Tool to Esitmate Solar Panel Cost for DC

There are a growing number of companies out there that are creating easy to use platforms to utilize data that has been collected. One of the cool things floating around if you live in Washington DC is the Mapdwell Project. According to their website, the Mapdwell Project is about enabling communities with information that will drive sustainable practices, community awareness, energy efficiency, and smart development through the aggregate effort of individuals.

In partnership with the District Department of the Environment (DDOE), Mapdwell has created and released to the public a cool solar power tool that you can play with. So that if you live in the District you can see what the cost and return of a solar system on your building’s roof top would be. The solar system size used is based on the size of the roof and is effectively the maximum size solar array you could install. You of course could install a smaller array. I randomly picked a residence with a roof about the size of my solar PV array to show the information the Mapdwell project provides and apologize to whoever lives there at using their address.

The Mapdwell project serves the purpose for education and outreach to District building and homeowners to test the economics of solar power for their building. The stakeholders for solar power are residents, businesses, installers, and government in the Washington DC city limits. It aims to advance information on costs and benefits of solar power and promote solar adoption for distributed generation of solar energy from roof tops.

You will notice in the chart above that the installed cost of solar power is $4.32/ watt. That is a reasonable cost estimate in today’s market for midsize array of 10 KWatt, but may be a little low for the smallest sites. The cost of solar power is very dynamic and constantly changing and there are several components to the return of a solar system. The first cost is the cost of the system. The market cost of solar panels and installation has been falling for years and according to the Mapdwell system would cost $30,482 for the purchase and installation of a. For the next couple of years the 30% federal tax credit is still available. The net cost of the solar system below after the tax credits was $21,337 for a 7.1 kilowatt system.

The monthly energy savings from the power generated would be $85 per month. Without additional incentives that would be a return of under 1.5% on your investment. However, you will notice that according to the Mapdwell system this solar array will earn $261 each month in SRECs. That appears to boost the return on investment to 19%, but what is a SREC?

A SREC is a credit for each megawatt hours of electricity that is produced (and used by me). 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). Most states at this point require their utilities to buy SRECs only from residents of their own states creating a closed market where the prices typically start off high until supply responds to that price. Other states, like Virginia, have no current solar RPS requirement and their RPS is voluntary.

The legislation creating SRECs and RPS in various markets creates a situation where most markets loose SREC value. Without minimum price support, markets like New Jersey where SREC prices were once over $600 become oversupplied and collapse. There is always price pressure as the market over builds and the next project is willing to accept a lower SREC price. Then either the market collapses or the state closes its SREC market to outside systems and accelerates the solar carve out.

In the District of Columbia, after the market price collapsed, the market was closed, and the RPS requirement was accelerated. For the 49.6 megawatts of required average capacity for next year, there are over 28.3 megawatts of solar photovoltaic systems currently registered and certified in DC that are eligible for the DC SREC market, but DC allows a three year life on SRECS so any saved SRECs from the previous oversupplied period can be sold. Only 8.8 MW of the 28.3 megawatts are actually located within the District the others were registered and grandfathered before the market was closed.

The SREC prices in DC are currently the highest in the nation and will encourage the installation of solar projects within the district, but peculiarities of the market may slow the installation of solar projects in the short run. The SACP is currently at $300 and set to begin stepping down in less than five years ultimately reaching $150. In 2017 when the SACP is cut the market price of SRECs should fall to reflect that even if there is no sudden surge in solar installations in DC.

Of the SREC markets only Washington DC and Massachusetts are not currently oversupplied or at near balance with price supports keeping the SREC market viable. Washington DC may remain stable for a few years because as a city it has no large capacity projects and is closed to outside systems. To meet the existing solar RPS the city would have to increase its current installed solar capacity by putting solar panels on single family and multifamily residential buildings, government buildings, University dorms and museums- a much slower build out and would explain the funding of the Mapdwell project to reach out to possible building owners. Remember, that the SRECS are only viable for a few years they step down in value even without the market overbuilding.

