Investigation into life-cycle costing as a comparative analysis approach of energy systems

Abstract

Although renewable energy sources have a potentially beneficial role to play as part of South Africa’s energy portfolio, the common belief is that renewable energy technology, especially solar photovoltaic (PV), is not viable for electricity production because it is too expensive compared with coal-based electricity. Statements such as these are made because the initial capital costs (procurement costs) are often used as the primary (and sometimes only) criterion for project, equipment or system selection based on a simple payback period. Due to life-cycle stages, often the real costs of the project or equipment, either to the decision maker or the cost bearer, are not reflected by the upfront capital costs. In this paper, the life-cycle costing approach is investigated as a means to improve decision making on the economic viability of energy systems. The investigation is based on a comparative analysis of decentralised residential solar power systems (RSPS) and centralised coal-fired electricity-generation systems. The case study demonstrates the ineffectiveness of the conventional (cost) analysis approaches