Cost and price aren't the same

WHEN I hear the question, “What’s the cost?” I know that the answer people are looking for is not usually about the cost, but the price: and they are not the same.

If you buy a new car, we tend to focus on the “bottom-line price” because that’s how much we are going to have to part with initially.

However, depreciation, running and maintenance costs are for life – the initial price is a one-off.

You might be prepared to pay more if the car has very low fuel consumption, low CO2 emissions and long service intervals.

With renewables you can generally put them into two categories:

- return on investment (payback), and
- reducing lifetime costs.

There’s some overlap between these two categories, but they can be distinguished.

Say you decide to buy a solar thermal system to heat your domestic hot water and let’s say the price is €6,000. It is generally accepted that a solar hot water system will
have paid for itself somewhere between five and eight years; this on the basis that you are using free solar energy to heat your water, not fossil fuels or electricity.

Let us say the payback time is eight years, so you have recouped your initial investment having saved money on the electricity you would have otherwise spent heating water.

After that, your Solar is providing free hot water for the lifetime of the system; which is where, of course, system lifespan then becomes a key factor.

So this example is both payback and reducing lifetime costs.

Incidentally, one of the first true evacuated tube solar hot water systems is still functioning perfectly today, some 21 years later; so the owner (an architect in Ireland), has more than got his money back.

Alternatively, let’s say you decide on a swimming pool heating system and decide that solar is the way to go.

Heating your pool in the ordinary way will not save you any money or give you any payback. However, if you choose to use solar power to heat your pool, you will have
reduced lifetime costs compared to any form of heating by fossil fuel or electricity.

Recently the amount of tax credit (crédits d’impôt) has been announced for 2011 and solar thermal systems have been slightly reduced from 50 per cent to a 45 per cent
reimbursement of the product cost, including charges and VAT.

However, that means that the capital investment for the above solar hot water system is still almost halved. So, before parting with hard-earned euros, consider the cost as well as the price.

This column is written by Marc Asker, head of EcoPower, a renewable energies company that he set up in 2007. He has been in the industry since 2003