How to calculate the per unit cost of solar power generation?

The per unit generation cost of solar energy is calculated by determining the total cost of installing and operating a solar power system and then dividing it by the total amount of electricity generated over its lifetime. Here are the steps to calculate it:

Initial Investment (Capital Cost): Calculate the total cost of installing the solar power system. This includes the cost of solar panels, inverters, mounting hardware, wiring, installation labor, and any other associated costs.

Incentives and Subsidies: Subtract any available incentives, tax credits, or subsidies from the initial investment cost. Governments and utilities often offer financial incentives to promote solar energy adoption.

Operational and Maintenance Costs: Estimate the ongoing operational and maintenance costs over the lifetime of the solar system. This includes expenses for cleaning, monitoring, repairs, and replacement of components.

Lifetime Energy Production: Estimate the total amount of electricity the solar system is expected to generate over its lifetime. This can be based on historical data, solar panel specifications, and local weather conditions.

Discount Rate: Choose an appropriate discount rate, which represents the opportunity cost of tying up capital in the solar system. Typically, this rate is based on the expected return on investment for alternative uses of the same capital.

Calculate Levelized Cost of Electricity (LCOE): The LCOE is a common metric for comparing the per unit generation cost of different energy sources, including solar. It is calculated using the following formula:

LCOE = (Total Cost - Total Incentives) / (Total Lifetime Energy Production * (1 + Discount Rate)^Lifetime)

Total Cost is the initial investment minus incentives.

Total Lifetime Energy Production is the estimated energy output of the solar system over its lifetime.

Lifetime is the number of years the solar system is expected to operate.

Discount Rate is the annual interest rate used to calculate the present value of future cash flows.

Per Unit Generation Cost: The per unit generation cost is typically expressed in terms of cents per kilowatt-hour (¢/kWh). This represents the cost of producing one kilowatt-hour of electricity from the solar system.