The Costs and Savings from Energy Efficiency Projects for the Home

Last Monday in the Wall Street Journal was an article “The Economics of Installing Solar Power.” They had a lovely chart with costs and returns that had virtually nothing resembling the actual costs and savings of my solar photovoltaic system. Though the costs of solar panels have gone down considerably since I purchased my system, and I discovered that solar panel installation costs less in San Francisco than Virginia and I assume cost less in urban centers than in rural areas. Nonetheless, the chart in the Wall Street Journal made me feel terrible, the cost of the fictional solar systems in the Wall Street Journal were all $5,500 a Kilowatt (KWh). Nonetheless, payback period is entirely dependent on the cost of electricity, rebates and incentives. Depending on how I continue to play the incentive game, my payback period could potentially fall in line with the fictional systems in the Wall Street Journal.

Right now (and for the past few years) electricity costs me $0.115 a Kilowatt. No matter how you look at it solar power costs more than the eleven and a half cents a kilowatt that NOVEC (Northern Virginia Electric Cooperative) is charging for residential power. The payback without tax credits and rebates would exceed the life of the system regardless of how good or bad a deal I got. In addition, my solar photovoltaic system cost way more on a per Kilowatt basis than the system cost they used. Prices have really come down on solar panels, but I do wonder if their costs include permits, plans and engineering, as well as the costs to change the electric panels and repair and seal the walls. The Wall Street Journal priced solar at $5,500 per KWh. The 5 KWh systems in the Journal have a listed cost of $27,500 while my installed cost was $58,540 for 7.36 KWh DC. Sizing their system up to my system size proportionally would be a cost of $40,480, but my cost included $1,500 for permits, plans and engineering. Nonetheless, you could probably install the same system today (even on the edge of nowhere) for $15,000- $18,000 less so even without the state of Virginia rebate the first year cost would be the less than my cost. 

My lifetime to date energy production

The actual cost of a solar photovoltaic system is really based on rebates, tax incentives and utility subsidies. Virginia no longer has rebates available and does not have any utility subsidies or solar renewable energy requirement, but I managed to snag a rebate when they were available and register my system in Washington DC before their market rules changed. My system was grandfathered when the market was closed. The Solar Renewable Energy Credits or SRECs are worth about $290 each right now (though I have sold them for between $95 and $350). Each SREC is a credit for each megawatt of electricity that is produced and used by me. SRECs have value only because some states have Renewable Portfolio Standards, RPS, which require that a portion of energy produced by a utility be produced by renewable solar power. Utilities in some states can fulfill that requirement by buying SRECs from solar installation owners and utilities in Washington DC are buying mine. As long as the market is not oversupplied (as is Pennsylvania) and there is a financial penalty for not meeting the solar carve out, then I can make more money selling SRECs than I save on the power I produce. With any luck I will be able to sell enough SRECs to get my payback period into the 10-15 year range. Energy savings from solar power are the most expensive no matter how you look at it.

A significantly shorter payback was from upgrading my heat exchanger. This past July I replaced my air heat pump with a new efficient system, replaced the ducting system in my attic and installed an attic fan and gable vent. The result is improved comfort and a $77 a month reduction in my electric bill during the summer cooling season and I assume an equivalent reduction in the winter bill. However, there are generally 3-4 months a year that I do not run the heating or cooling system so my annual savings will be closer to $600-$700 a year. That is about half the savings from my solar panels at fraction of the cost and I get a cooler, more comfortable home.

