I wrote that line in August 2006, quoting my wife Vicky, who was entranced by the most visible manifestation of what our just completed rooftop grid-connected solar system was achieving (“A Solar Story,” ED Online 13242). While that column covered the technical details of its installation, this story is about the economic advantages we’ve seen since then.
“Our costs sum out around $17,600,” I wrote two years ago. “If we actually reduced our utility bill by $1250 a year, payoff would be a little more than 14 years. Ask me in 2030.” An Electronic Design reader immediately wrote to chide me that I had not considered the time-value of money in making that estimate. He said I could have put that 17 grand into certificates of deposit or some other investment and collected interest, so that had to be figured into the equation, and the time-to-payoff would be longer. Okay.
Yesterday, the utility’s annual reconciliation of the account arrived in the mail. We’re on a “time of use” plan, so electricity taken from or placed onto the grid is approximately four times as valuable during peak-demand times than it is at slack times. There are more peak-demand hours in summer than in winter, so the algorithm is somewhat complicated. Effectively, we get only one electric bill a year, although we pay seven bucks or so in use taxes monthly.
The first full year living under a roof partially covered in solar panels, we found we had put approximately $80 more juice onto the grid than we’d taken from the grid. In terms of dollars (but not in terms of Watt-hours), we were energy-neutral. This year, we’d given the utility roughly $90 worth of free (to them) electricity. Vicky had been eager to see how year two compared to year one, so I phoned her at work. She was pleased, but then I mentioned that time-value of money thing.
“Ha!” she shouted. “We financed that system by selling Bank of America stock at $55 a share. Today, it’s worth $25!”
She also noted that accounting in dollars as if today’s inflated bucks were worth as much as they were two years ago was misleading. (If only we’d sold Bank of America and put the money into oil futures… Yeah, right. As Keynes said, “In the long run, we’re all dead.”)
So, will it take me 12 more years to reach my payoff? If oil keeps going up, or even stabilizes at $130, it may be sooner. What it comes down to is that it’s impossible to come up with a hard number for payback time, but Vicky’s original notion that this was a good investment is being amply demonstrated.
The Specs
Since I’m writing for engineers, rather than economists, let me recapitulate the details of the solar installation. On the roof, there are 16 Kyocera KC190GT modules on a Pro Solar rail-mount system. Solar panels are rated according to “PV USA Test Conditions” (PTC), which were developed at the Photovoltaic (PV) USA test site at the University of California, Davis.
The PTC rating refers to the output of a panel under conditions of 1000 W/m2 solar irradiance, 1.5 air mass, and 20°C ambient temperature at 10 m above ground level and a wind speed of 1 m/s. Each module on my roof has a PTC rating of 167.7 W dc. The dc output of the total panel array is nominally 2683 W (under PTC conditions). Two years ago, I said that our array appears to be better than that, based on voltage and current measurements made by the inverter, but I think that was optimistic. When I remember to look at the readout on a normal sunny day, I’m seeing 2200 to 2400 W.
That dc-ac inverter is a Fronius IG-series unit rated for 3 kW. The inverter’s nominal efficiency is 94%. The ac output from the inverter goes through an emergency cutoff switch located next to the house’s service entrance and goes on to a pair of breakers in the electrical panel.
Let’s look at capital cost and labor. To mount the panels, we needed some plywood under the shingles. The brackets for the mounting rails attach to that. But the old roof needed replacing, not just under the relatively small area where the panels would be mounted, but everywhere. All told, the roofing work came to around $10,000. When I wrote about this two years ago, I arbitrarily allocated $2000 of that to the solar system.
The contractor charged $24,600 for materials and labor, but we received a $7000 rebate from the utility. (I’m doing some rounding-off here.) So non-roof costs were $14,600. A county permit (we’re outside the city) costs around $750, and the contractor charged $250 for steering that through. That’s how I arrived at that $17,600 in 2006 dollars, when oil cost $75/bbl—see http://en.wikipedia.org/wiki/Oil_price_increases_of_2004-2006, and no, I don’t apologize for looking stuff up on Wikipedia.
