Calling All DIY'ers....What is Your Cost of Production?

Yes, it is hard to please everyone! Please do not misunderstand me, intrinsically, the COP calculation is fine. I really did advocate for a similar calculation in another thread, against some resistance, and even tried to give it a cool acronym like you are doing. My choice for the denominator was not lifetime generation, exactly, but lifetime electrical consumption from the PV system. As stated above, the value of electricity generated in excess of immediate consumption needs to be handled differently, and will depend on the net metering scheme used.

My issue with your posts in this thread is that the comparison of costs you are making is only meaningful with a very specific set of assumptions about what electricity rates will do in the future relative to the possible future value of today's cash used in other ways. Just because two numbers are reported in units of $ / kWh does not mean they can be meaningfully compared. Comparing your COP to LCOE, for instance, would lead to very misinformed conclusions about relative value of solar.

I am very glad to see another user of this forum attempting to independently determine the financial benefit of their system. Most just accept what they are sold, for better or for worse.

All this, pretty much regardless of what it's called, can be thought of as the stuff of process economics as applied to energy use. As such, there are as many ways to define what's meaningful as there are people to do the analysis - each one slightly or vastly different from the others. What may be a subject for discussion, among others, is how any method(s) is/are different from some commonly agreed upon set parameters put forward by people knowledgeable in the subject.

Thanks gentlemen, your comments are appreciated.

I didn't get much of a response for COP metric from DIY'ers. Maybe russ is right...there are not that many DIY'ers around and if there are maybe they just don't like to fool around with numbers.

In any case I know my numbers and I see COP (as I define it) coming down rather dramatically in the last few years. We can argue about the method of calculation but you can't argue with the slope. This augers well for the solar industry...with or without subsidies.

I realize now that COP does not mean a lot to anyone on "net metering" schemes. But here in the coal rich Midwest where "net billing" mostly prevails it is meaningful. If you are selling your excess production at a wholesale price then you have to know your costs. Selling at or below cost is just plain idiotic, yet there are people throwing money at these schemes with no hope of a payback.

If I avoid paying $.32/kwh for 100 kwh, and get paid $.02/kwh for 10kwh of excess production, I'm still WAY ahead, even if my costs are well over what I sold for.
And if I size it up a little and get to avoid paying $.32/kwh on 110kwh and am paid $.02 on 30kwh, it's still a good deal if my costs are under $.12/kwh for those additional kwh. (.32*10 +.02*20 vs. $.12 * 30)


My view is your cost-of-production is relying on more assumptions than a simple "when would this system pay for itself?" calculation.
And while you can get fancy with that calculation, just using 0% for inflation and 0% for increases in utility charges is probably good enough.
At least good enough to determine "yeah, this will pay off in 4-6 years" vs. "This pays off sometime around 20 years, but maybe never if my maintenance is a little higher or production is a little lower"

Now we are getting somewhere...CA Tom, I think you see the light.

When I first installed my system I wanted to offset my annual kWh usage, ~12,000 kWh. It turns out that of my 12,000 kWh production 44% was used internally (ie POCO never saw it) and I sold at wholesale 56% of production. OK now every kWh I produce above my internal needs must be sold at wholesale to my POCO. It is critical that I sell that excess at a profit....just simple economics. But as we know it is more complex than that. You have to take into consideration the time value of money (ie lost interest from putting that investment in a different productive asset) So it necessary to run an IRR calculation. If that IRR calc returns more than a comparable investment (lets say T-Bills) then I'm ahead of the game.

As sensij would want to do, you need to lay out your cash flows by year...from there its simple financial analysis. The tough part is determining the cash flows.