## 825 The Complete Cost Equation

The total cost of producing electricity with a DG system is developed in this section. The accounting can be done before or after taxes; the former counts the cash payments, the latter their net (after-tax) values. The two modes differ by a factor (1 - T) where t is the income tax rate. For example, if the market price of fuel is 5\$/GJ and the tax rate (federal plus state) t = 40%, then the before-tax cost of fuel is 5\$/GJ and the after-tax cost (1 - T) x 5\$/GJ = 3\$/GJ. Stated in terms of after-tax cost, the complete equation for the life cycle cost of a DG investment can be written in the form:

down payment cost of loan

-rfi

( A/P, r, Nt ) _ ( A/P, r , Ni - r l ) L(A/P, rd, Ni ) ( 1 + r i ) ( A / P, r „ i , Ni)J

'cred

Tfdep\

tax deduction for interest tax credit depreciation salvage cost of energy

cost of demand cost of maintenance (8.34)

where

 am = annual cost for maintenance (in first year \$) ^cap = capital cost (in first year \$) ^salv = salvage value (in first year \$) fdep = present value of depreciation, as fraction of C f = fraction of investment paid by loan N = system life (yr) N = loan period (yr) Pe = energy price (in first year \$/GJ) Q = annual energy consumption (GJ) rd = market discount rate re = market energy price escalation rate rd,e = (ri - re)/(1 + re) rdem = market demand charge escalation rate rd,dem = (ri - riem)/(1 + riem) rinf = general inflation rate rl = market loan interest rate rd,l = (ri - ri)/(1 + r) rM = market escalation rate for maintenance costs rd,M = (ri- rM)/(1 + rM) T = incremental tax rate 1cred = tax credit

If there are several forms of energy involved, e.g., gas and electricity, the term Q pe is to be replaced by a sum over the individual energy terms. Many other variations and complications are possible: for instance, the salvage tax rate could be different from t.

## Solar Stirling Engine Basics Explained

The solar Stirling engine is progressively becoming a viable alternative to solar panels for its higher efficiency. Stirling engines might be the best way to harvest the power provided by the sun. This is an easy-to-understand explanation of how Stirling engines work, the different types, and why they are more efficient than steam engines.

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