Is the rising cost of electricity threatening the viability of your operation?
Many are asking if solar is the solution. Can solar produce enough electricity? How is it stored so it is available when needed, night or day? What does it cost? How long will it take to pay for itself with electric savings? Will the cost come down soon?
No Batteries Required
Today’s solar electric (also called photovoltaic, or PV) panels are more efficient, powerful and cost-effective than ever. The systems described here are grid-tied, meaning the output of the solar system is connected directly to the community electric system, or grid. This is done at the main panel, between the house and the meter. While the PV is producing, whatever the house is using comes from the solar, and the excess goes to the grid. On the way, this electricity spins the meter backward. When it is not sunny outside, power comes in from the grid and turns the meter forward. This is called net-metering. Net-metered customers receive monthly statements from SDGE, but only one bill per year. This allows the system to make up a winter deficit of solar output with a summertime surplus.
At the end of the year, the account is “zeroed-out” and the metering starts over. If you use more than your system produces, you are billed for your use with a $5 per month minimum. If your net is positive, you will get a credit at the disappointingly small “wholesale energy producer” rate. For privacy buffs, it should be noted that, with net-metering, only the customer knows the total energy use. The net from the meter would have to be added to the PV system’s inverter output to determine the total electric use.
Half for Homeowners, Three-Fourths for Businesses
After accounting for incentives, solar produces power for far less than SDGE’s Tier 3 and higher home rates. For businesses subject to utility company “demand charges,” the opportunity to change rate structure could pay for the system even before it produces any electricity!
Besides different rate structures, homeowners and business have different federal solar incentives. Homeowners get a 30% tax credit to be deducted from taxes owed, which can be carried forward. In lieu of this credit, business owners receive a 30% cash grant through 2010. Businesses can also depreciate 85% of the system cost in five years, even though PV panels are warranted for 25 years and last much longer.
Additionally, since 2001 the California Energy Commission has paid nearly $3 Billion to Californians who have installed PV systems on their property. This cash incentive, or rebate, has declined on a schedule as more systems are installed, and is now about 15% of the typical system cost. Between federal and state incentives, homeowners get about half of the system paid for, and business owners get about three-fourths, thanks to the added tax deduction.
Most Roofs Work Fine
Most buildings have enough suitable roof area for the amount of solar they need. The power output of the system varies slightly with tilt and orientation. South-facing at about a 20º tilt is best but the range of directions that have less than a 10% loss in performance is wide. This can easily be made up with a few more panels. However, since solar eliminates top-tier priced electricity first, any amount of solar that fits will produce the highest possible return on investment (ROI), usually about 15% (tax-free) for homeowners and 25% (taxable) for businesses. If a roof area cannot be found, a rack structure to support the panels may qualify for all of the tax benefits and serve as a parking, shade or storage structure after the solar is completed.
Thin-Film, Solar Paint and Other Vaporware
Due to a rapid build up in PV panel manufacturing capacity beginning in 2006 when the California rebate was nearly three times what it has declined to now, combined with the subsequent decline in capital to finance the multi-million dollar utility-scale systems, silicon panel prices have fallen dramatically. For the average home system, the panels now represent only 25-30% of the total system cost. Large reductions in panel prices are unlikely and would not result in a significant price decrease.
The recent reduction in panel prices has dampened enthusiasm for the newer thin-film technologies that attempt to reduce cost with high volume production of lower efficiency panels. The low efficiency requires that twice as much panel area be installed which increases the costs of mounting materials and labor.
There has never been a better time to install solar. The cost of panels cannot decline as fast as the California rebate so the net cost of the system will gradually rise as the rebate diminishes. The pace of solar sales has responded and renewable energy is now considered to be one of the few bright spots in the economy.
Look at it this way: if you expect to buy electricity and pay taxes, solar tends to pay for itself in seven or eight years for a home, or four or five years for a business. Will you be buying electric power in seven years? Ten? Twenty? When the payments on your solar system end, the power keeps flowing. How long have you been paying your SDG&E bill? When will your account be paid off?