Economics of solar power generation

It is technically feasible for renewable energy technologies (RETs) to replace the present fossil fuel electricity infrastructure. The dependence on fossil fuels, the need of reducing the carbon emissions associated with energy use and the prospects of developing a new and extremely innovative technology sector make solar energy increasingly attractive. PV is considered a clean, sustainable, renewable energy conversion technology that can help meet the energy demands of the world’s growing population and reducing the adverse impacts of fossil fuel use. Photovoltaic electricity is a rapidly growing renewable energy source.

Pros and Cons of Solar PV:



The economic feasibility of PV projects is increasingly being evaluated using the levelized cost of electricity (LCOE) generation in order to be compared to other electricity generation technologies. The cost of solar generated electricity is typically compared to electricity produced by traditional sources with a levelized cost of energy (LCOE) calculation. Levelized Cost of Energy (LCOE) is the constant unit cost (per kWh or MWh) of a payment stream that has the same present value as the total cost of building and operating a generating plant over its life. LCOE is used as it is very useful in comparing technologies with different operating characteristics. Typically LCOE are calculated over 20 to 40 year life, and are given in the units of currency per kWh or MWh. The LCOE of solar PV systems reflects the price at which energy must be sold to break even over the assumed economic life of the system. Stated another way, it is the cost incurred to install and maintain an energy-producing system divided by the energy the system will produce over its lifetime of operation. LCOE is an assessment of the economic lifetime energy cost and energy production and can be applied to essentially any energy technology. It is frequently used to evaluate a technology or energy system against electricity purchased from the grid. The LCOE takes into account system costs, as well as factors including financing, insurance, operations and maintenance (O&M), depreciation and any applicable incentives. Installed costs are a primary driver for solar PV systems as they lack fuel costs and require minimal O&M.

The cost of solar generated electricity is higher as compared to electricity produced by traditional sources so the future of solar power is based upon reduction in cost, it is imminent that coal and fossil fuels are soon going to get depleted. But, solar energy beats traditional sources of power when it comes to consideration for the planet and sustainability of the environment.

Posted by: Vanita Rana


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