|
The life-cycle cost of a project can be calculated using the formula:
LCC = C + M pv + E pv + R pv - S pv .
where the pv subscript indicates the present worth of each factor.
- The capital cost (C) of a project includes the initial capital expense for equipment, the system design, engineering, and installation. This cost is always considered as a single payment occurring in the initial year of the project, regardless of how the project is financed.
- Maintenance (M) is the sum of all yearly scheduled operation and maintenance (O&M) costs. Fuel or equipment replacement costs are not included. O&M costs include such items as an operator's salary, inspections, insurance, property tax, and all scheduled maintenance.
- The energy cost (E) of a system is the sum of the yearly fuel cost. Energy cost is calculated separately from operation and maintenance costs, so that differential fuel inflation rates may be used.
- Replacement cost (R) is the sum of all repair and equipment replacement cost anticipated over the life of the system. The replacement of a battery is a good example of such a cost that may occur once or twice during the life of a PV system. Normally, these costs occur in specific years and the entire cost is included in those years.
The salvage value (S) of a system is its net worth in the final year of the life-cycle period. It is common practice to assign a salvage value of 20 percent of original cost for mechanical equipment that can be moved. This rate can be modified depending on other factors such as obsolescence and condition of equipment. http://www.sandia.gov/pv/docs/LCcost.htm |