From: Ron Kean (ronkean@juno.com)
Date: Wed Jun 16 1999 - 21:15:01 MDT
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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