[RE-wrenches] Solar electric generation system seems to make noeconomic sense

[Joel Davidson]

All this figuring makes my head ache...

I agree with Bob. If someone is willing to pay me to review their economic analysis, I may take the consulting job. I say "may" because the client has to give me other reasons for spending my time (remember, gang, all you really have is time so spend it wisely). I sense that this client is trying to show how smart he is not to invest in solar. I wonder if he did an economic analysis on having children or a hobby like golf or boating?

When a client asked me about PV economics, I ask:
- What are your reasons for wanting to go solar?
- What are your reasons for hesitating going solar?
- How much money do you have to invest in a PV system?

If they won't tell me how much money they have available, I'm like a real estate broker or computer system sales person. I have to know their budget so I can match them up with the right system for them. If they still won't tell me, I tell them that I am like a doctor. I have to know their budget to diagnose their situation and prescribe the right solution. If they still won't tell me, I say I am sorry but I can't help you.

People do things for all kinds of reasons, but people are driven to do things by their emotions. We fall in love and then make reasons why. We want PV, or children, or a boat and then make reasons why.

When your prospects throw around a lot of numbers that show PV does not make economic sense, you might want to give them Udall's classis essay (below). 99 out of 100 times they will not change their position. Time to move on. Life is short.

Joel Davidson

THE NEW FRONTIER: GRID-CONNECTED PV by James R. Udall, 1998

 

For two decades the photovoltaic industry has prospered by meeting the needs of off-grid homesteaders. From New Mexico to California, the backwoods has been the proving ground, where new products were launched, used, and relentlessly refined. 

 

Now, thanks in part to the movement Home Power helped spawn, solar is ready for the main event. The time is ripe to transplant PV, and the energy awareness it represents, from the Sierras to the suburbs. 

 

Nations like Indonesia and Mongolia conceivably could use PV to leapfrog from the Stone Age to the Information Age, without weaving a national transmission web. But the grid is a done deal in the U.S. Of the 100 million households in this country, 99.5 million are connected to utility wires. If PV is to achieve its full potential it must make inroads into this vast virgin market, the new frontier. 

 

SOLAR JIHAD 

 

Last June, President Clinton announced a program to install a million solar roofs by 2010. That’s right, a million. That means the nation must install 230 solar hot water and PV systems every day for the next twelve years. No rest on Sunday for weary wrenches. This isn’t a program, it’s a crusade. A solar jihad. 

 

Who are the "early adopters" who will buy these systems? What’s the best way to tap the emerging market for grid-connected PV? In this article I take a stab at answering those questions. 

 

I direct the Community Office for Resource Efficiency, a nonprofit energy office in Aspen, Colorado. Last year we sold and installed 5 grid-connected PV systems, ranging in size from 800 watts to 4.5 kilowatts; in price, from $4,200 to $35,000. Four systems were installed in the service territory of Holy Cross Electric Association, a rural co-op. Four is hardly a down payment on one million, but it’s enough to give Holy Cross more grid-connected, residential PV systems than any of the 932 co-ops in the United States. As I said, it’s a virgin market.  

        

THE CLIENTS 

 

Who’d we sell these systems to? Our clients ran the gamut. They included a millionaire shipping executive who flies his own plane; a Forest Service employee and his preschool teacher wife, who run marathons, drive a Geo Metro, and practice voluntary simplicity; an architect remodeling his house; a former ski patroller; and me. 

 

Average age: 45. We’re all homeowners, of course. (The grid-tied renter market is a mirage. Ascension Technologies has, however, begun to sell a 4x6 foot, 250-watt module with integral AC inverter that a renter might want to own.) As a group we differ in many ways. What we had in common was a willingness to think outside the box and the means to invest in the future. 

 

BATTERIES NOT REQUIRED 

 

Solar advocates delight in bashing utilities. But for all its faults, the industry has strung an amazing amount of wire. Rarely is an American more than 50 feet from an electrical outlet. It’s an everyday miracle we take for granted. 

