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The Economics of Going Off-Grid

by James Lea, 2 April 2006

Going Off-Grid

In an age of rising energy and resource prices, going off-grid is becoming an increasingly attractive proposition. By installing a range of technologies such as solar panels, rainwater harvesting systems, composting toilets and wind turbines, you can minimise your ecological footprint, and save money in the long run.

However, these systems cost money to install, and the sums can be quite substantial. An important question many people ask is: "how many years will it be before this system pays for itself?". That's not an easy question to answer, as the payback period can be many years, over which time interest rates and inflation will distort a simple calculation.

This article seeks to address that question, and to provide you with a tool and a method to help you calculate your own economic case for going off-grid.

Comparing Costs with a Spreadsheet

Screenshot of Payback Calculator spreadsheet graphTo accurately calculate payback periods, I have developed a spreadsheet, which you can download below.

The spreadsheet takes into account several important variables, including interest and inflation rates, in order to calculate a payback period. I have applied the calculator to a range of off-grid systems, including those meeting our needs for:

  • water
  • gas
  • electricity
  • food

The results are compelling: going off-grid will save you money, provided you design your systems carefully for low maintenance (an important permaculture concept).

Domestic Wind Turbines

Readers of my article about The Economic Case for Domestic Wind Turbines often ask me: "What is the payback time for this?" In other words, having made a large up-front investment in a wind turbine, mast, charge controller and wiring, when will the money saved on electricity bills make it cheaper than purchasing electricity from the grid?

Clearly the answer depends on the costs involved; however, inflation in both energy bills and maintenance costs, along with interest rates must also be factored in. The table below outlines the figures - largely taken from The Economic Case for Domestic Wind Turbines article.

Table 1 : Wind Turbine Costs

Category

Item

Value

Savings

Interest rate

4.5%

Turbine

Annual electricity production

4.3MWHr/year

Initial system cost

£7185

Annual maintenance

£100 (1)

Annual rise in maintenance cost

2.5%

On grid

Cost of purchasing 4MWHr electricity

£443/year (2)

Annual rise in electricity bills

10%

(1) Annual inspection of turbine, oiling etc (assumes tilt-up mast provides easy access so no special equipment needed)

(2) Given a charge rate of 9.05 p/kWHr and a fixed service charge 14.79p/day, then 4.3MWHr consumed over 365 days will incur a fixed charge of (365 days * 14.79 p/day )£53.98 and a variable charge of (4300 kWHr * 9.05p/kWHr) £389.15, yielding a total cost of £443.13

The system breaks even in year 14, and over a 30 year lifetime saves £80,403 over the on-grid system!

Download the Spreadsheet

I've developed this spreadsheet using OpenOffice, an excellent alternative to Excel. However, to support those still using Microsoft Office, I've also provided it in Excel format.

Disclaimer: I accept no liability for any losses incurred by the use of this spreadsheet. You should always seek independent professional advice before investing in off-grid systems.

How to Use the Spreadsheet

Full instructions are given on the first sheet of the spreadsheet. Some guidance: I suggest you explore the Calculator worksheet first, taking care to only enter data in cells with blue backgrounds (the other cells contain formulae), before then using the other worksheets. You may prefer to use the Calculator worksheet alone, once you have understood how it works.

If you find any errors in the spreadsheet formulae, or have any questions about how it works, please let me know.

-- (c) James Lea, www.GreenLiving.co.uk, 2005 - 2007 --