Though I had always assumed that when the time came I would replace my heat pump with a geothermal heat pump, that’s not what I ended up doing. After considerable research and getting several estimates I replaced my air heat pump with another air heat pump, a more efficient one, and re-ducting the attic to create a more efficient and effective system. The costs of installing a geothermal system in my existing home far exceeded the benefits. Based on the estimates I received the cost to reconfigure my finished basement ($5,000-$10,000) and install either a vertical coil or standing column well ($12,000-$18,000) on top of the cost of the heat pump and upgraded ducting combined with technical difficulties (a daylight basement and fractured rock system with no overburden), and the potential I might impact the drinking water aquifer or damage my garden ended my plans to retrofit a geothermal unit into my existing home. Instead I installed a more efficient and powerful heat pump, redesigned the ducts in my attic, and installed an attic fan. The result was heaven- a master bedroom that could hold 71 degrees at the heat of the day on a 100 degree day and the bedroom over the garage that in the past always was 10 degrees hotter than the master bedroom in summer and 10 degrees colder in winter was within 1 degree of the master bedroom and my electric bill fell by more than $77 for the month of July. (The decrease was about the same year to year or June to July.)

First of all my air heat pump like most is a split heat-pump systems consisting of two parts: an indoor (blower) unit and an outdoor (condensing) unit. Both units are designed to work together. Air Heat-pump systems manufactured today, by law, must have a seasonal energy efficiency ratio (SEER) of 13 or higher. Seasonal Energy Efficiency Rating (SEER) or Heating Seasonal Performance Factor (HSPF) for heat pump systems are the efficiency ratings on heat pumps, the higher the SEER/HSPF, the more efficient the equipment. The SEER is measured in average Btu output over the season divided by the watt hours and is the standard measure of energy use efficiency. Generally, the higher the SEER/HSPF of a unit, the higher the initial cost and lower the operating cost.

My old heat pump was a 3.5 ton with a SEER of 12 and a HSPF less than 8. Once the temperature reached 90 degrees in Virginia the heat pump ran continuously and could not keep the master bedroom or the bedroom over the garage cool. The master bedroom struggled to stay below 78 degrees and the bedroom over the garage was always 10 degrees warmer despite additional insulation. The old system was only 8 years old when the coil failed, but replacing the coil ($2,500) seemed like throwing good money after bad. We decided to do it right. After getting several bids and weighing my options, I had Randy Hayes and his boys (Hayes Heating and Air Conditioning) install a 4 ton Carrier Infinity 19 seer heat pump model #25HNB948, its matched multiple speed air handler and a programmable thermostat. The high efficiency two-stage heat pump allows me to oversize the unit slightly so that it can handle the hottest days without sacrificing optimal performance on more temperate days so the old rule that if a system is oversized, the system will cycle on and off too frequently, greatly reducing its ability to control humidity and its efficiency is no longer strictly true. I rounded up from base line Manual J to get the 4 ton.

In addition we (Randy and his boys) removed the old sagging flexible ducts and installed two new galvanized steel trunk lines (one to each side of the house) with 3 inch reflective duct wrap and tied the new flex lines into the existing vent boots with as little sag as possible (thanks to Randy’s middle son) using silver flexible ducts insulated with R-8. We minimized the amount of flexible ducting in the attic using as much galvanized ducting as was feasible (at an additional cost of $3,000, but the galvanized portion of the ducting will last longer and in all real world tests gives better air flow). Flexible ducts consist of three layers an inner core of a metal helix encased in a foil film, an insulation layer and the outer vapor barrier jacket. While fully extended properly installed flexible duct can be as good at maintaining air pressure as a galvanized steel duct, performance deteriorates as the ducts sag.

In the real world there is some degree of sag even in good installations and it tends to increase over time. In poor installations (like mine was) there were sharp bends and excess lengths snaked all over the attic in a daisy chain of connection using fiberglass plenums. This caused the inner layer of the flexible duct to crumple (it is a soft spring) and the helix pop out. Instead of smooth circular tube the flexible duct turned into a bumpy pathway for the air that caused turbulent flow and very significant pressure drop from the beginning to the end of the duct. In my case, there was almost no air flow in the bedroom over the garage (the room furthest from the air blower). The reason the drop was so great is that the ducts operate at very low pressure and small resistance due to friction can have a very big impact on flow. The old ducts were also R-6 insulation and black collecting more heat. Now I have conditioned air flowing into the bedroom over the garage and you can feel the cool air come out of the duct.

