>*(this is intitial, estimate cell output degradation of 5% per annum)
>Period of use: 10 years.
>Cost of panels and installation: $5000.00
>Personal Discount Rate: 6.5%
>Inflation rate: 1.5%
>Adjusted Discount Rate: 5%
>
>Year Output(kwh) Discounted output (kwh)
>1 2000 1900
>2 1900 1805
>3 1805 1715
>4 1715 1629
>5 1629 1548
>6 1548 1471
>7 1471 1396
>8 1396 1316
>9 1316 1251
>10 1251 1188
>Total discounted output: 15219 kwh
>Discounted cost per kwh: $0.329
>
>So thats how it works.
>--

Thank you, Mike, for the detailed explanation. I see that you talking about the lifetime cost per kwh assuming a 10 year life, 5% per year physical degradation, and and 5% per year 'Adjusted Discount Rate'.

Now if a person's 'Adjusted Discount Rate' is 5%, then would not a dollar 3 years from now have a present value of $1.00 x (0.95)^3 = 86 cents? Same for a kwh. That said, and assuming the physical output drops suddenly by 5% at the end of each year, should not the table look something like this:

Year     Physical Output(kwh)     		Discounted output (kwh)
1                  2000     x(0.95)^0.5           1949
2                  1900     x(0.95)^1.5           1759
3                  1805     x(0.95)^2.5           1588
4                  1715     x(0.95)^3.5           1433
5                  1629     x(0.95)^4.5           1293
6                  1548     x(0.95)^5.5           1167

7                  1471     x(0.95)^6.5           1054
8                  1396     x(0.95)^7.5            950
9                  1326     x(0.95)^8.5            857
10                 1260     x(0.95)^9.5            774

Total discounted output:     12824 kwh  (equivalent present value)
Discounted cost per kwh: $0.3898

What do you think?

Ron Kean

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