The Cost of Energy (COE) is another tool to examine the economic performance of your Wind Project.
A Cost of Energy (COE) calculation addresses the levelized value of your system over a system life time. Calculating your Cost of Energy (COE) for a given wind project gives you a number to assess feasibility of a project. Your Cost of Energy (COE) allows you to compare your project costs with other market options for sourcing electricity. This gives you a good gauge regarding your projects competitive position.
The Cost of Energy (COE) for a given wind project can be calculated from a general equation:
Cost of Energy (COE) = (IC * FCR + AOM)/AKWH
The Cost of Energy (COE) in Cents/KWH can now be calculated using these terms:
COE = Cost of Energy in Cents/KWH
FCR = Fixed Charge-Rate (Interest Rate)
AOM = Annual Operation and Maintenance Costs
AKWH = Annual Energy production in KWH
Example of Cost of Energy Calculation
Furthering our example of a Home Power Net-Metering System, the Cost of Energy can be determined. This project is using an ARE442 Wind generator rated at 10 Kw power and 1,800 KWH/Month Energy production, with an Installed Cost (IC) of $48,000. Our example becomes:
COE = (IC*FCR + AOM)/AKWH
COE = (48,000*0.09 + 480)/21, 600
COE = 22.22 Cents/KWH
In our example of the Home Power Net-Metering System for Kauai, Hawaii (where there is no rebate so back to the original IC cost of $48K), the levelized Cost of Energy (COE) over the life cycle of the hardware estimated at 20 years with Planned Maintenance Schedule (PMS) can be calculated.
With a Levelized Cost of Energy (COE) of 22.22 Cents/KWH, and a grid-market rate of 41 Cents/KWH this Home Power Net-Metering System makes economic sense.
NOTE: These economic models use a FIXED value of Energy. Since Energy is rising in price in all markets the real Simple Payback and Cost of Energy is much better than calculated. Doing a Yearly Net-Present Value and a spreadsheet would allow you to use these general equations to calculate more accurately your real performance expectation.
The Economic Performance of your Wind Project is dominated by your real Installed Cost of hardware, and your Actual energy production at your site. This will require investigation into your proposed Wind Equipment Manufacturer, and the actual physical characteristics of your site. Factors such as road access, fencing, gates, soil conditions, specialized equipment for installation (especially true for Large Wind Turbine projects) such as Boom Trucks or large Cranes.