Photovoltaics, Part 2: Enter the Dollar
Has the declining cost of PV systems made solar electricity affordable? Really?
Not too long ago, our own Jesse Thompson (known for his "What's Bothering Jesse?" segment on the Green Architects' Lounge) wrote a great article, PV Systems Have Gotten Dirt Cheap. It was a wakeup call for many.
Right now, in many states, it's actually cheaper to get your electricity from the sun than from your local power utility. Really. So why isn't this fact being shouted from the mountaintops? Why isn't everybody putting up PV arrays? Because the equations are not that straightforward.
Most of us need to finance our projects. If you're going to get your electricity from the sun, in most cases you're going to take out a loan (at, say, 5% annual interest) and buy 30 years' worth of electricity all at once. And that feels like a lot of money.
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So Phil and I decided it was time to slowly sip(SIP) Building panel usually made of oriented strand board (OSB) skins surrounding a core of expanded polystyrene (EPS) foam insulation. SIPs can be erected very quickly with a crane to create an energy-efficient, sturdy home. some summer cocktails and talk through the decision-making process. In Part 1 of this episode we talked about figuring out how big a PV array you need and how much electricity it will provide. Now we have to deal with what approach makes the most economic sense and deciding at what point pragmatism starts to turn into altruism.
News we should shout!: In many states, solar electricity is actually cheaper than buying it from your local utility company.
Solar Optimization Spreadsheet: This Solar Optimization Spreadsheet is a simple tool to help you compare the cost of solar electricity with that of a utility company. (Local information is required.) We've also included a State Electricity Cost Spreadsheet from the EIA to help you in case you are unsure of your actual rates.
Organic bananas: No, it's not another cocktail, but a metaphor for the "extra" cost of solar. How much MORE would you pay for organic bananas over your "regular" bananas?
Trends: Petro-fuel costs are on a pretty steady incline of 2.5% annually, while solar electricity is on a fairly steady decline of 7%. Solar is inevitable, baby.
Politics: I'm afraid it's a bit unavoidable at the moment. Phil and I hate talking about it, so we keep it very brief, but there's one party that believes in global climate change and in acting on our knowledge and one that values willful ignorance as a virtue and would like very much to remove the current incentives we have from now until 2016.
The 30% incentives are working: One reason solar has gotten so competitive so quickly is that these financial incentives for renewables are working. We are, as a nation, beginning to smartly invest in future technologies.
Are we embarrassed yet? Phil and I ponder why we are so far behind European nations in their embracing and investing in PV.
Song of the Episode: Phil shares a song you should add to the office playlist. It's Beachwood Sparks from their Tarnished Gold album playing "Earl Jean." Enjoy!
Chris: Hey, welcome back, everybody. Chris Briley here, host of Green Building Advisor’s ... Green Architects’ Lounge ...
Phil: Took you a minute, didn’t it?
Chris: It did! I was like, “Green something ..."
Phil: We’re still Green Architects’ Lounge.
Chris: And that’s my co-host, Phil Kaplan.
Phil: This is Part 2 of our podcast on PV.
Chris: I’m calling this one “Enter the Dollar.” We’ve covered PV and what all that entails, and now we’re adding the dollar equation to it. I was going to have Jesse in because he’s sort of the whistleblower on GBA for how cheap solar is.
Phil: Right, he wrote a guest blog called “PV Has Gotten Dirt Cheap.”
Chris: It was great, got lots of hits, and was a real wakeup call for everybody. Basically, if you buy PV—not finance it, but pay for it with cash—the power that you pay for from the sun is cheaper than the power you buy from the grid here in Maine. Shouldn’t everyone be screaming about this wakeup call? Instead, it’s a whisper.
Phil: I think a lot of it is because people don’t have that cash right now. Even though PV is pretty cheap—below $4,000 per kilowatt, pretty cheap, and the prices are dropping pretty fast—even still, most people have to finance that. In Maine we’re paying 13 to 16 cents per kilowatt hour. With all the incentives, when you buy PV, you’re paying 9 cents a kilowatt hour. The problem is that most people still have to finance PV.
Chris: Exactly. It’s part of the financing of your house. So you end up paying 5% more for PV. Maybe now is the time to pull out the solar cost optimization spreadsheet.
Phil: This is part of Jesse’s brilliance. He’s a whistleblower and he put this spreadsheet together because he sensed what was going on.
Chris: One guy with a microphone saying “Hey, you gotta believe me” doesn’t resonate like someone saying “Hey, you gotta believe me. Look at this.” If you’re on GBA, download the spreadsheet. If you’re not, we’ll talk you through it.
Phil: In the last episode, we talked about average kilowatt-hour use per year.
Chris: Let’s round it off to 11,500 kilowatt hours. That goes on row 14 of the spreadsheet—what we’re looking to generate, 100% PV. The PV system size would be about 8.6 kilowatts. Column A is for paying cash. Column D is for financing over 25 years.
Phil: So, we would be paying $153 per month to the utility company. If we could pay cash for PV, we would be cutting that down to $90 per month, assuming the incentives, the tax credits, are in place. So, right now, you’ve got over $62 a month in savings if you’ve got the cash to do PV. Why not do it?
Chris: Rich people should be putting solar on their houses right now!
Phil: But what about you and me?
Chris: We’re going to have to borrow money.
