Were going to calculate a Simple Payback for a Home Power Grid-Tie Wind Power Net-Metering System. This hardware is an ARE442 Wind Generator rated at 10 Kw used in Example A, the installed cost (IC) is $48,000. Now, we can calculate its economic Simple Payback.
IC = $48,000
AKWH = 21,600 KWH (Using 1,800 KWH/month from Manufacturer)
$/KWH = 41 Cent/KWH in Kauai
FCR = Fixed Charge-Rate (Cost of Capital), 9%
AOM = Use 1% of IC which equals $480
Using the Simple Payback equation above this Wind Project as a Simple Payback (in years) can be written:
SP = IC/(AKWH * $/KWH IC * FCR AOM)
SP = 48,000/(21,600 * 0.41 48,000 * 0.09 480)
SP = 9.56 Years
As you can see from this example, these calculations are brutal. In this example the Annual Operations and Maintenance Costs are very high $480. For most wind projects, these costs are usually smaller, given normal operating conditions for Wind Zones I-IV. Calculating your Simple Payback gives you a gauge to measure the merit of your financial structure.
Furthering our example, you can see the immediate impact of State Rebate programs. In Oregon there is a Business Energy Tax Credit called BETC. This tax rebate is defined as either 50% over 5 years (10% per Year), or can be taken upfront for a Pass-through value of 35%. Applying this rebate, using the 35% up-front pass-through the Installed Cost (IC) of $48,000 becomes $31,200.
SP = $31,200/(21,600 * 0.41 31,200 * 0.09 480)
SP = 4.77 Years
Clearly, the impact of State Rebates and other mechanisms to be discussed can dramatically impact the profitability of your Wind Project.
NOTE: At the time of this writing State Rebates for Hawaii are still being formulated, this is included to illustrate the impact of state rebates, if they apply to your Wind Project.