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The price of a kWh

Everybody knows that power from solar panels still is not competitive to power “from the plug point” With increasing fuel prices and decreasing costs of solar panels, these prices will meet each other more and more in the future.

When there is no electricity available at all, the situation is different. Both the investment in solar power as the installation of a power grid to the remote site will be high. In many cases it will appear that solar power will be economically most viable, due to the relatively low power demand.

Costs grid extension

From the figure this becomes visual clear. At low power demand the price of electricity from a solar power system will be lower than in case of grid extension, even at relatively short distances. Per location this graph will be different. The curves will depend on many local factors, like the landscape, the level of salaries, material costs.

Another comparison is the price of solar power and power from a generator. In this case, solar power does not compete with cheap electricity from the mains, but with expensive power from the generator. With the current fuel prices the competition becomes more and more fair: A kWh from a diesel generator is higher than $0.50, what is not substantial lower than the kWh from a solar power system. In some situations, solar power is already cheaper than a diesel generator.

Below an example is elaborated for the Cambodian situation.

PartPricelifetimeAnuity at interest 6%
Solar panel 100Wp$ 350 20 years$ 30.51
Battery 100Ah $ 150 4 years $ 43.29
Controller $ 50 10 years$ 6.79
Various (incl. installation costs)$ 150 20 years $ 13.08
Total $ 700 $ 93.67

At interest of 6%, 1900 hours full sunshine and system efficiency of 60%, the 100Wp solar power system will provide 114kWh annually. The average kWh-price will be $ 93.67 / 114 = $0.82.

The calculation of the kWh-price from a generator works in a comparable way. Let’s consider a 25kVA-machine, able to supply 20-25kW maximal, but rarely does, because this power is not always needed. Usually it operates in partial load. Compare it to a bus able to carry 50 passengers, which is transporting only 10 persons. The efficiency of this bus is lower compared to a full loaded situation.

Generator 25kVA Power kW: 20
Efficiency at partial load 15%
Diesel consumption per hour (litres)2.0
kWh generated in 1 hour 3.0
Price 1 liter diesel$ 1,10
Maintenance and depreciation per hour$ 0.20
Price kWh $ 0.73

This calculation really depends on the local situation. It refers typically to the situation where a local NGO runs a generator to power the buildings on its compound. In case of a Cambodian rural electrification entrepreneur (REE) or a battery charger, a higher load-factor can be reached, resulting in an improved efficiency. Combine this with a relatively low depreciation rate (these machines run for so many years) and you will understand that the retail prices of these entrepreneurs could be a little lower.