Tuesday, July 09, 2013

Solar electric panels... by the numbers

As I've been explaining, I'm advocating that Cheshire respond to the state's RFP for the third phase of a program called Solarize CT.  And now, the Town Council Chairman, Tim Slocum, has placed it on their agenda for Tuesday, July 9th @ 7:30pm in Town Hall.  Needless to say, I plan to be there and offer as much explanation as possible.  But numbers can be easier to understand in writing, so I'm explaining the economics here.  And you probably want to know...

How much does it cost for a typical home to get solar panels?

Without this program, it might be normal for a 2000 sq ft home in Cheshire to pay about $32,000 for solar panels.  That's based on a typical home using 700 kWh / month.  For your own understanding, check one of your CL&P bills to see if you use 700 kWh / month.  But in the meantime...

700kWh x 12mos = 8400 kWh / yr

So you need to generate 8400 kWh / yr.  And here in CT, we're lucky that we have a law allowing for net metering.  Net metering means that although you use electricity at night, if your solar panels generate more electricity during the day, the two get netted and you do not need to pay for generation or delivery services.

How many solar panels does a typical home need to generate 8400 kWh / yr?

A house normally gets about 7 kW of generation capacity installed.  And kW is how solar electric panels are normally described by manufacturers and installers.  But of course, the panels are not generating electricity all the time, such as at night.  In fact, the CT DEEP suggests that the typical generation capacity of solar electric in CT is 13%.  In other words, on average, panels work 13% of the time.  So here's the calculation to to get you to 8400 kWh / yr:

(7.1 kW) x (24 hrs / day) x (365 days / yr) x 13% = 8100 kWh / yr

So much does it cost to install 7.1 kW of solar panels?

Results from Phase 1 of Solarize CT (occurred from Sept 2012 to Jan 2013... and Phase 2 is ongoing) showed that homes in Solarize towns* installed an average of 7.1 kW at a cost of $27,000 before rebates & tax credits.  Among the other 165 and during the same period, homes paid an average of $35,000 for a similar installation.

Those numbers are typically discussed in terms of $ / W or $ / kW.  So the Solarize towns were paying about $3800 / kW and non-Solarize towns were paying about $4900 / kW.  And those costs are typically broken down into hard costs (hardware) and soft costs (labor).

The hardware comes from China and those costs are not dropping dramatically.  They were probably about $2000 / kW in 2011 and about $2000 / kW today.  Not stable like hard costs, the soft costs are dropping.  They were about $4000 / kW in 2011 and are now in the range of $1800 to $2900 / kW.

It's the soft costs where this program hopes to help homeowners save money, as well as do right for the environment.  Here are some ways where economies of scale can be achieved quickly with this program:

1) CT has 1.4 million homes.  We also have about 70 to 80 solar electric installers.  With 169 towns, we have about 13,000 initial contacts to be made between solar installers and town building inspectors. Yet CT now has only about 5000 solar electric installations, including about 30 to 40 in Cheshire.  The initial contacts between installers and building inspectors takes time.  By participating in this program and suggesting a preferred installer, the goal is to reduce time costs, such as this.

2) Ten installations in ten towns will require more travel time than ten installations in one town.

3) The cost of customer acquisition for solar installers is quite high.  This program hopes to leverage existing social networks in town to spread the word about the opportunity.  It's similar to Cheshire's Neighbor-to-Neighbor program for which we just got a letter in the mail this weekend.  N2N demonstrated that this approach can be successful in increasing awareness.

Anyway, these are some of the ways in which this program can help reduce the high cost of solar electric.  And while history cannot predict the future, it does suggest that the program itself may help reduce the cost of solar electric in Solarize towns.  And while solar electric panels probably now cost around $4500 / kW statewide, I suspect this program could help reduce those costs even further.

It's entirely possible that Cheshire could average $3750 / kW.  That would place the cost of 7.1 kW of solar panels at $26,600.  And then there's the state rebate of $1750 / kW, reducing the cost to $2000 / kW.  And depending on your income, there's also a 30% federal tax credit.  That would reduce the cost to $1325 / kW.

At $1325 / kW for 7.1 kW, you'd pay $9400 for your solar electric installation.

Now, let's break down your electric bill.  You probably have three parts:

1) generation services... this is the relatively new program where you choose your supplier.

2) delivery services... this is CL&Ps business.  They buy the electricity.  It may come from the nuke in Waterford, a gas plant in Middletown, a hydro plant in Quebec or somewhere else.  But it doesn't matter where the generator is located, CL&P handles the delivery.

3) interconnection services... this also gets paid to CL&P.

For all of the solar electricity that your panels generate, you pay neither generation nor delivery services.  However, as long as you are connected to the grid, you'll pay the CL&P fee which is currently $16 / month.

Assuming that you stay grid-connected, you can only avoid the generation and delivery services.  An example rate for these two services is $0.07 / kWh for generation and $0.05 / kWh for delivery, but check your bill to see exact numbers.

At $0.12 / kWh for 700 kWh / mo, you pay $85 per month for your electric bill.  That means you pay $1000 / yr for electricity.

$9400 / $1000 per year = 9.4 years payback

And with an estimated useful life of 20 to 25 years, this means that after ten years your electricity is free!

Ok, ok... it's a bit more complicated than that.  But this story is already really long.  And I imagine you're already bored.  :)  So I'll end it here and say... don't be shy about questioning me.  I'm trying to give you the basics, while giving the most pertinent details.  And when it comes to energy, this stuff tends to require lots of explanation.

Hope this was helpful.  Please be in touch!  If the Council approves the RFP response, I understand the State will be announcing their decision by July 31 with the program to occur from September 2013 to January 2014.  So things could start moving fast.

Tim White

p.s. In the interest of full disclosure, although I'm currently a full-time student at Yale's Environmental School, I'm interning this summer at CTs Clean Energy Finance and Investment Authority (CEFIA).  CEFIA is the quasi-public agency that is running the Solarize program.

* Four of the 169 towns participated in Solarize


CT Avon Rep said...

Is this Ownership of the panels or just Leasing of the solar panels & the homeowner still has to pay the installing company a monthly bill? At home depot there is a company that has a Lease Scam & I say scam because the home owner only Leases the panels & so has to pay forever for the use of the panels so it is no better than regular electric company except that now added onto the roof is the solar panel leasing equipment that you can't just decide to take off & reconfigure as your household needs change - it might take longer but a self install to own outright a solar/battery combo to eventually be off grid - your explanation hasn't been clear if the program that you're describing is the same as the contractor group with the kiosk in home depot but since you've not mentioned any battery storage setup it appears to be the same or similar & although your simplified math makes it look good the reality is that to agree to put solar panels on your home & not own them outright is not good for the home owner as it only sets another possible area of concern for a possible foreclosure if job hours are cut & income is lessened

Timothy White said...

I wasn't thinking about anything with Home Depot.

You can buy or lease. I have never heard of a lease that runs in perpetuity. The leases of which I've heard in CT are 15 to 20 years. And the people with whom I've spoken have not done it so much to save money (maybe a bit over the 20 yrs), as it was intended to provide household budget stability. That is, electric rates will almost certainly fluctuate for the next 20 yrs. But a lease will lock-in you payment.

As for the long-term property value of a home, your point is fair. But I've also seen a study that indicates solar panels increase the value of a home.

WRT batteries, you can buy lead-acid in CT. But I've not yet heard of any li-ion batteries sold in CT for residential use. They are in CA though. I think batteries will make sense in CT sometime in the 3-10 yr timeframe. Depends on laws / regs.