So continuing on a theme, there are many ways to describe value.   In order to measure the value of technology, we must measure it’s cost performance.  There are many elements of the value proposition that need to be considered, such as cost to acquire the technology, installation costs, maintenance cost and life expectancy.  And the benchmark for cost performance is the market price for the old technology.

So taking electricity, for example, any comparison of new technology to deliver electric power must be compared with the present cost to deliver power.  If coal fired powerplants can deliver power, with all of the costs already accounted for, at 10.6 cents per kWh, then any new method must achieve that cost performance or customers must be prepared to pay more for electricity.  If CO2 reduction or eliminating coal combustion pollution are sufficiently high priorities in the consumer’s mind, then electricity will simply have to cost more.  

From my minimal involvement in the utility industry, I know there has been serious effort dedicated to reducing pollution from coal-fired plants.  Soot and particulates are precipitated in a variety of techniques and “scrubbers” are used to further clean contaminants from the air.  Not perfect, but significantly better than the levels 20 years ago.

Among the alternatives, solar panels (or photovoltaic panels) are a clean method for generating electricity.  No combustion, super clean.  They are typically 11-12% efficient and large panels that generate 250W typically cost around $600.  One of the difficult issues in adopting solar power is that the 250 Watt rating is a capacity, not actual performance.  The maximum output of the panel is based on being perpendicular to the sun.

Tracking increases power output by keeping the panel in the ideal orientation to the sun. But trackers cost thousands of dollars and require some maintenance over the 20 year life expectancy of the solar panel.  If a large tracker costs $7500 and will handle mounting 20 panels, it has a direct cost of $375 per panel.  So the solar panel and tracker together are $975 to purchase.

There are 4465 hours of daylight per year here in Austin Texas.  With perfect sunlight all year, a 250 Watt solar panel might produce 1116 kWh which have a value of $118.30 at the rate of 10.6 cents/kWh that the utility bills in my neighborhood. Of course, sunlight is not always available, so the actual value of power generated might be quite a bit lower, like a third less.  And if you don’t clean your panels regularly the dirt accumulation will reduce output as well.

But even taking the optimistic, if somewhat unrealistic, maximum value of $118 for the revenue generated by a solar panel per year, the return on investment looks like 8 years not including the maintenance costs.  The opportunity to reduce operating costs with solar power is quite attractive. But the companies, like British Petroleum and Wal Mart, who are making the switch are able to do so based on the long term return on investment to reduce their operating costs.  This is not at all the same as claiming that solar power is reaching parity with the cost for utility power.