 

>From an engineering perspective, the grid is a tremendous resource. A grid-tied PV system will be more efficient, arguably greener, and certainly cheaper than a backwoods one. More efficient because the inverter can track the modules’ "maximum power curve" rather than the lower voltage needed to recharge batteries. Arguably greener because you don’t need batteries, which contain caustic chemicals, emit sulfurous gases, and eventually wear out. And much cheaper because, with the grid as backup, you don’t have to buy batteries, charge controller, control panel, or generator. Right there, you’ve knocked up to $5,000 off a typical stand-alone system. 

 

Getting the price down is critical, because no one on the grid needs PV, at least not in the same way an off-grid homeowner needs it. We’ve already got juice. It may be from a nuke, it may be from a coal plant, it may be hydro (or "embodied salmon"), but it’s there. 

 

To sell grid-connected PV systems you’ve got to get the price down and then help prospective customers understand that solar is to coal as a croissant is to a Twinkie. On a gut level, many people already grasp the key difference between fossil fuels and renewable energy. One is stealing from our kids, the other isn’t. 



DOLLARS AND SENSE 

 

We lumped our orders together and bargained aggressively for good prices. The 800 watt system—a Solarex prototype subsidized by the U.S. Department of Energy—cost $4,200 installed. The two 1.35 kilowatt systems we installed cost $11,500. My 1.8 kilowatt system cost $13,000.  And the 4.5 kilowatt system, the largest residential grid-tied system in Colorado, was $35,000. A contract from Sandia National Laboratory covered our logistical costs. Again, someone buying a single system might not be able to match these prices. 

 

I’ll return to economics in a moment, but first a word on hardware.

 

OFF THE SHELF

 

Here again let’s doff our hat to the backwoods bunch and the PV industry. Much of the gear we installed in 1997 was unavailable or unaffordable in 1987. Early PV systems were cobbled up and soldered together. Products were primitive, assembly an adventure. Buying a PV system now is like buying brake pads at NAPA: it’s all off-the-shelf, readily available at increasingly reasonable prices. 

 

Four of our systems used Siemens 75-watt modules and Trace inverters. The fifth featured Solarex’ thin-film Millenia modules and an Omnion inverter. The Siemens modules carry a 25-year warranty. This was a big selling point. What other product is guaranteed to last that long? I’m 46, these modules could easily outlive me and become heirlooms. 

 

Trace’s familiar SW4048 has been modified for utility-tied applications. It comes with an attractive, powder-white weatherproof outdoor enclosure. Bells and whistles include automatic power tracking, evening shutdown and morning wake up, under/over voltage and frequency shutdown, plus AC and DC disconnects. AC output is either 120 or 240 volts. We used 120 volts on our smaller systems, 240 on the largest. 

 

The inverter eats 44 to 64 volts DC. In practice, this means wiring three modules in series, then running the series groups in parallel to the inverter’s DC side. After being converted to AC, the electricity flows through a PV meter and then to a breaker in the home’s electric panel. 

 

Pat Kiernan of Eco Electric in Basalt, Colorado, a master electrician and electrical engineer, supervised the installations. The tidy outcomes reflect his thoughtful and meticulous approach. Heatstroke to hypothermia, Pat endured it all. 

 

We used nonmetallic conduit between modules, fuses for each series of three modules and ground-fault protection on our roof-mounted systems. (The latter is required by code, but does it provide protection proportional to its $500 expense? We remain unconvinced.) The Siemens modules have integral bypass diodes, but we added isolation diodes to each series group in two systems that are prone to partial shading. That way shaded panels can’t be fried by the rest of a sunlit array. 

 

POLE MOUNTS, ROOF MOUNTS 

 

Two systems were pole-mounted, three went on a roof. Direct Power and Water Corporation built our sturdy, attractive racks. The pole-mounted racks are supported by 4- or 6-inch, Schedule 40 steel pipe, cemented 3 feet in the ground. The racks are adjustable from 15 to 65 degrees. 