Finally to help the whole system work well, we added another gable vent (on the south facing gable) and a temperature controlled attic fan in the east gable. The result was that fabulous feeling of luxury (during the test period) of lying in bed in the middle of the day on a 100 degree Sunday and pulling the covers up because it’s cold. After a week of freezing out the bedroom at all times of the day and night, we settled back at a more reasonable temperature, but still reduced our energy use by about 670 KWh for the month. Total cost $16,300 for everything-heat pump, ducting, attic fan, installation, removal of the old equipment and cleanup. Part of the cost was simply to have heating and air conditioning, part for improved comfort and the rest for energy savings.

So, I did not get a geothermal heat pump, but I am more than satisfied with the cost savings and comfort improvement of my new air heat pump over the old one. The geology of my property was not ideally suited for a horizontal coil, too many rocks. The water table is shallow (under a hundred feet). My septic field and 56 new trees were in the way of the drill rig needed for a vertical loop or standing column well, and the location of my ducting and blower were not easily accessible to a new well without digging up the driveway, patios and/or garage or moving all the utilities in the house. For another house geothermal could be an easier or better solution. I had not thought through the requirements of geothermal when I purchased the house and finished the entire basement.

Finally, the first energy project I did and you should too, was to seal and insulate the house. Heating and cooling account for 50% to 70% of the energy used in the average American home. Inadequate insulation and air leakage through ducts, walls and roofs are the major sources of wasted energy in most homes (see upgrading my ducting above). Though, my house was built in 2004 the insulation and thermal properties were not optimal. I turned to the Building Envelop Research of the Oak Ridge National Laboratory for guidance. The Oak Ridge National Laboratory performs their Building Envelop Research for the US Department of Energy, DOE, and publishes their guidance in their “Insulation Fact Sheet,” which is available on the blog home page and through this link. Insulation and sealing was the most cost effective project I had done. Despite having it professionally done the payback was under 4 years in straight energy savings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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.

The Value of Solar Renewable Energy Certificates (SRECs)

Solar Renewable Energy Certificates, SRECs, are not real, they are environmental “commodities” created by regulation that was born in New Jersey in 2004-2005 as a way to encourage and support the growth of solar energy within the states that utilize them. SRECs are not physical entities, but merely a credit for having made power. Like most consumer solar arrays I use all the power produced by the panels in my own home, nonetheless, my system generates 10 SRECs a year. Because SRECs are not physical items their value depends entirely on regulation which can change over time and that is the inherent risk in making financial decisions based on regulations. There was always a risk that some (or all) SRECs could become worthless at any time if regulations change. Some SRECs were actually designed in a way that would decrease in value over time and state legislatures have stepped in to prevent that.

SRECs are created by state regulations. In order for SRECs to have any value, the states must have a mandated Renewable Portfolio Standard, RPS, the SRECs must be tradable and there must be a punitive financial penalty for not meeting a solar carve out portion of the RPS. A renewable portfolio standard (RPS) is a state legislative requirement for utilities to generate or sell a certain percentage of their electricity from renewable energy sources. The percentage requirements under RPS programs vary widely from state to state, but for SRECs to have any real value there must be a solar carve out and be tradable.

In some states with solar grant or rebate programs the utility company owns the SRECs so that the homeowner can not sell them. This has worked in states like California where electricity rates are high and tiered and the solar installation market has become is more competitive and utility payments effectively fund solar rebates. As of September 20, 2010, 36 states plus the District of Columbia and Puerto Rico have enacted an RPS or a renewable portfolio goal (RPG). Of these states, only New Jersey, Maryland, Washington DC, Delaware, Ohio, Pennsylvania, and Massachusetts have assigned a multiplier to Solar RECs and created a separate SREC market where the homeowner or facility owner maintains ownership of the SRECs.

