A Full Year of Solar Power- My Return on Investment This Year

How did I do with a full year with my solar photovoltaic panels? To purchase and install a 7.36 KW solar array consisting of 32 Sharp 230 watt solar panels, 32 Enphase micro-inverters and mounts was $57,040. For the engineering and permits I paid $1,500 for a grand total of $58,540 out of pocket. Now it gets complicated. The 7.36 KW are equivalent to 6.2 KW PTC. I reserved 6 KW PTC Renewable Energy Rebate from Virginia and on completion of installation, inspection by the county, and sign-off by my power company, NOVC, I filled out all my paperwork, provided copies of permits, signed off inspections, invoices, technical information, contractor information and pictures of the installation, and meter (before the 180 day deadline despite snow, rain and contractor problems), and promptly (within 4 weeks) received my renewable energy rebate of $12,000 from Virginia. This payment was not taxable income, but rather reduced the “cost basis” of the PV Solar system for federal tax purposes. Thus, from the original installation cost of $58,540 I subtract the Virginia Renewable Energy Rebate of $12,000 to obtain my net cost of $46,540 to apply the 30% and obtained a federal tax credit of $13,962. My total out of pocket cost for my solar system after the first year is $32,578. My energy production as tracked by Enphase was actually higher than the PV Watts the DOE model energy production at 9.7 megawatt hours for the year (there was a several weeks during the spring where my internet connection was spotty and the data from the solar panels was not consistently received by Enphase so my generation was probably a little higher). My savings on electricity is $1,200 per year, NOVEC, a cooperative, has very good residential rates. That is about a 4% return on my investment each year (unless NOVEC raises their rates). Without additional incentives my PV solar array would return about 4% a year.

The cost and return on a solar power system is largely based on regulated incentives and there are more. The final incentive is the Solar Renewable Energy Credit or SREC. Each SREC is a credit for each megawatt hours of electricity that is produced. SRECs have value only because some states have solar set asides from their Renewable Portfolio Standards, RPS, which require that a portion of energy produced by a utility be produced by renewable power. Utilities in those states buy SRECs from solar installation producers. It is a way for states to ensure that the upfront cost of solar power is recovered from utility companies (and ultimately from the rate paying consumers). Some states, like New Jersey and Maryland, require their utilities to buy SRECs only from residents of their states creating a closed market where the price can be very high until supply responds to that price. Other states, like Virginia, have no current solar RPS requirement and their RPS is voluntary. Still other states, like Pennsylvania allow their utilities to buy their RPS from any resident within the PJM regional transmission organization. The Pennsylvania SREC price has collapsed due to oversupply and a method of calculating the penalty fee, the Solar Alternative Compliance Payment, SACP, that is favorable to the utilities and ultimately the consumer.

There are estimated to be about 105 megawatts of solar capacity now in place in Pennsylvania, while the 2004 law requiring utilities to buy only 44 megawatts of solar renewable energy credits for the current year. The result: SREC prices have crashed within Pennsylvania. The solar industry says the market may remain oversupplied for several years unless the legislature steps in. I am fortunate that my SCREs are registered and were grandfathered in the (now closed) Washington, D.C. market when they accelerated their solar RPS. So, for the moment, I can still sell my SRECs at an attractive price. I expect that the Washington D.C. market price for SRECs will increase in the short run, then fall as the market supply over responds to the regulatory demand and the falling SACP. For the moment and probably for the next two to three years I expect favorable SREC prices in the near term with the Washington D.C. SACP set at $500 until 2016, and with regulatory demand slightly more than or near balance with supply for the moment. The DOE loan to Project Amp remains a market supply risk. Remember, the DOE recently approved a $1.4 billion loan guarantee to support Project Amp; the installation of 752 MW of photovoltaic solar panels on 750 existing rooftop owned by Prologis. This represents more than 80% of the total amount of PV installed in the U.S. last year when the renewable energy solar photovoltaic rebates were widely available. Depending on where these solar photovoltaic panels are installed and in what time frame they could significantly impact the solar market and change the SREC markets in several states.

