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Residential Renewable Energy Sources Case Studies of Return on Investment

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2011 ASEE Annual Conference & Exposition


Vancouver, BC

Publication Date

June 26, 2011

Start Date

June 26, 2011

End Date

June 29, 2011



Conference Session

Engineering Economy Education

Tagged Division

Engineering Economy

Page Count


Page Numbers

22.1245.1 - 22.1245.29



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Paper Authors


Louis Reifschneider Illinois State University

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Associate Professor
Registered Professional Engineer
Research interests include product design, net-shape manufacturing, and sustainable technology.

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Residential Renewable Energy Sources Case Studies of Return on InvestmentRenewable energy is a popular topic today because of concern over rising energy costs. Federaltax credits for renewable energy sources for principal residence are slated to last until 2016. Forexample, up to 30% of the cost to install a solar photovoltaic or small wind turbine qualify forfederal tax credits. There are also state tax incentives and utility company rebates to promote theinstallation of residential-based renewable energy capture. This paper addresses the economicand engineering factors that determine the return on investment of two residential renewableenergy sources: photovoltaic and small wind power. The technical and financial informationpresented in this paper provide enough data to serve as either case studies in engineeringeconomy classes or as design problems for engineering students learning the fundamentals ofrenewable energy technology. Because there is much interest in the subject of renewable energy,the topic lends itself to be good case study material for college-aged students.The analysis of return on investment begins by specifying the typical components used for eachenergy conversion technology. A brief but complete overview is presented on how availableclimate data from the National Renewable Energy Laboratory is used compute the electricalenergy generated from photovoltaic and wind power systems. This study assumes a 2 kilowattphotovoltaic array and a 10 kilowatt faceplate power rated wind turbine are being used toprovide supplemental electrical energy for a private residence. The return on investmentcalculation assumes the electrical energy generated by the systems is off-setting the cost ofbuying such energy at going consumer rates. The initial investment for each technology is basedupon the retail purchase price of grid-tied power generation system, typical mounting hardwarecost, and an estimated installation cost. Factors that offset the capital expense are the federal taxcredits and rebates available through state programs. The expected life of the system and anominal recurring maintenance cost complete the factors used to compute the internal rate ofreturn. Some inputs have more uncertainty than others, thus perturbations in the installation cost,periodic maintenance cost, and life expectancy are made to assess their effect on the rate ofreturn.Five areas near well known cities with significantly different climates and tax incentives are usedto illustrate the effect of location and tax policy on the economic justification of these systems.The climate and economic data show some areas in the country are well suited for solarphotovoltaic but perhaps not wind power. Other areas in the country have sufficient sustainedwind energy but lack adequate solar insolation to warrant photovoltaic panels. In summary, thispaper provides the reader a single source for information about how climate data, technology,and economic factors interact in the field of renewable energy.

Reifschneider, L. (2011, June), Residential Renewable Energy Sources Case Studies of Return on Investment Paper presented at 2011 ASEE Annual Conference & Exposition, Vancouver, BC. 10.18260/1-2--18594

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