Loking forward, I expect the costs for home and business solar installations to come down. New technologies like sputtered copper indium-gallium selenide (CIG) are moving closer to commercial viability, and efficiencies aren’t bad if you have enough roof. But that’s a topic for another column.
Spec requirements on line-tied synchronous inverters are pretty tight: google "Inverter islanding" to get an idea of the scope. Not something a casual hobbiest should take on without in-depth study.
SeaBee -August 02, 2008
Been thinking about PV panels to ease the powerbill during summer months for a while, but ROI/payback has always been some obstacle. I am not a electrical engineer but have managed to operate a soldering iron with occasional success. 1) on the inverter question: I agree that the procurement cost is outrageous. Would it be possible to build one from junk parts? I have converted several PC power supplies for tasks like Ultrasound generator, HV powersupply, power pulse generator and other stuff. The power needed here is however about 10 times larger. 2)ROI: From lack of inverter I considered to use PV panels to power a small HVAC unit in addition to the one already installed. No batteries, no inverter - so capital investment should be low. The unit operates on DC when the sun shines. During night and cloud times the conventional unit would kick in. This would use PV power at the time when the power company charges the most and payback should be shorter. Comments invited.
chrisoe -July 25, 2008
Funny, because homeowner Bob (or Roberta) might think nothing about dropping $50K into kitchen or $20K for a hot tub -- what's the ROI on a jetted tub? Current PV-inverter-battery economics are still too niche for consumer pricing. Just install your solar already and enjoy the Greener-than-thou bragging rights. BTW Ni-Fe stationary cells have good capacity and 100-year lifetimes if maintained properly. No need to wait for exotic, royalty-bound chemistries.
SeaBee -July 24, 2008
A few things bug me RE PV systems. 1. It seems like when I was a kid ('70s) I saw various companies hawking PV systems at trade fair/home show venues. At that time, the time to payoff was conveniently projected at about 15 years. Here we are 30 years later, and with all of the remarkable tech improvements, the time to payoff hasn't improved. I'm not laying the ground for some conspiracy theory, but while consumer items are usually priced at what the market will bare, I believe the PV market must get their pricing ques by what time to payoff the market will bare.
2. Has anyone looked into Inverter manufacturing? PV inverters aren't that complicated. Here in California, there are quite a few hurdles to get over, if you want to manufacture and sell PV inverters. It's all supposed to be for the protection of the consumer, but what it really does, is make for a rather expensive and exclusive club to join if you want to sell PV inverters in CA. The members of which, have little competition, which helps keep the prices for these products rather high. So, the consumer spends more for this stuff because of this, but doesn't mind because of the rebate they're getting (to qualify for the rebate, the consumer must purchase the inverter from a member of CA's exclusive inverter MFG club). There's a lot of money circulating here, but who's it benefiting? The consumer? Ha! PV inverters should be available at the local electronics place (Fry's Electronics? Best Buy?), or home repair center (Home Depot? Lowes? Wal-Mart), for a few hundred dollars, not multiple thousands of dollars.
Anonymous -July 23, 2008
Charlie T: Is it really that simple? No and Yes. Comparing to rotating machines, raising voltage puts VARS back into system and advancing the phase angle puts WATTS back into the system. I assume the inverter does the electronic equivalent - no experience. So yes, appropriately connect the inverter to the line.
Anonymous -July 23, 2008
Did your property taxes go up because of installing the solar panels?
Anonymous -July 23, 2008
Even though my engineering carrer consisted of working with 60Hz Industrial power control using SCR's the size of coffee cups, I'm still a bit fuzzy on this concept of running the meter backwards. It would seem that in order to do that, your home made AC must be a higher Voltage than what's coming from the power company. I relate it to charging or discharging a battery depending on the external Voltage, although I think I'm missing something. Do you simply connect the output of your inverter to the grid? Is it really that simple?