Phil: What about the 99 percent? Let’s walk through this scenario. Financing at 5% for PV, we would pay $227 a month. That’s more than the $153 a month we pay to the utility company. But with incentives in place, that $227 for PV goes down to $159 a month. So, we’re comparing $153 to $159—$6 more a month for PV.
Chris: So, at a 5% interest rate, I’ll just be paying $6 more for PV than I pay to the utility company?
Phil: That’s right.
Chris: The question is, am I willing to pay $6 more a month for clean energy than for dirty energy?
Phil: That’s a good question.
Chris: Are you going to tell me about your bananas? When we were outlining this show, trying to figure out how we’d talk about cost and PV, Phil said he would tell me about organic bananas. OK, Phil!
Phil: Well, you walk in the store and see regular bananas and organic bananas. They look the same and kind of taste the same. But one is 69 cents and the other is 89 cents a pound.
Chris: I’m going to buy the 89 cents ones because they have a little organic sticker on them.
Phil: Are you? Because they make you feel a little bit better.
Chris: If the difference were 67 cents and $89, well…
Phil: Right, I wouldn’t buy PV in Louisiana, for example, because of the difference in the cost of electricity.
Chris: The metrics aren’t the same as they are here. If the organic bananas cost the same, I’d get them. If they’re 10 cents more, I’d get them. If they’re $2 more, well…
Phil: In some parts of the country, like here in Maine, we pay 16 cents a kilowatt hour. If you’re financing PV at 5% over 30 years, you’re paying 17 cents a kilowatt hour. But guess where the cost of electricity is going?
Chris: I have stats, my friend. Your petro fuels are on a steady incline. If you take the past three or four decades, there is about a 2.5% annual cost increase. Solar PV is going down, about 7% annually. There’s no reason to believe those trends won’t continue. Sure, there’s fracking. Sure, PV technology might level out. But I don’t think so. Then, it is inevitable…
Phil: We’ve got 7% in one direction and 2.5% in the other direction. For instance, the cost of electricity in 20 years in Maine is going to go up from 16 cents a kilowatt hour to 30 cents.
Chris: And where’s PV going to be? Lower.
Phil: Of course, the incentives may drop away at some point.
Chris: Well, we have them until 2016 at least.
Phil: That depends on who is elected.
Chris: True. If you’re conservative and are electing conservatives, chances are you won’t have those incentives anymore.
Phil: We don’t need to get political here. Just the facts…
Chris: Solar is inevitable. You’d rather be the smart guy advancing this stuff than the guy who is a decade behind, trying to catch up.
Phil: If you’re in Connecticut, you ought to be fist-pumping right now. They pay 19 cents a kilowatt hour already, and New York is closing in.
Chris: California is in the 13 to 14 cents territory.
Phil: In Hawaii, you buy electricity before food.
Chris: It’s 21 cents a kilowatt hour.
Phil: So give me some low states, Chris.
Chris: Basically, the middle of the country.
Phil: Washington is a controversial one. I’d like to hear from people in Seattle who have PV. Tell us why; make the case.
Chris: They have low solar yield and real low electricity rates, but they still do PV.
Phil: They are on board with Spain and Germany—countries that are still doing this when they have similar outputs to Seattle.
Chris: It’s really depressing to see people in the Unites States argue and fight about this when there are countries who started doing PV a decade ago. We need to get on board and start investing in the infrastructure, so communities can invest as well. By the way, solar has gotten cheaper, faster, in part because of the incentives. It’s working.
Phil: Here’s the question: Are we embarrassed yet?
Chris: I’m embarrassed.
Phil: Me too.
Chris: Europe is having financial catastrophe, and they’re still ahead of us and still of the mind that PV is a wise investment and that’s where new technology should be developed.
Phil: Let’s talk about some important websites. Dsireusa.org.
Chris: Spell it right. Lord knows what happens if you don’t. But this is a good site; it’s a national database and always has the new rebates right away.
Phil: Another one is NREL.gov, from the National Renewable Energy Laboratory. It has the PV Watts calculator. That’s how you can find out the solar output of your city.
Chris: One local company we’ve worked with, Revision Energy, has a simple solar calculator on its website. You can put in what you spend on energy, what you’d like to offset, and it fills in the rest—what your solar energy would cost, what you’d save, all that stuff. If data makes your eyes glaze over, this calculator will give you bare bones, large ballpark numbers.
Phil: On Green Building Advisor, Martin Holladay has written an excellent article.
Chris: Along with Jesse’s article. Be sure to check out all the links in this blog.
Phil: I just want to add, don’t fret about the roof space on your house. As architects and designers, we know the rules and we know when we can break them.
Chris: That goes for roof pitch as well. The perfect solar angle is not really your latitude. You want to be a little bit lower, because the sun is so powerful. Don’t get hung up on that. Play with a few degrees one way or the other, and you’ll only lose efficiency by a couple of percent. Don’t say, “I’m 20 degrees off of true solar south, so I can’t do PV.” That’s a copout and you deserve to be spanked.
Phil: The only time we want to use ridiculous angles is because we think the building looks cooler that way. It’s called architectural conceit, and sometimes it makes the building look better.
Chris: It does. But we like having reasons for that; not just that it’s cooler.
[The episode closes with a song by Beachwood Sparks, off their “The Tarnished Gold” album.]
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