Homeowners looking to find a cheap way to generate electricity often install solar panels. However, they need to understand solar power costs to ensure their satisfaction with this investment. You can determine a solar power system's long-term and upfront costs with the Levelized Cost Of Energy (LCOE) and Price Per Watt (PPW). In this article, we will tell you all about them.
Solar Price Per Watt
In this pricing system, homeowners can see their payment for every watt of solar panel capacity installed. Solar power capacity measures the maximum amount of power that any system can generate in ideal situations.
It doesn’t mean how much power the system will produce because solar energy generation depends on the intensity and amount of sunlight captured. You can compare the value of different solar power systems and solar panel pricing with PPW.
Calculation And Important Information
Calculating PPW is easy; just write down the total price of the system you are purchasing (after incentives), and divide it by the number of watts of generation capacity for that specific system.
Some important information:
- Dollars per watt ($/W) is PPW’s unit.
- When you factor in all the incentives, rebates, and other financial costs in the price of your solar power system, you get the net system cost.
- Most solar panels have a size in kilowatts (1kW = 1,000 watts).
- Convert it into watts (W) by multiplying it by 1,000.
- PPW can be calculated by dividing the net system cost by the total wattage.
The Usefulness Of Price Per Watt
You can compare different quotes for solar panels with PPW. The comparison is between systems, regardless of any difference in size. It also simplifies the payment for solar generation and gives an accurate payback period estimate.
Levelized Cost of Energy
It is the average per-unit price of any type of energy over the system's lifetime. LCOE compares the unit economics (the ratio of acquisition costs to lifetime value). The technology used for testing varies in energy-generating sources like coal power plants, natural gas, and green energy.
Solar companies use LCOE to advertise their solar power system's lifetime unit cost ($/kWh). It is cheaper than purchasing electricity from a local utility company. This is important as a customer can generate lifetime savings by going solar.
Electricity rates are bound to increase over time since natural resources are diminishing. You are saving yourself from rising retail rates forever by purchasing solar panels. LCOE proves all this, but it is more complex to calculate than PPW.
LCOE considers the following:
- Size.
- Efficiency.
- Net cost.
- Records a range rather than a precise value depending upon the installed system's scale size and geographic location.
- The annual rate of deterioration.
- Amount of daily sunlight received.
Things included in LCOE are:
- Financing costs (the sum of interest payments made over a system's lifetime).
- Net system price.
- Service and upkeep costs.
- Net Present Value (NPV).
- Nominal power.
- Expected lifespan.
- Average efficiency.
- Sunlight hours for a specific area and time.
- Capacity factor.
Since LCOE calculates using the net system price, please check the interest rate on the financial product you choose and add its total cost to the system’s price. A system with a lower upfront cost and a higher interest rate will have a worse LCOE because those prices raise the lifetime costs and decrease your savings.
The Advantage Of LCOE
With LCOE, you can easily estimate the long-term feasibility of renewable energy. It looks at the big-picture value of solar panels across 25-plus years. It also shows how the cost per kWh of energy your system produces decreases over time. The longer you use your system, the lower the kWh will be.
LCOE can efficiently calculate the cost of electricity generated by two different solar panels while the other factors remain unchanged. By this, you can check which system will save you more money. LCOE can also let you compare solar systems in different geographical locations. This is extremely helpful, especially when comparing solar to various electricity rates by state.
The Difference
LCOE calculates long-term value and costs, while PPW seeks upfront costs. PPW is simple to calculate, while LCOE is complex. With LCOE, you can compare the average per-unit cost of the electricity generated by your solar panel. On the other hand, PPW compares solar power and solar panel system installation prices. Ultimately, it is up to you to decide which calculation you want to go for.