Cost Effectiveness of Renewable Energy Equipment

Some households install their own means of generating renewable energy, such as roof-top solar panels and domestic wind turbines

The cost-effectiveness of introducing domestic solar and wind energy equipment can be determined by evaluating
- The installation cost of the equipment
- The amount saved in fuel costs

This is called the payback time

$p a y b a c k t i m e (y e a r s) = \frac{i n s t a l l a t i o n c o s t s}{s a v i n g s p e r y e a r}$

This is a way of determining the amount of time (in years) that the equipment needs to be fitted before the savings start to outweigh the installation costs
- For example, if a solar panel costs £5000 to install and saves £500 per year in electricity bills, the payback time would be 5000/500 = 10 years

Worked example

A household installs solar panels on their roof to heat their domestic water supply. The cost of fitting the solar panels was £5500.

The domestic water supply is heated using gas. Before installation, the household pays £980 for gas. One year after installation, the household pays £610 for gas.

Calculate the expected payback time.

Answer:

Step 1: List the known quantities

Installation cost = £5500
Savings per year = £980 − £610 = £370

Step 2: Calculate the payback time

Payback time = $\frac{i n s t a l l a t i o n c o s t s}{s a v i n g s p e r y e a r}$

Payback time = $\frac{5500}{370}$ = 14.9 years

It will take about 15 years before the savings start to outweigh the installation costs

Cost Effectiveness of Renewable Energy Equipment (WJEC GCSE Physics)

Revision Note

Cost Effectiveness of Renewable Energy Equipment

Worked example

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Author: Katie M