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: Combined Science)

Revision Note

Cost Effectiveness of Renewable Energy Equipment

Worked example

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Author: Katie M