The legislation creating SRECs and RPS in various markets is always in flux. In the District of Columbia, the RPS market has requirements of about 7.6 megawatts of installations for next year, but there are over 45.7 megawatts of solar photovoltaic systems currently registered and certified in DC that are eligible for the DC SREC market. Only 1.2 MW of the 45.7 megawatts are actually located within the District. In Pennsylvania the RPS requirement for next year is 44 megawatts and there are 104.8 megawatts of solar photovoltaic systems currently registered and certified in that state with only 36.3 are actually located in Pennsylvania.

Even in a market created by regulation, the relationship between supply and demand creates the price. A market that cannot attract the supply to meet the mandated demand will have above market SREC prices until the supply increases this is effectively what happened in New Jersey’s closed market with aggressive RPS requirements. An open market that attracts too much supply too quickly would face a collapse in SREC pricing. Virtually all states have more SRECs available for sale than mandated RPS at this time. Price collapse has occurred in the states with open markets and small RPS requirements. This situation creates the dynamics for legislatures to limit access to these open markets in the future to protect in-state generators or conversely to slow the development of solar projects in the eligible adjacent states. That is the problem in markets dependent on regulation for their existence a state legislature will determine the ultimate return I get on my investment in solar photovoltaic panels.

New Jersey, Maryland, Delaware and Massachusetts have SREC markets closed to out of state facilities. Ohio, Pennsylvania and Washington DC allow sale of SRECs of facilities in adjacent states. New Jersey and Massachusetts have additional mechanisms to protect the market SREC value and the instate market from significant oversupplies like those seen in Pennsylvania and DC. New Jersey pioneered the SREC program in their 2004 and launched in 2005. In the early years, in addition to closing its borders to out-of-state facilities, New Jersey placed a cap on the size of project eligible for the SREC market to protect the small generator. There is also a protection to the SREC value in the Solar Alternative Compliance Payment that is the punitive fee for failing to meet the solar carve out. Massachusetts has made a 10 year commitment to their program setting a floor price of $300.

Virginia where my solar panels are located does not have a mandated RPS, it is voluntary. In addition, Virginia does not have a solar carve out in their voluntary standard. All REC are priced the same in Virginia at about $15 a megawatt as I would be competing against the landfill gas generators such as the Prince William County landfill. In addition, my electric cooperative sells power at a very low cost (about 11.5 cents per kilowatt over 300). I am eligible to sell my SRECs in Pennsylvania and Washington DC. Currently both of these markets have and oversupply of SRECs and the price has collapsed. Two factors have created this dynamic; there is no cap on the size of eligible projects and the recent SREC prices, state rebates in several states and federal tax credits that had effectively reduced the cost of solar installations increasing both the return on investment and thus the supply of solar installations and SRECs. Large projects and small consumer projects responded to these incentives and anticipated SREC payments to overbuild solar installations. The time lag inherent in SREC generation feeds the market inefficiency.

This delay has created the price collapse in the market. Too much supply of SRECs entered the market over the past 18 months before SREC prices were able to indicate to the market that it needs to slow growth. At this point, one of two things is likely to happen, either growth of solar projects will slow in the markets where the SREC price has collapsed (Washington DC and Pennsylvania) or the states will incorporate a price support feature into their market. That price support could either come in the form of a floor price akin to that seen in the Massachusetts market, or a mechanism that triggers a requirement increase in the event of a price collapse. Often these price supports are accompanied by closing the market to avoid paying out of state generators with local rate payer money. On the other hand if more states create open SREC markets, the price support could come in the form of shifting supply from one state market to the next. If each facility is eligible in several states, the market becomes more diverse and subsequently more secure. However, regulators tend to choose to protect their own and their faith in open markets is not something I would bet on. At this point it appears that my investment in solar panels will return will be less than I hoped.

