# What is the effect of efficiency on the cost of electricity?

I'm having trouble understanding the effect of efficiency on the cost of electricity for a PV system.

By the graph I've uploaded, as the efficiency of a PV system goes up, the cost of electricity goes up. But the equation in the other photo has efficiency in the denominator of the equation, meaning that when efficiency increases, the cost of electricity decreases, assuming investment and maintenance costs stay the same.

I'm intuitively thinking that as efficiency increases electricity prices also increase. Is my problem that I'm assuming investment and maintenance costs stay the same? I would assume that a more efficient system costs more to make as it uses more materials and more labor.

## Answers and Replies

mfb
Mentor
By the graph I've uploaded, as the efficiency of a PV system goes up, the cost of electricity goes up.
Which graph? In general that statement is not true.
I'm intuitively thinking that as efficiency increases electricity prices also increase.
If you can produce more power for (nearly) the same price, cost per kWh goes down. At some point an increase in efficiency gets too expensive, so there is some ideal point, marked with a red dot in the total cost/efficiency plot.

anorlunda
Staff Emeritus
They are trying to tell you that high efficiency systems cost more. Usually more money buys more quality, but it has nothing to do with physics.

I try to remember that solar panels are improving rapidly doubling in performance price ratio every three years of so. I plan to buy new panels in 2016 and to discard them as obsolete in 2019. Others may spend more today and plan to keep them for 20 years. Without a perfect crystal ball foreseeing the future, nobody can say with certainty which plan is better.

Your cost per kwh depends on your assumption about the useful lifetime, and on the discount rate on money in your mind.

In the 1970s AT&T was still building phones designed to last for 45 years. At the time, most people thought that was optimum.

mfb
Mentor
I plan to buy new panels in 2016 and to discard them as obsolete in 2019.
Do you really expect to get the cost of 2016 panels back in 3 years? Otherwise just wait. Installation costs are relevant as well.

CalcNerd
anorlunda
Staff Emeritus
Do you really expect to get the cost of 2016 panels back in 3 years? Otherwise just wait. Installation costs are relevant as well.

It is not just cost. I am a sailor. I live on a boat. Where to put those darn things is a problem. This year I will replace three panels with one having slightly more watts. In three years, I want to replace that one with a smaller one.

The size of the panels is inconvenient and a hazzard to seaworthines of the vessel. Hurricane force winds or breaking waves can rip it loose and turn it into a projectile.

When I get down to 240 watts in 4 ##ft^2##, I'll stop upgrading.

mfb
Mentor
Ah, on a boat replacing them makes more sense.

240 W in 0.37 m2 is ... optimistic. Even if they are exactly aligned with the sun (and I guess they are not) that still needs an efficiency above 50%, something that has been demonstrated in a lab but not in realistic conditions.

jim hardy
Gold Member
Dearly Missed
When I get down to 240 watts in 4 ft2 , I'll stop upgrading.
64% efficient ? I'd settle for that !

dlgoff
CWatters