 

On the roof-mounted systems Direct Power lengthened the racks’ front legs so that the modules would stand 2 feet above the roof and thus out of the snow. We fixed the 4.5 kilowatt roof-mounted system at a 35-degree tilt, steep enough to shed snow, flat enough to maximize year-round production. The other roof-mounted system is seasonally adjustable.  

 

NET METERING

 

Some utilities object to net metering. Usually the issue isn’t money but control. They don’t want your juice on their wires. Or, they don’t want to set a precedent that could come back to haunt them. There are some distributed generation technologies coming down the pike that utilities definitely won’t want to net meter, including fuel cells and 50-kilowatt microturbines the size of beer kegs. 

 

We were lucky. The two utilities we worked with, Holy Cross Electric and Glenwood Spring Municipal, were open-minded. After some analysis and friendly discussion, they agreed to net meter. At midday, when the systems are producing more electricity than the home can use, the meter spins backward. At night or during high usage it spins in the normal direction. 

 

SHOCKS & SAFETY

 

Utility linemen don’t want PV systems backfeeding the grid during a power outage when they are working on supposedly dead lines. Both the Trace and Omnion inverters address this with multiple safeguards. Since these sine wave inverters are designed to sense, sync, and dance with the grid, it’s impossible for them to operate without it. That means they can’t zap a lineman during an outage. It also means that a grid-tied PV system won’t provide backup power. If you wanted this feature you could add a battery pack, charge controller, and transfer switch. We didn’t because of the expense, and because the grid is up 99.7% of the time. 

 

DOLLARS AND SENSE, PART TWO 

 

PV prices have fallen enough to bring them tantalizingly within reach. For most families, 35 grand for a PV system is out of the question. But 10 grand, 12 grand? Americans routinely pay $3,000 for a four-pound laptop computer and up to $40,000 for a sport-utility vehicle that loses thousands of dollars in value the moment it leaves the dealer’s lot. Is a PV system more or less "cost effective" than a Suburban? Understanding the emerging market for PVs forces us to re-examine hoary stereotypes about customers’ ability and willingness to pay for solar energy. 

 

IT’S NOT COST-EFFECTIVE

 

Gag me with a spoon. If I heard it once, I heard it a dozen times: "What’s the payback?" I heard it from an architect, rancher, engineer, and electrical inspector. Dividing my system’s price by its production gave my brother-in-law his bottom line: "It’s not earning its keep." The pernicious payback perspective plagues PV people; I heard the now-familiar qualms from module and inverter manufacturers alike. Even our installer Pat Kiernan, as devoted to solar as anyone I know, quizzed me about the economics. 

 

If PV systems get to $2 watt, everyone will do it and won’t ask why. Today, though, we’ve got to wrestle with the economics. What’s-the-payback probably got its start after the first Oil Crunch, when some builder was trying to figure out whether it made sense to add fiberglass insulation to his next 2x4 shell. Duh. 

 

Twenty years later, what’s-the-payback has become a mindless chant. In no other realm does this mentality prevail. Your wife’s pregnant!? Jeez, I’m sorry, kids aren’t cost effective. Honey, let’s buy a new sofa. Have you done a cost-benefit analysis?

 

We’ve been brainwashed, infected with bean counter disease. When I began this project a year ago, I knew that PV was not "cost-effective," but I ran spreadsheets to prove it. I fiddled with discount rates to figure out how much less cost effective it was with 5% money than with 10% money. As I debated whether to buy a system myself, I chewed my pencil down to a nub trying to justify the investment. 

 

It was impossible. Buying a grid-connected PV system is folly. Why pay 25 cents a kilowatt-hour for solar power when you can buy coal power for 7? Are you brain-dead, a moon rock? PV is cost-effective for cannabis growers, dirt-poor Haitians, Soviet cosmonauts, Everest climbers, Indonesian peasants, and the Mars Rover. As for the rest of you, forget it.

