## 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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