How to Calculate the Cost of Photovoltaic kWh
Solar photovoltaic energy has become one of the most sustainable and cost-effective options for generating electricity. Therefore, one of the key aspects that both individuals and businesses must consider when opting for solar energy is the cost of photovoltaic kWh. But how is this cost calculated? In this article, we explain it simply.
THE COST OF photovoltaic kWh
The cost of photovoltaic kWh refers to the price we pay for each kilowatt-hour (kWh) of electricity generated by a photovoltaic system, in other words, for each unit of energy produced by our installation. This cost is crucial in determining the profitability of a solar installation, as it directly impacts the savings that can be generated compared to conventional electricity.
Factors that Influence the Cost of Photovoltaic kWh
The calculation of this cost is not as simple as multiplying the price of solar panels by their efficiency. There are various factors that affect the calculation, which are essential to obtain an accurate estimate:
- Initial investment: The cost of installing a photovoltaic system, which includes the solar panels, inverters, batteries (if included), and installation costs.
- System lifespan: Typically, solar panels have a lifespan of 25 to 30 years. The lifespan of the system affects the total installation cost, as the longer the lifespan, the cheaper the cost per kWh will be.
- Annual energy production: The performance of the photovoltaic system is calculated based on the amount of energy it produces annually. Factors such as geographical location (latitude, sunlight hours), panel orientation and inclination, and shading from nearby buildings or trees can all affect the annual energy production.
- Maintenance: Although photovoltaic systems require little maintenance, we cannot forget about the maintenance costs throughout their lifespan, which include cleaning the panels and periodic inspections of the components.
- Grants and subsidies: Depending on the legislation in force, there may be subsidies or government aid that help reduce the initial installation cost and, consequently, lower the cost of kWh.
The Calculation
A simplified version of the calculation of the cost of each kWh produced by a photovoltaic system is done using the following formula:
Photovoltaic kWh cost = Initial investment / Total energy production over the system’s lifetime.
We can simplify the total production as:
kilowatts of power * equivalent sun hours * years in operation.
However, to get a more accurate figure, maintenance costs, inflation, the lifespan of each system component, panel degradation, and other techno-economic parameters must also be considered. As a simple example, if, for instance, your 50 kWp photovoltaic system costs €40,000 and produces 72,500 kWh per year over 25 years, the calculation would be as follows:
- 50 kWp installation.
- Initial investment: €40,000.
- Annual production of 72,500 kWh (from 50 kWp * 1,450 equivalent sun hours).
- Total production over 25 years: 72,500 kWh x 25 = 1,812,500 kWh.
- Photovoltaic kWh cost: €40,000 / 1,812,500 kWh = €0.022/kWh.
Tools That Can Optimize This Calculation
The calculation of photovoltaic kWh cost can be done more accurately and efficiently with digital tools. For example, one such tool is E·Manager, which allows monitoring and managing all photovoltaic installations, providing up-to-date data on consumption and energy generation.
E-Manager optimizes energy production and adjusts recommendations to maximize economic savings. Furthermore, with its management of collective self-consumption and coefficient distribution, energy communities can distribute energy more efficiently, reducing the global kWh cost.
The cost of photovoltaic kWh depends on various factors, and although the initial investment may seem high, long-term savings are significant. When comparing the cost of photovoltaic electricity with the price of conventional electricity, it is clear that photovoltaic self-consumption is becoming an increasingly profitable and sustainable option, both for businesses, municipalities, and individuals.
Comparing the Cost of Conventional Electricity
The cost of photovoltaic electricity is one of the great advantages compared to conventional energy sources. The price of electricity from the grid varies by market, but in many countries, this price ranges from €0.12/kWh to €0.15/kWh. So, with a photovoltaic system, not only is the dependence on the grid reduced, but substantial savings are also generated over the years.
Now, if we talk about recovering the investment (ROI), this will depend on the installation cost, the savings generated, and the energy production. Using the previous example, if you save €5,500 annually with your solar installation, the payback period would be 7.2 years (€40,000 / €5,500 in annual savings).