Examples&Economics

EXAMPLES OF RENEWABLE ENERGY TECHNOLOGY

AND THEIR ECONOMICS

We have developed examples that examine the economics of investing in renewable energy technology from several perspectives. Immediately following are examples of renewable energy technology installed on existing buildings. We also have developed a simple example of installing a renewable energy system at time of construction as part of our Sustainable Design services.

Systems Installed on Existing Buildings

SOLAR THERMAL

Solar thermal systems recover the sun’s energy and use it to heat water or air for hot water use (e.g., showering, washing clothes and dishes), space heating, and even to heat outdoor pools. The solar energy collectors can be mounted on top of your building’s roof, on the ground, or they can be integrated into the building as part of the roof. Two 4’x8’ collectors will meet up to approximately 75 percent of the annual water-heating needs of a typical family of four.

Maintenance of solar thermal systems is required as with any other appliance, and is simple and straightforward. All that is usually necessary is an annual check of the collector fluid quality, the plumbing fittings and a few drops of oil to lubricate the collector fluid pump. This annual inspection will take less than two hours.

Solar Thermal Economic Example Solar Thermal Photos

SOLAR ELECTRIC

Solar electric systems, also known as photovoltaic (PV) systems, convert solar energy into electricity. These systems can be used to supply all the building’s needs or can run in parallel with the local utility in order to use the utility’s energy when necessary. The use of a battery system will store excess PV generated electricity, providing energy at night or when the local utility power is not available. Similar to solar thermal systems, the panels of solar electricity systems can be mounted on the roof, as a ground-mounted system, or integrated into the building as part of the roof. A roof-mounted 1,600-watt photovoltaic system can supply approximately 60 percent of a typical family of four's annual electricity requirements.

Maintenance of a solar electric system is dependent upon the equipment installed. Inspection of the system should be completed every two months initially and then can be can be conducted two times a year as you get more comfortable with the system's performance. A maintenance schedule should include inspection of the electrical connections for any corrosion or loose fittings, adding distilled water to batteries when needed (if included in the design), and testing the batteries' specific gravity.

Solar Electric Economic Example Solar Electric Photos

WIND ENERGY SYSTEMS

Wind energy systems use wind power to produce electricity. Similar to solar electricity systems, wind energy systems can supply all or part of your electricity needs. They can run in parallel with the local utility, and/or use batteries as a backup source for energy when it is calm, or when utility power is unavailable. The size of the windmill can vary greatly. Typical system sizes range from 300 to 10,000 watts, with the diameter of the blades ranging from 4 feet to 23 feet, respectively. A 500-watt windmill can supply approximately 25 percent of the annual electricity needs of a typical family of four.

Maintenance of wind energy systems is a function of the components that comprises the system. Maintenance may be as simple as a semiannual inspection of electrical connections for corrosion or loose fittings, oiling a few bearings, and inspection of the tower connections. Larger wind energy systems may also include lubrication of a gearbox and/or changing the gearbox oil every several years.

Example of Wind Economics Wind Energy Photos

HYBRID ENERGY SYSTEMS

Hybrid energy systems combine solar thermal, solar electric and/or wind energy technologies. Wind and solar electric energy systems complement each other well, since wind is usually available on cloudy days, when solar energy is not, and vice versa. In a solar thermal/solar electric system, solar thermal energy can be extracted from solar electric panels and used to heat water or air. A 2000-watt photovoltaic system with a 500-watt wind mill system can supply all of the electricity a family of four needs.

The maintenance of hybrid systems will depend upon the combination of the systems described above that comprise your system.

Example of Hybrid Economics Hybrid System Photos

Examples

SOLAR THERMAL

The owner of a second home on Block Island is considering the use of solar water heating system to heat hot water during part of the spring, all of the summer, and most of the fall. (In the winter, they leave the thermostat set at 45 degrees to prevent the pipes from freezing.) After talking to several installers of renewable energy projects, they decide upon a design that will supply hot water during the time when they are on Block Island, and provide space heating during the winter months, when they are away. With this design, they believe they can get the most benefit from their investment. This example assumes they finance the cost of the system remaining after the grant with a 5-year home equity loan. The interest on the loan is tax deductible. The following analysis is for the first 15 years of the system's expected life of thirty years. All figures are in current dollars.

