Costing a solar powered pumping solution

Understanding the various pricing aspects that make up the cost of a solar pumping system may assist you in minimising the operational costs of the system and help further your understanding of the long-term cost viability of the various systems available. 

Note that the economic criteria given here are defined only in relation to agricultural pumping applications. The following information and definitions are general in nature and should not be taken as financial advice. For advice regarding the accounting and tax implications of implementing a solar power solution, you should consult a professional financial advisor. 

Life cycle cost: an introduction 

The life cycle cost (LCC) of any equipment or system is the total ‘lifetime’ cost of purchasing, installing, operating, maintaining and disposing of that equipment. Figure 67 summarises the typical life cycle cost for a medium-sized diesel-powered pumping system. 

Figure 67: Typical breakdown of life cycle costs for a medium-sized diesel-powered pumping system (Source: Office of Industrial Technologies Energy Efficiency and RE – US Department of Energy).
 

Why do I need to consider the life cycle cost (LCC) when all I want to do is purchase a pumping system? 

The LCC of a solar-powered pumping system can be compared to those of pump-powering alternatives – diesel pumps, for instance. Making such comparisons can help you find the most economical system for your needs. 

Typically, solar pumping systems have higher up-front costs than similarly sized diesel-fuelled or grid-powered pumping systems, but minimal operatingl costs. There are no fuel costs and maintenance costs are low. A diesel pump, in contrast, incurs continuous operational expenses, including ongoing and increasing fuel costs, additional labour and higher maintenance costs. The LCC of a proposed solar pumping system and alternative systems will provide you with a good indication as to which type of system will be the most cost-effective choice. 

The LCC can also be used to choose between different solar pump packages. A more expensive solar package may be more durable than a cheaper package, requiring less maintenance and fewer replacement costs in the future, which may make the more expensive system more economical over the long term. 

 

The LCC can be used to determine the ‘breakeven’ point of different technologies. An example of this – a comparison between a solar pumping system and a diesel pumping system – is shown in Figure 68. The diesel pump is the cheaper option until the breakeven point, at around three years. After this time, the solar pump becomes progressively cheaper to run than the diesel one. 

Figure 68: Scale of costs to ‘breakeven’ point between two diesel water pumps and a solar water pump (Source: ‘UNDP GEF Feasibility Assessment for Replacement of Diesel Water Pumps with Solar Water Pumps’. 2008).
 

To calculate an accurate LCC, a number of financial factors should be considered. They include: 

  • present energy/fuel prices, 
  • the expected annual energy price increase (inflation) during the pumping system’s life, 
  • the discount rate (inflation) of purchasing equipment, 
  • the interest rate, 
  • expected equipment life (calculation period), and 
  • ongoing costs (maintenance, down time, environmental, disposal, labour, etc). 

Pumping cost breakdown 

The costs of a pumping system can be divided into capital costs (up-front costs) and operating costs (ongoing costs). 

Capital costs 

The capital costs of a pumping system comprise any up-front costs. These include the costs of: 

  • design 
  • equipment, 
  • installation and commissioning, 
  • purchasing land to accommodate the pumping system, 
  • grid connection (if applicable), and 
  • financing/legal work. 

Typically, the capital costs of a solar pumping system are high in comparison to those of fuel-powered pumping systems, due to the cost of solar modules, electrical wiring and associated installation services. By comparison, diesel pumps are generally cheaper to purchase and install. 

On the upside, the cost of solar modules has decreased significantly over the past 10 years, as shown in Figure 69, making them more competitive in price. A solar pumping system can have a lower capital cost based on the fact that it provides a localised power-generation source. Just compare the cost of a solar pumping system with that of having to power a pump from the electricity grid in locations where connection to the grid may require installing kilometres of poles and wires from the nearest grid supply point to the pump location! 

Figure 69: Trends in typical solar module prices ($/watt) in Australia 1993-2013 (current AUD) (Source: APVI National Survey Report of PV Power Applications in Australia 2013).
 

Rebates may be available to reduce the up-front cost of a solar-powered pumping system. An overview of rebates available at date of publication is included in Appendix G. Note: available rebates are subject to change. 

Operating costs 

The operating costs of a pumping system include any ongoing costs incurred over the life of the system, including: 

  • energy costs – the cost of the fuel/electricity required to run the pump, such as diesel fuel. The unit cost of electricity or fuel usually increases over time, so this needs to be taken into consideration over the life of the system (Figure 70). Solar pumps have no ongoing energy costs. 
  • maintenance costs – the costs of regularly checking and servicing the entire pumping system. Servicing may involve lubricating moving parts, checking oil and water levels, checking pipes and cables, observing the operation of the pump and cleaning (including costs of the tools and materials required for maintenance, oil, water, et cetera). A solar pumping system requires far less ongoing maintenance than a diesel-based one. 
  • replacement costs – the cost of replacing parts of the system due to wear, including those of replacing minor components such as seals and bearings as well as major components such as the motor, pump, inverter, and batteries (if applicable). 
  • personnel costs – the cost of time spent monitoring and operating the pump, and associated costs that may include time spent refuelling, starting up, shutting down and maintaining the pumping system as well as the time and fuel spent travelling to and from the pump – for example, to carry diesel fuel to the site, and in refuelling. Many farmers don’t put a monetary value on their time but this should be included in an economic analysis. 
  • safety costs – costs associated with the risk of storing fuel and operating dangerous equipment. These may not apply directly in all circumstances, but any safety risks arising from the use of a diesel pumping system should be considered, and could also result in higher insurance premiums. 
  • other costs such as measurement & verification (M&V) – If the project is generating any certificates or carbon credits under federal or state programs, there may be costs associated with the measurement and verification of outcomes. 

Figure 70: Modelled price rise of petrol over until 2050 (Source: 20130922 ‘The Trending Price of Petrol’, Malcolm Moore, Innovative Synergies).
 

A comparison between solar and diesel pumping 

While solar has higher associated capital costs, diesel pumping has significantly higher operating costs over the life of the system. 

It is not possible to provide specific figures for these cost comparisons because each possible pumping installation will have its own installation, logistics and pumping requirements and thus, will incur differing costs. The figures shown give an indication of the varying scale of costs between the two pumping scenarios over the estimated life of the solar pumping system, i.e. 20 years. 

Typically, solar is superior to diesel for stock and domestic applications when all costs are considered. Table 21 breaks down the factors to be considered when comparing solar pumping and diesel pumping systems. 

Table 21: Small system - indicative, cumulative cost allocations for solar pumping and diesel pumping systems. In this example, it can be seen that solar power solution is beneficial
 

Indicative modelling of these cumulative costs places solar well ahead of diesel equivalent (see Figure 71) 

Figure 71: Diesel vs solar - indicative cost comparison for stock and domestic pumping
 

Modelling cumulative costs for large systems is far more complex given the wide range of variables likely to be involved. 

If pumping is both highly irregular and high volume the business case for solar is likely to depend on there being other uses for electricity on farm, ability to reduce tariffs on mains electricity, or ability to export and sell excess electricity off season. 

Energy

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