Analysis & Projections

Distributed Generation System Characteristics and Costs in the Buildings Sector

Release date: August 7, 2013


Distributed generation in the residential and commercial buildings sectors refers to the on-site generation of energy, often electricity from renewable energy systems such as solar photovoltaics (PV) and small wind turbines. Many factors influence the market for distributed generation, including government policies at the local, state, and federal level, and project costs, which vary significantly depending on time, location, size, and application.

As relatively new technologies on the globalized production market, PV and small wind are experiencing significant cost changes through technological progress and economies of scale. The current and future equipment costs of renewable distributed generation are subject to uncertainty. As part of the Annual Energy Outlook (AEO), the U.S. Energy Information Adminstration (EIA) updates its projections to reflect the most current publicly-available historical cost data and utilizes multiple third-party estimates of future costs in the near and long terms. Performance data is likewise based on currently available technology and expert projections of future technologies.

During the AEO2011 reporting cycle, EIA contracted with an external consultant to develop cost and performance characterizations of PV and small wind installations in the building sector1. Rather than develop two separate paths for residential and commercial, the contract provided cost and performance data for systems of various sizes at five-year increments beginning in 2010 and terminating in 2035. Two levels of future technology optimism were offered, a base case and an advanced case, with the advanced case including lower equipment costs, higher efficiency, or both.

From this information, EIA used annual weighted-average costs for a typical system size in each sector. Abbreviated tables of these system sizes and costs are presented in the residential and commercial chapters of the AEO Assumptions Report in Tables 4.3 and 5.3, respectively. Additional information in the contracted report, such as equipment degradation rates, system life, annual maintenance costs, inverter costs, and conversion efficiency, were adapted for input in the Distributed Generation Submodules of the buildings sectors modules of the National Energy Modeling System.

As described in the assumptions reports, other information not included in the report, such as resource availability, avoided electricity cost, interconnection limitations, incentive amounts, installed capacity-based cost reductions, and other factors, ultimately affect the capacity of renewable distributed generation added within a given sector, year, and Census division.

For editions after AEO2011, certain assumptions (mainly system costs) have been updated based on reports from the National Renewable Energy Laboratory and Lawrence Berkeley National Laboratory. Table 1 shows the cost and efficiency assumptions for residential and commercial solar photovoltaic and small wind systems used in the AEO2010 (published prior to the contract reports), the AEO2011 (published after the contract reports), and the AEO2013.

The solar photovoltaic report, Photovoltaic (PV) Cost and Performance Characteristics for Residential and Commercial Applications, is available in Appendix A while the small wind report, The Cost and Performance of Distributed Wind Turbines, 2010-2035, is available in Appendix B. When referencing these reports they should be cited as reports by ICF International prepared for the U.S. Energy Information Administration.

Table 1. Efficiency and Capital Cost Assumptions for Selected Years
  AEO2010 AEO2011 AEO2013
    Year Representative
System
Size (kW)
Electrical
Efficiency
Installed
Capital Cost
($2009/kWDC)
Electrical
Efficiency
Installed
Capital Cost
($2009/kWDC)
Electrical
Efficiency
Installed
Capital Cost
($2009/kWDC)
    2010 3.5 0.180 $9,315 0.150 $7,183 0.150 $7,200
    2015 4.0 0.200 $8,042 0.175 $5,346 0.175 $4,965
    2020 5.0 0.220 $6,770 0.192 $4,549 0.192 $3,890
    2025 5.0 0.220 $5,498 0.197 $4,284 0.197 $3,664
    2030 5.0 0.250 $4,225 0.200 $4,102 0.200 $3,508
  Residential 2035 5.0 0.250 $4,225 0.200 $4,048 0.200 $3,462
    2010 32.0 0.180 $6,684 0.150 $6,889 0.150 $6,410
    2015 35.0 0.200 $5,893 0.175 $5,109 0.175 $4,475
    2020 40.0 0.220 $5,102 0.192 $4,332 0.192 $3,558
    2025 40.0 0.220 $4,312 0.197 $4,067 0.197 $3,340
    2030 45.0 0.250 $3,521 0.200 $3,890 0.200 $3,195
Solar Photovoltaic Commercial 2035 45.0 0.250 $3,521 0.200 $3,837 0.200 $3,151
    2010 2.0 0.130 $7,472 0.130 $7,802 0.130 $7,802
    2015 3.0 0.130 $7,106 0.130 $6,983 0.130 $6,983
    2020 3.0 0.130 $6,758 0.130 $6,604 0.130 $6,604
    2025 3.0 0.130 $6,427 0.130 $6,234 0.130 $6,234
    2030 4.0 0.130 $6,111 0.130 $6,051 0.130 $6,051
  Residential 2035 4.0 0.130 $6,111 0.130 $5,903 0.130 $5,903
    2010 32.0 0.130 $4,270 0.130 $5,243 0.130 $5,243
    2015 35.0 0.130 $4,061 0.130 $4,715 0.130 $4,715
    2020 40.0 0.130 $3,862 0.130 $4,287 0.130 $4,287
    2025 40.0 0.130 $3,672 0.130 $3,973 0.130 $3,973
    2030 50.0 0.130 $3,492 0.130 $3,717 0.130 $3,717
Small Wind Commercial 2035 50.0 0.130 $3,492 0.130 $3,627 0.130 $3,627
Note: kWDC = kilowatts of direct current.

 

Footnotes

1Distributed generation systems often cost more per unit of capacity than utility-scale systems. Another, separate analysis involves assumptions for electric power generation plant costs for various technologies, including utility-scale photovoltaics and both on-shore and off-shore wind turbines used in the Electricity Market Module. http://www.eia.gov/forecasts/capitalcost/