Monday, November 16, 2009

Renewable Energy Incentives and Solar PV Panels

On October 6, 2009 Governor Kaine of Virginia announced that a portion of the stimulus dollars we are all paying for as been allotted to its Residential and Commercial Solar and Wind Incentive Program. Up to $15 million will be provided in rebates to partially reimburse the costs of residential, commercial and nonprofit renewable energy systems. For residential users the first 10 kilowatts, the rebates will be $2.00 per watt for Photovoltaic Solar systems, $1.50 per watt for small wind turbines and $1.00 per watt for solar thermal units (solar hot water heaters). The rebate is less than you might think because system capacity is defined in Virginia as the installed system’s predicted peak alternating current (AC) output. The system’s predicted peak alternating current (AC) output is calculated as: PTC output Watts per module x Number of Modules x Inverter weighted efficiency. Thus, the rebate is for the AC output not the DC installation size that you are sold. The predicted peak alternating current output would be around 75%-80% of the DC rating.

Virginia has net metering. Combining this with the federal tax credit of 30% and the sale of the renewable energy credits, REC’s, which can be sold to California utilities who’ve just had their renewable energy hurdle rate increased or to others needing RECs. Current prices quoted for RECs are $220-$300 per kilowatt/year and are sold in 4 or 5 year contacts to REC aggregators. (Packaging RECs might be a nice clean business to be in.). Solar mounting modules with connectors built in cost about $7-$8 per (DC) watt installed. All of these incentives added together could bring solar PV within range of dreaming of actually having a payback period.

Though, I am fully aware that the payback period for my hybrid car is around infinity, due to my extremely low driving (less than 4,000 miles annually). I am tempted once more by green technology. So I went to the renewable energy recourse center to use their PVWatts Version 2 calculator to see if I could get an estimate of the energy cost savings for the Solar PV cells. It helps to have your latitude and longitude (get it off your cell phone GPS function) and know what you actually pay for electricity and if you have net metering (the credits for power generated is at the same rate as you are charged). The model uses hourly weather data and a PV performance model to estimate annual energy production and cost savings for a crystalline silicon PV system. It allows users to create estimated performance data for any location in the United States. The PVWatts Version 2 calculator uses the data from a typical meteorological year data station and site-specific solar resource and maximum temperature information to provide PV performance estimation. (Solar systems work more efficiently on sunny cool days.)

The PVWatts tells me that a 5 kW array mounted on my roof would generate about $760 dollars of electricity a year at $0.0122 per kW. This is what I pay NOVEC, my power co-op. Taking that data and calculating a payback period using a 4% interest rate and assuming that I obtain all the available incentives, the payback period for the solar panels would be 30 years with power costs remaining constant. The life of solar panels is between 20 and 25 years, so the payback with these assumptions is about the same as my car- will never happen. However, the sale of the RECs changes the economics. RECs are bundled together and sold for 4 or 5 years, paying quarterly. They represent twice the annual savings in power. So counting the RECs the solar panels actually appear to have a reasonable return. There is no guarantee what the value of the RECs will be in the future or if there will be any value. RECs only have value because utilities are required to generate and increasing amount of their power from renewable sources. If the regulations change or the utilities find cheaper sources of RECs then the return evaporates.

Armed with this information, I was able to convince the husband that the solar panels might be worthwhile based on the above analysis and the fact that I would let him turn up the air conditioning in the summer. It is still a big decision because even with rebates and tax credits we would have to come up with the cash to pay for the system. So, its on to the next stage of investigating installing a solar PV array. Now, it is on to finding the right contractor and obtaining bids.

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