Abstract
Despite advances in small-scale hybrid renewable energy technologies, there are limited economic frameworks that model the different decisions made by a residential hybrid system owner. We present a comprehensive review of studies that examine the techno-economic feasibility of small-scale hybrid energy systems, and we find that the most common approach is to compare the annualized life-time costs to the expected energy output and choose the system with the lowest cost per output. While practical, this type of benefit–cost analysis misses out on other production and consumption decisions that are simultaneously made when adopting a hybrid energy system. In this paper, we propose a broader and more robust theoretical framework—based on production and utility theory—to illustrate how the production of renewable energy from multiple sources affects energy efficiency, energy services, and energy consumption choices in the residential sector. Finally, we discuss how the model can be applied to guide a hybrid-prosumer’s decision-making in the US residential sector. Examining hybrid renewable energy systems within a solid economic framework makes the study of hybrid energy more accessible to economists, facilitating interdisciplinary collaborations.
Highlights
Despite technological advances in small-scale hybrid renewable energy systems, there are very few studies that model the economic decision-making of a household which generates energy from multiple sources
We find Price of Energy Consumption (PEC),3 = λb − a(cs + f ), the unit price of energy consumption is equal to the retail price of electricity less the unit cost of energy passing through the battery, for the fraction of energy that is stored in the battery
Why do residential units adopt a hybrid instead of a single renewable energy system? The economic model presented in this study illustrates how the production of renewable energy from multiple sources affects energy efficiency, energy services, and energy consumption choices in the residential sector
Summary
Despite technological advances in small-scale hybrid renewable energy systems, there are very few studies that model the economic decision-making of a household which generates energy from multiple sources. There are several benefit–cost analyses that examine a prosumer’s decision to adopt a single renewable source (examples include Zarte and Pechmann [5], Jung and Tyner [6], and Swift [7]). Ghaitha et al [8] examine the economics of a residential wind turbine system while Ghaitha et al [9] and Swift [7]. There are only few benefit–cost analyses for hybrid energy systems in the residential sector. We refer to a household that produces and uses energy from multiple sources, including renewables, as a ‘hybrid-prosumer’. The system owned by the hybrid-prosumer is referred to as a ‘hybrid energy system’ (HES) or a ‘hybrid system’
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