Random Ramblings of Everyday Life

Economics of Solar Power

Posted in Guides by ziptrickhead on July 12, 2010

This article will be the start for a series of solar energy articles that I will be writing.

The recent trend, especially in the technological world, is being “green”. Basically, people are realizing that the human race is slowly destroying the Earth and that steps have to be taken to preserve the planet. One method, a very popular one at that, is the use of alternative energy outside of burning petroleum products, such as the use of solar cells for solar power.

Solar power isn’t the only solution, and by all means it isn’t the best solution for every location around the world. Obviously if you live in a place with a lot of direct sunlight for several hours a day then solar power would be more efficient than in the place with very little direct sunlight.

It is important to note that no one denies the fact that solar power has a very expensive startup cost. But is solar power really “worth it” over a long period of time?

When we measure electricity use, we use the unit kilowatt hours (kWh). According to the World Bank, the electricity use in the United States during the year 2007 was 13,652 kWh per capita. 1 kWh is equivalent to 3,413 British Thermal Units (BTUs).

Lets look at some of the more common fuels burned to produce electricity.

1 barrel of crude oil can produce approximately 5.8 million BTUs or 1699 kWh
1 cubic foot of natural gas can produce approximately 1,034 BTUs or 0.3 kWh
1 ton (2,000 lb) of coal can produce approximately 6.19 million BTUs or 1814 kWh

With those three sources, it would either take around 8 barrels of crude oil, 45.5k cubic feet of natural gas, or 7.5 tons of coal in order to generate enough electricity for one person for one year.

According to Bloomberg Business Week, the price of a barrel of crude oil dropped to $74.92 on July 12, 2010. Fairbanks Natural Gas listed the price of 100 cubic feet of natural gas as $2.335 during 2009, which would be an equivalent of $0.023 per cubic feet. Meanwhile, a ton of coal costs approximately $50. Forbes mentioned that the burning of coal provided 50% of the electrical power in the United States and that’s no surprise considering how much potential energy can be obtain from coal in a low price point. Costs works out to $599.36 for crude oil, $1046.64 for natural gas, and $375 for coal per person per year.

Now let’s consider the cost of solar power. Solar cells generated DC power, while most electrical appliances are made to run on AC power. During that conversion in the inverter, there is typically loss; let’s estimate it at 10%. So the estimated electricity use of 13,652 kWh increases to 15,017 kWh to compensate for the 10% loss. That averages out to 41 kWh that has to be generated each day. Of course there isn’t sunlight 24 hours a day everywhere so estimate that peak sunlight hours are during mid-day; 3 hours a day. That would require a system that could generate approximately 14 kW per hour of peak sunlight. A quick search online showed results that a 14 kW system could be purchased for around $50,000. Generally these solar power systems have a life of 20-30 years. Even if you managed to get the full 30 years, that would equate to spending $1667 a year for electricity.

Just looking as the quick analysis shows that solar power is really the more expensive option. In fact, just several years back, solar cells were no as efficient as they are now, and power systems were more expensive than they are now for the same performance. So why bother? Well, our other sources of power are limited. Granted, those resources probably won’t be gone during my lifetime, but they will be eventually. The prices for oil, gas, and coal constantly fluctuate as well. Just a few years ago, a barrel of crude oil was priced at over $100. The price for the raw fuel doesn’t include the inflated prices that the power company charges the end consumer either (ie. transporting and processing the fuel, as well as distributing the power and paying the salaries of all those involved).

Solar power does have several advantages though, outside of just being eco-friendly. As technology advances, solar cells will be able to generate more power in less surface area, with more efficient conversion of photons to current. There are also places that get more peak sunlight per day than others. For those places, like a desert, solar power may even be a cheaper alternative to traditional fuel. Plus, the solar power system will still generate power even during times where there isn’t peak sunlight. Solar power can even make money for you. If your system is connected to the power company’s lines, any excess power produced will be available for the power company to use, and they will pay you for that energy. There are also many government funded programs that will give people rebates for installed solar power systems which can help with the high set up cost.

There is also modularity. Solar power systems do not come in one enclosed system, but several parts. If any one component breaks or stops functioning properly, it can easily be swapped out. When solar cells themselves improve, the old cells can be removed and replaced while the inverter and wiring stays the same. Solar cells can also be installed on special mounts that will adjust the angle and direction of the cells to get the most exposure, increasing peak sunlight hours.

So is solar power worth it? In my opinion, yes! While it is indeed expensive, and I can’t promise that “the system will pay for itself in 20 years”, it does help the environment and gives you a certain freedom away from “the grid”. Many individuals and companies are seeing the value of solar power and are investing into it. As the technology is more widely used, the technology will decrease in price in the long run. Perhaps if the demand is great enough, one day solar power will be financially obtainable for everyone. Some companies like Google and Kyocera are installing “solar tree groves”, basically using large solar panels in their parking lots to harvest solar energy as well as keep cars in the shade. How’s that for ingenuity?


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