Capital Cost
a. Installed Cost	$4,200
b. Grant	- $1,050
c. Cost After Grant (a-b.)	$3,150
d. 25% Rhode Island Renewable Energy Tax Credit (Depreciation and Federal Tax Credit not applicable in this example)	- $ 788
e. Actual Installed Cost (c-d)	$2,362
Operation Benefit/Cost
f. Fifteen Year Total Annual Savings	$11,700
g. Fifteen Year Total Annual Operation and Maintenance Cost	- $750
h. Fifteen Tax Total Interest Payment (financed at 11.2%)	- $734
i. Fifteen Year Total Benefit (f-g-h)	$10,216
j. Fifteen Year Average Benefit (i divided by 15)	$681
Economics
k. Simple Payback including interest (e divided by j)	3.5 years
l. Simple Payback excluding interest [e divided by (j-h))	3.2 years
m. Simple Return on Investment including interest (1/k)*100	28.6%
n. .Simple Return on Investment excluding interest (1/l)*100	31.0%

Over its expected life of 30 years, the renewable energy system will displace enough fossil fuel to prevent 50,000 pounds of carbon dioxide (a green-house gas attributed to global warming), 70 pounds of smog-producing nitrogen oxides, and 50 pounds of acid rain-producing sulfur dioxide from being emitted into the island’s ecosystem.

HYBRID INSTALLATION: SOLAR ELECTRIC,

SOLAR THERMAL, AND WIND

A property owner decides to build a bed and breakfast. The location of the land is several hundred yards from the utility lines, and it would cost approximately $20,000 for a power line to be built to the site. The owners decide to see if they could meet their power needs with renewable energy. After discussing their energy needs with several renewable energy system experts, they decide to install 3,600-watt of photovoltaic panels, a small, 500-watt windmill on a 31-foot tower, a 3,000-watt backup propane generator, and a solar hot water heater.

Since the bed and breakfast is a commercial business, the owner can directly utilize the 10 percent Renewable Energy Tax Credit, 5-year MACRS depreciation, and any interest incurred in financing the system's purchase. The following analysis is for the first 15 years of the system's expected life of 30 years. All figures are in current dollars.

Capital Costs
a. Installed Cost	$34,498
b. Grant	- $8,625
c. Cost After Grant (a-b.)	$25,875
d. 10% Renewable Energy Tax Credit and Depreciation and 25% Rhode Island Renewable Energy Tax Credit	$12,074
e. Actual Installed Cost (c-d)	$13,801
Operating Cost/Benefit
f. Fifteen Year Total Annual Savings	$33,820
g. Fifteen Year Total Annual Operation and Maintenance Costs	-$2,813
h. Fifteen Year After Tax Total Interest Payment (financed at 8.0%)	-$5,924
i. Fifteen Year Total Benefit (f-g-h)	$25,083
j. Fifteen Year Average Benefit (i divided by 15)	$1,672
Economics
k. Simple Payback including interest (e divided by j)	8.2 years
l. Simple Payback excluding interest (e divided by (j-h))	6.3 years
m. Simple Return on Investment including interest (1/k)*100	12.2%
n. Simple Return on Investment excluding interest (1/l)*100	15.9%

Over its expected life of 30 years, the renewable energy system will displace enough fossil fuel to prevent 320,000 pounds of carbon dioxide (a green-house gas attributed to global warming), 270 pounds of smog-producing nitrogen oxides, and 210 pounds of acid rain-producing sulfur dioxide from being emitted into the island’s ecosystem.

In this case, the actual renewable energy system installed cost is less than the cost of the power line extension, and provides tax benefits while saving $33,820 in energy costs, with only $2,813 in operation and maintenance costs over 15 years. When considered from the alternative cost perspective of bringing in utility power, this renewable energy system has an immediate payback.

WIND SYSTEM, LATER EXPANDED

TO SOLAR ELECTRIC

The owners of a three-bedroom home on a one-acre lot are considering the installation of a 1,500-watt wind turbine to offset the cost of electricity. They decide they would also like to utilize four days of battery storage to ensure they have a backup supply of electricity in case of a power failure or sustained adverse weather. They have neighbors in the lots around them and want to install a system that is quiet and does not obstruct their view.

After assessing the best spot for the turbine, and allowing for setbacks to meet Block Island's zoning requirements, they decide to think longer term. They utilize the grant to buy the basic components of an energy renewable system, which utilizes wind energy at this time, but can be later expanded to include solar electric panels. After discussing their energy needs with a design professional, they specify a 4,000-watt inverter that can handle the wind turbine, as well as the solar electric panel output that is to be installed in a few years. The following analysis is for the first 15 years of the system's expected life of 30 years. All figures are in current dollars.

Capital Cost
a. Installed Cost	$12,980
b. Grant	- $3,245
c. Cost After Grant (a-b.)	$9,735
d. 25% Rhode Island Renewable Energy Tax Credit (Depreciation and Federal Tax Credit not applicable in this example)	- $ 3,245
e. Actual Installed Cost (c-d)	$6,490
Operating Benefit/Cost
f. Fifteen Year Total Annual Savings	$17,961
g. Fifteen Year Total Annual Operation and Maintenance Costs	-$1,731
h. Fifteen Year After Tax Total Interest Payment (financed at 8.0%)	-$2,229
i. Fifteen Year Total Benefit (f-g-h)	$14,000
j. Fifteen Year Average Benefit (i divided by 15)	$933
Economics
k. Simple Payback including interest (e divided by j)	6.9 years
l. Simple Payback excluding interest (e divided by (j-h))	6.0 years
m. Simple Return on Investment including interest (1/k)*100	14.5%
n. Simple Return on Investment excluding interest (1/l)*100	16.7%

Over its expected life of 30 years, the renewable energy system will displace enough fossil fuel to prevent 328,000 pounds of carbon dioxide (a green-house gas attributed to global warming), 243 pounds of smog-producing nitrogen oxides, and 196 pounds of acid rain-producing sulfur dioxide from being emitted into the island’s ecosystem.

