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How to calculate whether it is financially worth installing a domestic renewable energy solution

Last Updated on Monday, 21 March 2011 14:06





There are many renewable energy options for domestic property these days allowing you to heat your home, hot water and generate your own electricity, but they are all expensive.   Manufacturers also have lavish claims for how much you will save.   Reducing carbon emissions is important, so this kind of technology is very important to our future, but if the financial return is inadequate, you may get better return for your money and the environment by simply insulating your loft.  Here are some simple steps to calculate the financial viability of an energy project.

  1. Find out the likely useable energy you will be able to harness in kWh, for photovoltaic’s and a wind turbines this will be electrical energy; and with a heat pump or solar hot water it will be direct thermal energy.
  2. Determine the cost of that energy from the electricity grid or the gas supply or for any other fuel you may use for heating.  There is a graphic included for most fuel types giving the current fuel price per kWh.  
  3. All you do now is multiply the fuel price per kWh that you are replacing by the usable energy you are harnessing in a year.  
  4. This will give you your annual energy saving.
  5. The final step to estimating a payback time is to divide the cost of the equipment by the financial value of the energy saving per year.
**

As an Example

You may consider installing solar cells on your roof.   With all the sunlight availability calculations, and the efficiencies of the solar cells considered, you may work out that your system can produce 2000kWh per year, which you can store easily for use later.  If Electricity costs 0.12 pounds (or dollars) per kWh then you would be saving 240 pounds per year.  The system costs you, fully installed, 15000 pounds, the installation would then take 62.5 years to payback the investment.

Heat pumps is another very interesting one, have a look at this:-

Doing this type of calculation can very quickly tell you what it is sensible to invest in to get the most out of your money and to save the most energy.  There are those who would like us to ruin ourselves financially to save 1g of CO2


**Some Assumptions:-
Does not consider maintenance costs,
Excludes finance and alternative investment considerations


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