The total installation cost was $58,540. I obtained the Virginia Renewable Energy Rebate of $12,000 and the 30% tax credit of $13,962 and my total out of pocket cost for my solar system after the first year is $32,578. A rough estimate using the DOE model of my savings on electricity is $1,400 per year. This past year I earned $1,045.94 in SREC income for the partial year that my panels were installed. That is slightly over a 7.5% return on my investment last year. Now my future returns do not look as bright. My husband, an experienced investor, has reacted well to this lowering of anticipated return on investment reminding me that our own power generation savings is worth more than 4% each year at the current cost of electricity.

Fleeting Solar Incentives and Regional Markets

The government has determined that solar, wind and geothermal sources of renewable energy are to be encouraged. Tax incentives, cash incentives and rebates targeted at end users were created to encourage the adoption of renewable energy projects including solar panels. These incentives change from location to location and from year to year making the decision to invest in solar photovoltaic system very complex and potentially risky. The renewable energy credit that I obtained in Virgina to help offset the cost of my solar photovoltaic installation has been exhausted and there are no current expectations to continue to fund the program in Virginia. However, I have discovered as I look at programs in other locations that the state rebate in Virginia at $2,000 per kilowatt PTC was quite generous.

Over the past few months I have watched the price for SRECs (solar renewable energy credits) fall each month in Pennsylvania where I have been selling my SREC. If you recall, SRECs are not physical entities, but merely a credit for having made power (I used all the power produced by the panels in my own home). Because SRECs are not physical items their value depends entirely on regulation which can change over time and that is the inherent risk in making financial decisions based on regulations. There was always a risk that SRECs could become worthless at any time if regulations change. Of course they could become worth more. Meanwhile, I will continue selling SRECs on the spot market. I continue to observe the market and it appears to be due to changes in regulation.

Utilities in the state buy SRECs from solar installation producers to meet their mandated Renewable Portfolio Standard, RPS. 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 is kept high. Other states, like Virginia, have no current RPS requirement. Still other states, like Pennsylvania allow their utilities to buy their RPS from any resident within the PJM regional transmission organization. The power in the grid is purchased and sold on a regional basis, so I suppose there is some logic to a regional SREC market, but it may not be in the best interests of state residents. There is a virtual market place where nothing is sold by virtual companies. Only accounting entries change hands in this market.

The SREC programs in the eastern states of Pennsylvania, Maryland, Delaware and New Jersey, have been one of the catalysts for solar development because they increase the return on investment in a solar photovoltaic systems in their markets. When Maryland, Delaware and New Jersey recently updated their SREC laws to increase the requirements and raise the fines, the price in their closed markets went up. However, that change coincides with the falling SREC price that I have received. In addition, Pennsylvania has been examining closing its SREC sales to out of state installations.

When the original PA SREC program was created in 2004, the law included SRECs from out-of-state facilities. A recent PA bill to increase RPS failed, but it would have excluded all out-of-state facilities that have already been built and certified by the Pennsylvania AEPS Program to sell SRECs in the state’s market. These are existing solar facilities like mine that have been selling SRECs for the Pennsylvania market, and could be shut out of the SREC market in the future. This may actually be a good thing for the PA SREC market, but has the potential to significantly reduce the return from my solar photovoltaic installation. This; however, was always the risk with financial incentives based on regulations and laws in other states. This was a risk I accepted and must now live with.

The legislation creating SRECs and RPS in various markets is always in flux. In the District of Columbia, the RPS market has requirements of about 8 megawatts of installations at the current time, but there are over 27 megawatts of solar photovoltaic systems currently registered and certified in DC that are eligible for the DC SREC market. Only 1.1 MW of the 27 MW are actually located within the District. This situation creates the dynamics to limit access to the market in the future.

California has a series of solar financial incentives that are location specific and very different from the eastern markets. I will be looking the various incentives and costs associated with a residential solar project in San Francisco in the coming days. California does not have a SREC or as they call it a Tradable Renewable Energy Credits (TRECs) market to meet California’s RPS. Though there are stiff RPS in California utilities have not been allowed to buy TRECs to comply with RPS. In addition, the CA PUC has maintained cap on TREC volume and price preventing the development of a TREC market in the state..