In two years, the owners installed 1,600 watts of solar electric panels at a cost of only $6,400 as the inverter, cable and batteries had already been purchased utilizing the grant. This increased the annual savings by $900, with the Fifteen-Year Total Benefit becoming $25,701. The simple payback on the complete including interest charge on the complete installation was lowered to 9 years or a simple return on investment of 11%. The simple payback excluding interest charges was 7.5 years or a simple return on investment of 13.3%.

SOLAR ELECTRIC (PV) SYSTEM

The owners of a four-bedroom house believe the best way to help protect Block Island's fragile ecosystem, which the enjoyment of is one of the reasons why they chose to live on the island, is by utilizing sustainable building concepts. They decide to install a solar electric system that will supply most of their needs. They also realized the best way to maximize the effectiveness of renewable energy technology is by first looking in their home for energy efficiency opportunities. Taking advantage of the latest technologies, they purchased warm tone compact fluorescent lamps, and an energy-efficient refrigerator/freezer. They were also able to utilize a rebate from the local power company to help pay for the lamps. Installing these energy efficient devices lowered their energy consumption by over 40 percent, making their renewable energy resources go much further.

The couple installed a simple 1,000-watt solar electric system, utilizing an inverter that could be added to, if they decided to increase the size of their system at a later time. The company they selected offered leasing, which allowed the 10 percent Renewable Energy Tax Credit and 5-year MACRS depreciation to be transferred to the owners. The following analysis is for the first 15 years of the system's expected life of 30 years. All figures are in current dollars.

Capital Cost
a. Installed Cost	$6,592
b. Grant	- $1,648
c. Cost After Grant (a-b.)	$4,944
d. 10% Renewable Energy Tax Credit and Depreciation and 25% Rhode Island Renewable Energy Tax Credit	- $2,307
e. Actual Installed Cost (c-d)	$2,637
Operating Benefit/Cost
f. Fifteen Year Total Annual Savings	$6,491
g. Fifteen Year Total Annual Operation and Maintenance Costs	- $450
h. Fifteen Year After Tax Total Interest Payment (leased at 9.0% interest)	-$1,410
i. Fifteen Year Total Benefit (f-g-h)	$4,631
j. Fifteen Year Average Benefit (i divided by 15)	$308
k. Simple Payback including interest (e divided by j)	8.6 years
l. Simple Payback excluding interest (e divided by (j-h))	6.5 years
m. Simple Return on Investment including interest (1/k)*100	11.6%
n. Simple Return on Investment excluding interest (1/l)*100	16.1%

Over its expected life of 30 years, the renewable energy system will displace enough fossil fuel to prevent 68,000 pounds of carbon dioxide (a green-house gas attributed to global warming), 51 pounds of smog-producing nitrogen oxides, and 41 pounds of acid rain-producing sulfur dioxide from being emitted into the island’s ecosystem.

Renewable Energy Systems Installed at Time of New Construction

Often the most cost-effective way to install renewable energy systems is at the time of construction. This reduces the cost of running pipes, conduit, and wire.

The following example describes the economics of installing a solar electric system on a home at the time of construction, and operating and maintaining it for thirty years.

Capital Cost
a. Installed Cost	15,560
b. Grant	- $8,000
c. Cost After Grant (a-b.)	$7,560
d. 10% Renewable Energy Tax Credit	- $1,556
e. Actual Installed Cost (c-d)	$6,004

Operating Benefit/Cost
f. Thirty Year Total Annual Electricity Savings	$20,635
g. Thirty Year Total Annual Operation and Maintenance Costs	- $3,806
h. Thirty Year Total Interest Payment Deduction Benefit (at 7.0% interest)	+$2,875
i. Year Total Benefit (f-g+h)	$19,704
j. Year Average Benefit (i divided by 30)	$657
k. Simple Payback including interest (e divided by j)	9.1 years
l. Simple Return on Investment including interest (1/k)*100	10.9%
From a monthly perspective, the cost of the renewable energy system is an extra $43.94. By the tenth year, the system is saving $45.38. Cash flow continues to be positive until the end of the thirty years and beyond. In the twentieth year, the monthly system savings is $64.40 (cash flow $20.46 to the positive), and in the thirtieth year, the monthly system savings is $95.62 (cash flow $51.68 to the positive)