Cost is an important factor when considering the purchase of any product, including a DER technology. However, determining the cost of a DER 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 DER technology can also be estimated and compared to the price currently being paid for electricity from the power grid.

Equipment costs for DER 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 DER 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 DER 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. The decision analysis discussion introduces the types of questions that need to be answered when purchasing DER equipment. It also includes examples of the kinds of calculations typically used in the DER decision-making process.