 

CHEAP POWER

 

To understand why grid-tied PV is not cost-effective, look at energy solutions that supposedly are. Building 110 nuclear power plants before figuring out what to do with the waste is cost effective. Drowning the Columbia River and its priceless salmon runs is cost effective. Spending $50 billion a year to defend the Persian Gulf oilfields is prudent. Strip mining pays nice dividends; Wyoming coal is literally cheaper than dirt. Chernobyl was a superb investment. Acid rain, ozone depletion, many happy returns. Burning enough fossil fuel between now and 2100 to warm Earth 4 degrees makes fiscal sense; just think, we’ll be able to grow wheat in Siberia. 

 

Conventional energy economics is a value system masquerading as mathematics. At its heart is one key assumption: the future is worthless and the environment doesn’t matter. Fie on future generations, who needs 'em? What have my grandchildren done for me? 

 

For 80 years, our culture has had cheap power on a pedestal. In most contexts, cheap means "shoddy" or "second-rate." Cheap is schlock, cheap is shunned. Think of your own purchasing behavior. Do you buy the cheapest ice cream, put powdered dairy creamer in your coffee, drive a Yugo? Of course not. But when it comes to electricity, cheap is best. 

 

If similar thinking prevailed in the underwear industry, Calvin Klein would sell only burlap bras and boxer shorts. Scratchy sure, but cheaper than cotton. A Public Underwear Commission would ensure that he didn’t try to blend some pricey silk garments with the burlap ones. If consumers complained of a rash, the PUC would say, "Quit itching. Americans want cheap undies.

Burlap is best."

 

The cheap power paradigm is bankrupt. It’s a fraud. Pathetic. Close to criminal. If you value the future or the environment, PV is cost effective. If you don’t, it isn’t. It’s that simple.

 

CAN THE SUBURBS AFFORD SOLAR? 

 

What would it cost the average family (with an appropriately sloped roof) to get, say, half their juice from the sun? Is that option affordable? 

 

Some historical perspective is useful. When Thomas Edison began selling electricity a century ago, he sold kilowatt-hours for $3.20 each, in today’s dollars. When my rural electric co-op began service in 1943, ranchers willingly paid about 40 cents a kilowatt-hour. Electricity rates in Germany are 18 cents, in Japan 20 cents. In other words, many people have in the past paid, and are today paying, close-to-solar prices for electricity. 

 

Relative to cheap coal (and ignoring global warming), solar may appear expensive. But in the context of many budgets, it is quite affordable. Daily production from my system will average 8 kilowatt-hours.  Each kWh costs me 25 cents, compared to the 7 cents I pay for coal. The difference—18 cents—is my added cost. It works out to $1.44 a day, $42 per month, $518 per year. That’s what it’s costing me to get 75% of my electricity from the sun. 

 

Break the bank? Hardly. My family of five spends almost fifteen times that much on food, five times that on automobiles, almost twice that on piano lessons. Any family that can afford cable television or the Internet, could probably afford to get some power from the sun.

 

HURDLING UPFRONT COSTS 

 

First cost remains a huge hurdle. When you buy a PV system you are paying for 20 years of energy upfront. If my family had to buy 20 years of groceries upfront we’d starve. Until we can breach this barrier, grid-tied PV will remain a tough sell. 

 

You can buy a nice PV system for about $12-$15,000. Since that’s the cost of a late-model used car, perhaps the auto industry offers some lessons. The first is to forget payback. Cars depreciate rapidly.  And yet, 15 million will be sold this year at an average price of almost $20,000. Only 10% are bought with cash, while 60% are leased and 30% are financed. Cash buyers are a market sliver. How does Ford get the rest of us into the showroom? Rebates—cash back!—and cheap financing—1.9%, 2.9%, and so forth. 

 

To move PV into the mainstream, we need ready financing.  Many homeowners have (or qualify for) 9% home equity loans. But zilch (zero-interest) loans would be even better. There’s some talk that low-interest loans may become available through the Million Solar Roofs program. Let’s hope so, for nothing would do more to catalyze that program and the Feds should put money where mouth is. Installing PV on new homes and rolling the investment into the mortgage is an exciting strategy, now being pursued by the Sacramento Municipal Utility District. 

