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Considerations with Distributed Generation: Capital Cost

Cost is an important factor when considering the purchase of any product, including a DG technology. However, determining the cost of a DG technology is often more complex than simply purchasing a piece of hardware at a published price. In addition to equipment (or capital) cost, there are labor and other expenses related to installing the equipment. The cost of electricity produced by the DG technology can also be estimated and compared to the price currently being paid for electricity from the power grid.

Equipment costs for DG technologies are often quoted in terms of their cost per kilowatt of electricity produced, or $/kW. For example, a 50 kW microturbine may cost $1000/kW, or $50,000.

High capital costs are presently the norm for many DG technologies and serve as a deterrent to their widespread implementation. However, as production levels and sales increase, it is expected that economies of scale will result in decreased equipment costs.

When considering the adoption of a DG technology, many questions must be asked to determine which technology best fits the specific situation, especially in terms of meeting the energy requirements at a cost that is acceptable.