Overall, the return on investment for my solar panels will be 4% based on the power they generate and the current cost of electricity from NOVC, who have not raised their rates in more than 5 years and returned some profits to their customers recently as rebates. As long as they are available I will continue to obtain additional profits from SRECs, but those returns are not guaranteed for the long term. This year I sold 8 SRECS for a net of $1,458 after fees but before taxes. So that my return on my solar panels was 8% for the year and slightly more than half the return is taxable income. Still this was the best investment we had this year.

Reducing the Carbon Footprint with Cap and Trade Legislation

The "American Clean Energy and Security Act" is HR 2454, it is also known as the Waxman-Markley energy bill, or simply as "ACES." The Bill includes a cap-and-trade global warming reduction plan designed to reduce greenhouse gas emissions in the U.S. The current goal is a reduction of 17% by 2020. Other provisions include new renewable energy requirements for utilities, studies and incentives for carbon capture technologies, energy efficiency incentives for home and buildings, and grants for green jobs. The bill is expected to be on the House floor in June.

The Congressional Budget Office analysis estimated that price increases associated with a 15% cut in carbon dioxide emissions would cost the average U.S. household $1,600.00 a year. This weekend the World Business Summit on Climate Change will meet in Copenhagen. Bjorn Lomborg, in his opinion piece in the WSJ discusses the cost of green jobs in Spain as well as his opinion of the "Climate-Industrial Complex." (A lovely turn of phrase.) It is difficult to determine the cost benefit analysis of ACES since the exact relationship of man made greenhouse gas reduction and climate change is not known. It is evident, however; that reducing greenhouse gas emissions or any other custodial care of our planet takes resources: money, time, energy and passion. Spend to care for the earth and its atmosphere and there will be less for other things. We as a whole will be poorer, but hopefully with a more sustainable earth. We need to spend wisely to get the most effect from our resources and efforts.

A cap and trade system will cost the American consumer more for power, transportation and many goods. There will be profits to be made in a cap and trade system, who will hold the profits and who will bear the costs remains to be seen. Hopefully, the unintended consequences will not overwhelm the goals of the bill.

I do see the first glimmers of green jobs. This month in CEP (Chemical Engineering Progress) was a very helpful and inspiring article by Jeffrey H. Siegell titled "Improve Your Air Emissions Estimates." With the apparent goal to properly estimate the baseline, Mr. Siegell identified several problem areas in typical reporting estimates. I love system mass balance, waste stream sampling, release modeling-all of it. Though I have not modeled a processing plant since my US EPA and DuPont days, I think there will be great opportunities in systems emissions modeling.

The Price of Solar Power is Falling

The Wall Street Journal reports that the recession has pushed down the cost of solar power. Back in the late 1970’s when I first looked at the idea of solar power and PV cells the cost per watt was something like $120 just a last year the price was $4 or more. Now it seems that the cost has been pushed as low as $2 per watt. That does make you want to buy. However, not all states offer incentives.

In the 1950’s when Bell Labs fist developed the PV cell operating efficiency was 4%, in the 1970’s efficiency was 9%. Currently efficiency is 15% and there are developers working on higher efficiency PV and concentrating systems. Between manufacturing cost reductions and increase efficiency we find ourselves with solar PV cells at $2 watt. Is that good enough?

Today a PV cell provides 1,000 watts per square meter (costing $2,000 at the current recession discount). At noon on a cloudless day in the Arizona desert (optimal conditions) that square meter produces an impressive 6 kilowatts hours per day. Unfortunately, most of the United States (my address included) has less than optimal solar conditions for much of the year. For the worst part of the year with the current 15% efficiency I calculate that I would get less than 1 kilowatt hour per day from that square meter of solar PV cell in the winter and rainy days, the optimal production for my location seems to be about 4 kilowatt hours per day (despite my location on a knoll and with a dead on southern facing roof). Even this level of pricing does not meet my hurdle rate of return on investment (the best use of my money). Despite my goal to someday move off the grid which will take a combination of technologies, I am tethered until solar and residential turbine technology make the next leap. Until that time, passive solar techniques are where I'm spending.