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

[Peter Talmage]

In this analysis doesn't 465 kWh/month x $ .0633 /kWh x 12 months/yr = $353.21 saved per year not $29.43? Or am I missing something?

Peter Talmage
Energy and Design
Northfield, Mass.

> To: RE-wrenches at lists.re-wrenches.org
> Subject: 
> [RE-wrenches] Solar electric generation system seems to
> make noeconomic 
> sense
> 
> 
> 
> Dan,
>  
> 
> 
> Residential Analysis
>  
> On the residential
> analysis, at best case ( NH 
> $6k rebate not being taxable) at $35k minus $6k
> and -30% federal tax 
> credit you have $20,300. net cost today.  At a 25 year
> interest rate of 
> 3.25% (5.41% available today - 40% tax rate) the same
> dollars placed in a 25 
> year interest earning account would grow to $45,696. (That
> is after taxes are 
> paid at 40%)
>  
> My present
> residential kWh rate (not business 
> rate) is .0633/kWh.  Your 5kW system at 465 kWh
> generated per month x 
> .0633/kWh = $29.43 saved per year.  If the savings per
> year earns a 
> compounded interest at 3.25% (after taxes)  and the
> kWh stays the same each 
> year, the compounded savings in the 25 yr. lifespan at
> 3.25% (after taxes yield) 
> = $13,653.  Now this assumes the $29.43 increases at a
> rate of 3.25% 
> annually (increase in utility charge per
> kWh) .
>  
> So in 25 years (the
> projected lifespan of the solar 
> system, if all goes according to the plan) the $20,300.
> would grow to $45,696. 
> after taxes.
> The savings each month
> would grow too, at the same 
> rate as the money placed at 3.25% and that total in 25 yrs.
> = 
> $13,653.
>  
> In order to reach $45,696.
> based on kWh savings, 
> even at an astounding 6% annual increase in the utility
> rate for 25 years, the 
> savings the first month would have to be $66.18 (not $29.43
> which is today's 
> reality) and increasing from that number at an annual rate
> of 6% compounded 
> monthly to equal the same $45,696.  
> 
>  
> I have ignored the $5.41
> monthly basic charge that 
> all rate-D (domestic use) customers have, which would add
> to $2541. in 25 years 
> at 3.25% increase annually.  I have ignored any
> maintenance costs, failed 
> electronic components beyond warranty period, 
> and breakages on the 
> solar equipment in 25 years.
>  
> I used www.bankrate.com loan calculators, savings goal calculators, and
> savings calculators to 
> arrive at these numbers.
>  
>  
> Business Analysis
>  
> On the business analysis,
> it is a disaster because 
> putting the kWh aside, the utility company will not reverse
> the peak load 
> (called demand charge or distribution charge) per kW. 
> Today they charge 
> $4.44 per kW.  We run about 32kW now and 2400 kWh
> monthly.  Even if we 
> generated 100% of the kWh we consumed per month (on a much
> larger solar array) 
> the Demand Charge still hits us at about 40% of our
> electric bill, and it will 
> never be reduced by the solar energy.  Since the
> reduction in our electric 
> bill will only be to a maximum of 60% reduction monthly,
> the business side comes 
> out worse than residential.  The utility company bases
> the peak kW number 
> on ANY 15 minute period of time at anytime during the
> billing cycle(a month) and 
> it can only ratchet upwards, never downward.
>  
> The business rate G-2 is
> 9.2 cents per kWh today 
> (not the 17 cents I previously assumed by dividing the
> total monthly kWh into 
> the utility bill $ total.) Even at best possible rate
> of $6. per watt, 
> which doesn't exist, At 465kWh monthly from 5000 watts,
> we'd need to have a 
> 25.8kW solar array to satisfy 2400kWh monthly.  $6. x
> 25800 watts = 
> $154,800. for the system.  That cost -30% =
> $107,800.  When placed in 
> an interest bearing account for 25 yrs. at 3.25% (after 40%
> taxes on 5.41% APY) 
> that money grows to $242,664.  
>  
> Say we matched our
> consumption in kWh with the 
> energy generated, so our supply cost drops to zero. 
> That still leaves our 
> $4.44 per kW which is unaffected by the solar electric
> generation system.  
> At $142.08 per month (32kW x $4.44), each and every month,
> with an assumed 
> increase of the kW rate at 3.25% it amounts to $65,950. in
> demand charges.  
> 
>  
> On the kWh, at 9.2 cents
> per kWh, 2400 kWh would 
> generate a bill of $220.80 monthly.  Say we see an
> annual increase of 3.25% 
> annually for 25 years.  The potential savings is
> $102,491.  Say 
> we matched the kWh consumption with the solar system
> 100%.  That would 
> leave us with an outlay of $65,950. in demand
> charges.  Take the $102,491. 
> savings and subtract the $65,950 demand costs.  That
> leaves the business 
> with $36,541. compared to $74,223. left over if the utility
> bills had just been 
> paid in full at an increase of 3.25% annually.
>  
> In the business example,
> note I am stretching the 
> cost of the installed system downward at $6. per
> watt,
> stretching the increase in
> the cost per kWh to a 
> rate of 3.25% over a span of 25 years (perhaps it will not
> increase at that 
> rate),
> assuming no maintenance
> nor repair, nor replacement 
> expenditures in 25 years operating the solar
> system,
> and overlooking the
> monthly basic charge of $24.61 
> which when increased 3.25% annually for 25 years amounts to
> 
> $11,423.
>  
> Interestingly enough,
> aside from this analysis, I 
> have never read anything about the economic trap the
> utility company Demand 
> Charge creates for the installation of a solar electric
> system for small 
> business.  
>  
> The my competitor's
> solar array at $400k - $226k VT 
> grant - 30% federal tax credit calculates out to $2.09 per
> watt installed 
> cost.  Do they pay a Demand Charge per kW
> load?.
>  
> Doesn't it make more
> sense to wait until the 
> price per watt on solar electric generation makes
> economic sense?  
> Correct me if I made any mistakes in my analysis
> please.  I would love to 
> justify the installation from an economic
> standpoint.
>  
> I contacted the NH PUC and
> brought the issue of the 
> Demand Charge to their attention.  I was told there is
> nothing they can do 
> about it, it is up to the small business consumer to
> uncover that little 
> gem.
>  Jim
> 
> 
> Dan 
> Brown
> President
> Foxfire Energy Corp.
> Renewable Energy 
> Systems
> (802)-483-2564
> www.Foxfire-Energy.com
> NABCEP 
> #092907-44  
> 
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