U.S. Department of Energy - Energy Efficiency and Renewable Energy

Tribal Energy Program

Economics

The economics of energy efficiency and renewable energy projects vary widely depending on a host of factors ranging from technology maturity to the cost of financing. The renewable resource, distance to the grid, regional wholesale power costs, utility interconnection rules, and maintenance requirements all affect the project economics. Some general information on renewable energy costs is provided under Costs.

Understanding technology performance, which is directly related to renewable resource availability, is the first major step in understanding renewable energy project economics. Due to the time-varying nature of most renewable resources (geothermal excepted) some sort of computer simulation is often used to determine the hourly generation, which when added up results in monthly or yearly generation totals. If the electricity is more valuable during certain times of the day, or certain months of the year, these variations can significantly affect the project economics and must be taken into account. Below are links to several sites that provide free copies of computer simulation software that makes the job of system performance estimation fairly straight forward and tractable.

You will find the following computer models useful in your economic analyses. All perform some form of hourly simulation using local resource information.

  • HOMER and Hybrid 2 were designed for simulating multiple renewable technologies in conjunction with energy storage and diesel generation.

  • The RETScreen® International family of models developed by Natural Resources Canada provide technology-specific simulations and include cash flow analysis.

  • EnergyPlus is a whole-building energy simulation program.

HOMER (Hybrid Optimization Model for Electric Renewables)

HOMER is a computer model that simplifies the task of evaluating design options for both off-grid and grid-connected power systems for remote, stand-alone, and distributed generation (DG) applications. HOMER's optimization and sensitivity analysis algorithms allow you to evaluate the economic and technical feasibility of a large number of technology options and to account for variation in technology costs and energy resource availability. HOMER models both conventional and renewable energy technologies:

Power sources:

  • solar photovoltaics (PV)
  • wind turbine
  • run-of-river hydro power
  • generator: diesel, gasoline, biogas, alternative and custom fuels, cofired
  • electric utility grid
  • microturbine
  • fuel cell

Storage:

  • battery bank
  • hydrogen

Loads:

  • daily profiles with seasonal variation
  • deferrable (water pumping, refrigeration)
  • thermal (space heating, crop drying)
  • efficiency measures

For more information on the HOMER modeling tool, visit the HOMER website.

Hybrid 2

Hybrid 2 was designed to study a wide variety of hybrid power systems. The hybrid systems may include three types of electrical loads, multiple wind turbines of different types, photovoltaic systems, multiple diesel generators, battery storage systems, and four types of power conversion devices. Systems can be modeled on the electrical power buses for alternating current (AC), direct current (DC), or both buses. A variety of control strategies and options may be investigated with the models, which incorporate diesel dispatch strategies as well as interactions between diesel generator sets and the batteries. An economic analysis tool is also included that calculates the economic worth of the project using many economic and performance parameters.

The Hybrid2 code employs a user-friendly graphical user interface (GUI) and a glossary of terms commonly associated with hybrid power systems. Hybrid2 is also packaged with a library of equipment to assist the user in designing hybrid power systems. Each piece of equipment is commercially available and uses the manufacturers' specifications. In addition, the library includes sample power systems and projects that the user can use as a template. Two levels of output are provided: a summary, and a detailed time-step-by-time-step description of power flows. A graphical results interface (GRI) allows for easy and in-depth review of the detailed simulation results.

RETScreen® International

The RETScreen Renewable Energy Project Analysis Software has been developed to help decision makers and planners evaluate renewable energy projects in the initial planning stage. The RETScreen International software is useful for both decision support and capacity-building purposes. In terms of decision support, the software provides a common platform for evaluating project proposals while significantly reducing the costs, time, and errors associated with preparing preliminary feasibility studies. Regarding its capacity-building benefits, the software — together with the on-line product, cost and weather databases, and on-line user manual — serves as an educational tool. RETScreen International includes performance simulation models for wind power, photovoltaic systems, small hydropower, active solar air and water heating, passive solar heating, biomass heating, and geothermal heat pumps.

EnergyPlus

EnergyPlus is a whole-building energy simulation program that engineers, architects, and researchers use to model energy and water use in buildings. Modeling the performance of a building with this tool enables building professionals to optimize the building design to use less energy and water. EnergyPlus models heating, cooling, lighting, ventilation, other energy flows, and water use. Read about new features.