 

Leasing is another intriguing option, particularly for business customers who could write the costs off as a business expense. Are there people who want to lease a PV system for, say, 10 years? We hope to find out. 

 

Rebates would also jumpstart the market. The $3/watt buydown now available in California should unleash a torrent of orders. I can imagine people moving to the flake state just to take advantage of this juicy deal.

 

BEYOND COAL

 

As we were installing my system, a class of students from Solar Energy International arrived to help. One eager beaver, fresh from a lecture on efficiency-and-renewables, chided me about some incandescent light bulbs in the house. Caught by a frugalista, a compact fluorescent Nazi. 

 

Most grid-connected homes haven’t captured all their efficiency opportunities. Does it make sense to add PV until they do? Good question. Our systems will meet between 20% and 90% of their home’s energy needs. Not bad, could be better. Wasting energy is our national pastime and in a perfect world we’d do a whole-house energy retrofit first. But to my way of thinking every PV module represents a small victory in the war on carbon. 

 

The Intergovernmental Panel on Climate Change estimates that stabilizing the climate will require 60% reductions in global carbon dioxide emissions. If that’s true, by 2050 the world will need 11 Terawatts of carbon-free power, as much as we now get from all fossil fuels. Visualize 1 trillion solar panels, stretching from Earth to Saturn—and you’ll grasp why we need to get started today. 

 

An average American home produces 25,000 pounds of CO2 each year due to its energy consumption. How much could solar technologies reduce this CO2 footprint? I was curious to find out, so in addition to installing a PV system, I added a solar hot water heater, replaced an energy-inefficient refrigerator, tracked down phantom loads, and improved my lighting. 

 

Before the retrofit my house used approximately 7,000 kilowatt-hours of coal power per year. After the retrofit, the house is on pace to use just 1,200 kWh, an 83% reduction. Daily CO2 emissions have been lowered from 38 pounds to 6.5 pounds. Over their 20-year lifetime, the solar water heater and PV system will avoid 230,000 pounds of CO2. 

 

PERFORMANCE

 

So far all of our grid-connected systems are performing flawlessly. Nary a glitch. With a 25-year module warranty, inverter reliability is the make-or-break maintenance issue. Theoretically life on the grid should be less arduous for an inverter than life off, since the grid can easily provide the heavy surges of power needed to start a refrigerator, vacuum, table saw, or all three at once. Trace inverters come with a 2-year warranty. We’ll buy a 3-year extension. After that, well, we’ll hold our breath. 

 

THE ROAD AHEAD

 

In Japan, 10,000 people are on a waiting list to buy subsidized PV systems. The Japanese government, which is putting $90 million a year into their rooftop program, has identified PV as a strategic technology. Not significant—strategic. Take a memo, Energy Secretary Pena. Ambitious PV programs are also underway in Germany, Switzerland, and other European countries. The U.S. is lagging, but hopefully we’ll catch up. Someone once said of Americans, "Count on them to do the right thing after they’ve tried everything else." We’re getting pretty far down the list. Personally, I’m bullish on clean power. Living with PV is instructive, and you soon come to understand that this technology is a gift to the future.

 

I’m writing this on a crisp, cloudless December day. Though the sun is low and its arc is swift, my array has been bathed in sunlight since dawn. As the sun sets, I go out to check the day’s production. It’s 10 kilowatt-hours, enough to lift a pickup truck 5,000 feet into the air. That’s also 10 pounds of coal left unburned, and 20 pounds of carbon dioxide not spewed into the atmosphere, there to linger a century or more. If that’s the payback, I can live with it.



----- Original Message ----- 
  From: robert ellison 
  To: RE-wrenches 
  Sent: Monday, July 27, 2009 7:36 AM
  Subject: Re: [RE-wrenches] Solar electric generation system seems to make noeconomic sense


  All this figuring makes my head ache, that being said. Here
  goes.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.re-wrenches.org/pipermail/re-wrenches-re-wrenches.org/attachments/20090727/3580e554/attachment-0003.html>