Announcement

Collapse
No announcement yet.

Using Product warranty, not Performance warranty for LCOE calc?

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • Using Product warranty, not Performance warranty for LCOE calc?

    I've been reading that performance warranties are 25 years, yet product warranties are usually 10. Can someone help explain why LCOE calculations are based on the 25 year performance warranty, when on year 11 if a panel fails to function for any of the "product" warrant reasons, I'm out of luck. Shouldn't the LCOE be based on 10 years?

  • #2
    Originally posted by Canuck7870 View Post
    I've been reading that performance warranties are 25 years, yet product warranties are usually 10. Can someone help explain why LCOE calculations are based on the 25 year performance warranty, when on year 11 if a panel fails to function for any of the "product" warrant reasons, I'm out of luck. Shouldn't the LCOE be based on 10 years?
    LCOE is a method to calculate/estimate system acquisition/ownership/maint. and other costs and financial considerations as necessary and particular to the application. It has no particular fixed or variable time frame and can be based on any length of time.

    LCOE is a one of a subset of life cycle costing methods.

    Beyond using net present values of costs, revenues and expenses, etc. expressed in terms of, or as equivalents of nominal or real energy costs per unit of energy rather than simple units of currency, LOCE is not much different than other forms of process economics, or what some folks call engineering economics. It' maybe a bit more practical or understandable as applied to solar process economics, but there's not much special about it, and no mandate for a certain time period length of analysis beyond what's appropriate for the application, and or whatever who's paying the piper thinks is appropriate.

    BTW: Performance warranties are mostly/entirely marketing gimmicks used to sell product. They are essentially meaningless for a lot of reasons and not worth thinking/worrying about.

    Google is your friend. type "LCOE" into Google and read on.

    Comment


    • #3
      Thanks J.P.M. Google is my friend. That's how I found this forum, and learned a bit about LCOE. Your explanation makes sense, thank you! I guess what I'm really after is why 25 years is used in the denominator in most cases. I'm deciding on installers now, and they describe it as such. When I plug some numbers into the equation, total energy production based on 10 years in the denominator makes the LCOE look pretty different than 25. But it seems like the "guarantee" of energy production stops at 10.

      Comment


      • #4
        Originally posted by Canuck7870 View Post
        Thanks J.P.M. Google is my friend. That's how I found this forum, and learned a bit about LCOE. Your explanation makes sense, thank you! I guess what I'm really after is why 25 years is used in the denominator in most cases. I'm deciding on installers now, and they describe it as such. When I plug some numbers into the equation, total energy production based on 10 years in the denominator makes the LCOE look pretty different than 25. But it seems like the "guarantee" of energy production stops at 10.
        You're most welcome. Get more info. Mine is presented in good faith, but is certainly not 100% correct all the time.

        Process economics/life cycle costing/LCOE/etc. can be a mine field due to general ignorance about such things along with the concept of something called the time value of money.

        Peddlers use that ignorance to separate the ignorant from their assets.

        As you allude, using a, say, 12 year life cycle or period will yield vastly different numbers than will, say, a 25 year life cycle.

        An example: I use 12 years in my analyses for a lot of reasons that seem to make sense to me.

        Using that 12 yrs., the nominal LCOE for my system is $0.2049/kWh, with the real LCOE = $0.1789/kWh.

        If I switch from 12 years to 25 years, the numbers change to $ 0.1367/kWh nominal and $ 0.1075/kWh real.

        Now: A couple of questions.

        How many folks out there in TV land care, much less understand what you just read ?
        How many folks might think a PV system that will generate the lower numbers will be the more cost effective system and thus more cost effective by what looks like a fair amount?
        Which time period, 12 or 25 years, do you think a PV peddler is likely to use when making a pitch to Joe & Jane 6 pack ?

        Now the kicker: Which time period is the more valid one to use ?

        I'd suggest that's the important one to ask/answer before any others, and it's not an easy one. As a matter of fact, it may have several answers. Helping to get a clearer picture and choose/balance alternatives is one of the big, but not sole reason why process economics exists in the first.

        PV systems can last a long time, with most systems probably remaining serviceable and producing power longer than PV has commonly been available.

        However, simply because a thing will last 25 years doesn't make 25 years a valid time frame.
        - Technology will change. People want the latest/greatest.
        - In the U.S, people move about every 7 years or so, shifting the subject to include resale values or "savage value". See comments or resale value below.
        - What if I'm 70+ years old when I buy and I've got one foot in the grave and one on a banana peel ?
        - Fill in the blank with other reasons as suits the situation.

        As it looks now, but admittedly maybe a bit murkey, PV may not add much to the resale value of a home. FWIW, knowing what I think I might know, I'd never buy a home with existing PV on the property. I wouldn't be surprised if, as folks get more informed, or more likely have reality crammed down their throats, that my opinion may become more common if not ubiquitous, and perhaps have a negative influence on the perceived view of the value of existing PV systems. Any PV system, first off, wouldn't be sized right for my needs. Second, it was likely purchased (or worse, leased or PPA'd) by some solar ignorant soul who only bought on low buck and got screwed in ways unknown. I'll buy my own headaches. Third, looking around at all the derelict solar water heaters, I'm pretty sure human nature will treat PV systems the same in the future and ignore them. I don't think that will bode well for PV adding much to resale values.

        Take what you want of the above. Scrap the rest.
        Last edited by J.P.M.; 09-11-2017, 02:24 PM.

        Comment


        • #5
          Excellent, JPM. Just what I was looking for.

          Thanks again,

          Mike

          Comment


          • #6
            Originally posted by Canuck7870 View Post
            Excellent, JPM. Just what I was looking for.

            Thanks again,

            Mike
            You're welcome. Again, question everything everyone says, including and maybe even and particularly me, until your own knowledge gains allow you to understand/judge what you're being told.

            Comment

            Working...
            X