Wednesday, April 14, 2010

It Ain't Easy Being Green

Our campus is going green. Our student newspaper, The Shorthorn, reports that we are going to put solar panels on top of a new parking structure to be built. How much are you willing to pay so that our energy is "green" rather than "brown?" A lot it turns out.

We will get a $1.8 million grant from the state to purchase and install the 500kw solar panels. I did some digging and discovered that an efficient system operates 2,400 hours a year, so ours could possibly generate 1,200,000 kwh per year. With an expected lifespan is 20 years and at an discount rate of 10% this is equivalent to a present value of 10.22million kwh over the project's lifespan for a cost of just under $0.18 per kwh. These are the average capital costs per kwh. There may be additional, likely minor, operating costs. However, the highest electricity rate in Texas, for residential service, is about $0.12 per kwh (my provider charges me $0.10 per kwh). This means that the capital costs alone are at least 50% greater than the opportunity cost.

This opportunity cost does not include the externalities but if these external costs are less than 50% of the current price, this is a bad deal for Texas taxpayers. It is a great deal for the campus (free money? where do I sign up). Moreover, we get the marketing value of striving for sustainability (sic).


  1. nice--this belongs in the third edition

  2. I read that wholesale electricity prices in West Texas sometimes go negative due to the effect of subsidies for producers, is this true?

  3. Doc: Sorry, but I wouldn't know.