As to cloudy days and storage, there have been tremendous strides in battery technology in the past few years, so the "massive" storage as one commenter put it may not be all that impractical as these systems develope.
I agree however, that the short term answer to out nations energy problems is more the economics of supply and demand rather than "green vs big oil". We need to increase the supply NOW as well as look to the future for alternative energy sources. Oil drives our economy and all the CFC's and conservation we can muster will not change that equation. When you have controlling factions that have agenda's that are harmful to our economic well being, we must override their apparent "good intentions" and do what's right.
Charlie T -July 23, 2008
Not having to come up with the $300 to $400 dollars a month to pay the electric bill would be a blessing for me and 85 to 90% of the people in the country. You did a good thing.
Anonymous -July 23, 2008
I would love to see the addition of a Residential Micro Cogen/Heat Power MCHP system such as the Freewatt http://www.freewatt.com/Technology/freewattpowergen.asp
as a natural companion to your PV array, as it can benefit you during periods of solar reduction (dark,atmospheric,weather,seasonal) and still tie into your synchronous meter system.
Current challenges seem to be Natural Gas only at this time (LP planned for next year)and similar cost/credit structure.....perhaps it would overall accelerate the payback, and improve living conditions.
It seems that most regions are still trying to figure out their retail/wholesale pay/charge structure. D and S schedules are certainly worth investigating.
Greg Steve -July 23, 2008
Your economics are a bit biased. You received a rebate from the utility company, which really means that other customers and/or taxpayers subsidized your installation. You also sell your power to the utility --- what if all your fellow like-minded consumers did the same thing? Would they ALL run their meters backwards on sunny days and all demand power on cloudy days? So that means that the utility would still have to be there with its capital investment to serve you and your neighbors, based on the whims of the weather. And if you want to completely disconnect from the utility, you would need massive amounts of battery storage unless you live in Arizona. Figure out the economics with battery storage of several days --- the cost of the photovoltaic array will seem trivial! Forget the dollars, you say? Well, then figure out the number of kilowatt hours of energy required to manufacture a solar cell --- starting from sand, which needs to be melted and vaporized to make the pure silicon to get high-efficiency cells. After you do all that, write the next article with more rational figures!
RickG -July 23, 2008
Interesting engineering project, even if ROI has not been determined. Have any similar projects been published using wind power?
Anonymous -July 23, 2008
What about considering taxes?
$17,000 earning 4% interest, taxed at 35% = $442/year net. No inflation protection.
OR $17,000 in Solar panel saving $1250/year tax free, inflation adjusted.
This is how I justified my solar installation.
Paul Ueunten -July 23, 2008
Using your round numbers, it will take you approximately 14 years at the current rates for the system to pay for itself. How long do you expect the system to last? Is it warranted for life? While I am all for going green and being a responsible consumer, the costs of these systems do not justify them.
With the environmental abuse that the panels take, I will bet you that you will have at least one panel fail before it pays for itself, not to mention the inverter. If the inverter were to fail, your looking at ~$3000 for a replacement at current prices. How much longer to make that payback then? For the system to be worth it, the ROI needs to be 5 years or less. The equipment will not last long enough to make a payback on 14 years. It will be lucky to last 10. But as other readers wrote, I will check back in about 14 years.
Anonymous -July 23, 2008
Get yourself a plug-in car and accelerate the ROI greatly!
Rick Steeb -July 23, 2008
Re:Still Working On My Solar-Panel ROI, I to am on solar and completely off the grid, with approx 3.4kw pk output. I thought about hooking on to the grid for back up which is why I’m writing this. I did some checking and apparently there is a schedule S which means SCE is a secondary back up, which I believe does not have all the changes and can earn you cash as a generating facility, not just credit for a bill. I did not peruse it since I'm not on the grid, but if I were I would get off schedule D (domestic) and get on S (secondary) generating schedule.
Jim Guthery -July 23, 2008
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