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$/MT CO2

October 15, 2010
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I have never actually seen the inside of a calculation of how much it costs to avoid CO2 using PV. So I thought I’d do it myself and see if it’s as horrible as some people seem to imply.

Now a watt of PV installed for a year can produce from about 1-2 kWh/yr. Maybe that watt cost $3 to install. One kWh produced normally in the US, by the EPA estimate, is about 0.7 kg CO2 / kWh. So using an average value of 1.5 kWh/W-yr, we could assume about 1 kg/W-yr.

But this forgets two pretty significant things – those kWh are valuable; and there is a loan that adds cost to the PV. So for round numbers, let’s assume the loan doubles the amount of money spent on the PV; but the value of the electricity offsets the original amount. Voila, we are back where we started – $3/W of added cost. This is obviously very rough! But it is assumptions like this that make all these calculations ‘rough’.

So if you calculated the cost per MT of CO2 on the basis of one year PV output, it would be $3/1 x 10-4 MT = $3,000/MT – not a pretty picture.

But if you assumed that PV would last 30 years, then PV would cost $3000/30 = $100/MT. This seems to be the number you hear the most often.

Still high.

But at a hundred years, this might settle down to about $30/MT plus some degradation and for O&M. So here’s my first ansatz at calculating the $/MT CO2 of PV:

Cost per MT of Avoided CO2 from PV (First Approximation, $/MT CO2 avoided)

Assumes 1.5 kWh/W-yr Sunlight $3/W $1.5/W
30 years $100 $50
100 years $30 $15

If the PV were cost effective at $2/W, say, then the $3/W number would be higher; but the $1.5/W number might be almost zero (and the the details of the loan, the degradation, extra cost for variability, and O&M would need to be included).

Here’s another way to look at this, based on levelized electricity cost. We have to make some broad assumptions, so let’s assume that solar electricity is worth 10 ¢/kWh. And let’s assume that $3/W system has a levelized cost of electricity of 16 ¢/kWh with a 30-year loan (this is about right for a sunny location). That means it needs a 6 ¢/kWh for 30 years subsidy to be installed. Each kWh avoids 0.7 kg, so this is 9 ¢/kg, or 90 $/MT (rounding up). Each year, society would have to pay an additional $90, but would also get another MT of saved CO2.

This doesn’t count the fact that after 30 years, society would actually start saving money (the PV system is running for 1 ¢/kWh, so we would be getting 9 ¢/kWh savings). So that means in another 20 years, or 50 years total, our CO2 would have been avoided for free. (This connects up with the previous analysis if the savings after the loan were included.)

But no one ever counts the post-30 years part, usually saying it is “discounted” away. So much for the Hoover Dam – it’s just a phantom of our collective imagination. (Actually, the savings are real; it’s only the economists who think business-defined discounting is “real,” when in fact it is only used for business to maximize short-term profit. It is not societally defined the same way.)

Ken Zweibel

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3 Comments leave one →
  1. Slurry permalink
    October 20, 2010 7:13 pm

    Ken, when PV capex falls below $2,00/Wp (the marginal cost is already there) and the LCOE hits 10 cents/kWh you will get free CO2 abatement. It’s not more than 3-4 years away.

    • gwsolar permalink*
      October 20, 2010 7:43 pm

      I agree. We can look forward to it.

      I also agree with your other comments, and will also be looking at the methane as storage option.

  2. November 3, 2010 12:02 am

    I’m looking forward to it as well. I live in the southeast and for the first time I am hearing advertisements on the radio about building solar panels. Im trying to get involved with college programs and state run programs to really get my site known. ; ] let me know if there is anything I can do for George Washington Solar.

    Will@

    solar energy home

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