Friday, July 17, 2009

Co-Generation Return on Investment

In the last post, our Ecopower operating costs were estimated at $.08/KWH using $2 per gallon propane cost when running in combined heat and power mode (as opposed to just straight generation where the operating costs are $.34/KWH for the same fuel price). How does this savings translate into a return on the investment? The answer to that question depends upon how often (and at what level) the Ecopower is run as well as the power company power cost.

The present power cost here in Southern CT is $0.18/KWH, so for each Kilowatt-hour generated, our present savings is ten cents. This cost difference is variable and is at the high end of the historical range due in part to the lower propane costs relative to the cost of fuel last year when the power costs were set for the year. Next year the power costs will probably come down to $.12/KWH, or, at least they should, so the cost difference will shrink. However, the fuel costs will also probably continue to decline, so it will still be cheaper to generate locally.

Let's now assume that we have an application where the Ecopower can be constantly run. With net power production at 4.7 KW maximum power and using 8760 hours per year, we get a potential of 41,172 KWH generation annually which translates to an annual savings of $4117.2.

Our cost to install the Ecopower was about $28,000. This, frankly, is high. Looking at the technology, I can't see why this unit couldn't sell for $15,000 or less. Unit production would have to be much higher and parts would have to be manufactured locally instead of the current reliance on some European parts for this cost to be realized, but $15K should be within reach. At any rate, for full generation capacity at current margin and our installation cost, the return on investment is 14.7%.

How did we do? That is a loaded question, because we have a lot going on here with many tests of the Ecopower versus the geothermal, start up issues, & etc. A quick estimate is that if we had run the Ecopower when we called for heat (as opposed to sometimes calling our geothermal units first), then we would have generated close to 20,000 KWH over the year, so the return would have been close to 7%. Instead, from Jul 1, 2008 to Jun 30, 2009, we generated 13,112 KWH giving us a return of 4.7%. Not a great return, but it sure beat the stock market over the past year in addition to the other benefits (less reliance on the grid, less fuel burned in power plants, etc.). Notice that our unit's capacity utilization was only 31%. In other words, we only used the Ecopower 30% of the time.

Which number to quote? It depends upon how much heating needs you have. Our house is (roughly) 4200 square feet, and our heating needs are only hot water year-round and space heating in the cold season for a family of four. In this situation, the 7% return is probably a typical number with the possibility it could be double that with a lower capital cost. If we had a swimming pool or a hot tub or other large heating load, our generation would go up with potential 15% return at present installation cost, or double that with large scale capital costs. These numbers tell me that this technology should become ubiquitous.


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