Prices for photovoltaic (PV) systems have been dropping steadily, making the investment in residential-sized arrays more appealing than ever. Lower prices and a decision in Congress to extend the federal investment tax credit means that ever larger systems are within reach of more homeowners.
But what about homeowners whose construction budgets strictly limit the size of the PV system they can realistically afford? They are people like James Timmerberg, who is building an all-electric house in Ohio and would like to invest in solar — if it makes economic sense.
Writing in a Q&A post at Green Building Advisor, Timmerberg explains his situation this way: “I’m building an all-electric home. I am currently paying 7.22 cents per kilowatt hour. I’m poor, but could possibly budget $5,000 for solar power, if 30% of that $5,000 is returned to me as a tax credit. Would investing that $5,000 in solar power make sense? (This question is premised on the cost to me, after the tax rebate, being $3,500.)
“Or,” he continues, “would my $5,000 be eaten up by installation costs, and leave me generating enough electricity to operate an LED light fixture? It doesn’t matter what I could do for $15,000 or $20,000. I don’t have that much money to spend on solar power, unless I want to live in a garden shed.”
Should he spend the money on solar? That question is the focus of this Q&A Spotlight.
What you get for $5,000
The cost of a PV system can vary a good deal depending on where you live, as previous studies have found. But for argument’s sake, Stephen Sheehy has picked $3.50 per watt as the cost of a typical system, and Timmerberg won’t be buying much electricity with that.
Sheehy suggests that Timmerberg get in touch with a local installer, but suspects that he would be looking at a system with a capacity of 1 to 1.25 kilowatt, and given the small size of the system his money might buy, perhaps even less.
“Depending on where you live,” Sheehy says, “a 1.25 kW array produces around 1,500 kWh/year. At your rate of 7 cents, you’ll get about $100 worth of electricity.”
The price that Timmerberg is paying for electricity is relatively low, adds Charlie Sullivan, so it’s unlikely the investment in solar would be a good one. “But,” he adds, “how many kWh you get for 1.5 kW of solar depends on how sunny your climate is. If you are in a really good sun location, and you can find an installer who gives you a really good price, it might work to be a reasonable investment.”
Even if Timmerberg’s small system produced only $105 worth of electricity per year, adds GBA senior editor Martin Holladay, that still amounts to a 3% yield on a $3,500 investment. “There are worse investments these days,” he says.
In addition, Holladay says, there may be other incentives available to him, including local or state rebate programs or SRECs, a type of credit for generating electricity with a renewable source, that make the investment worthwhile. And a lease, in which Timmerberg makes no down payment, would be another option worth exploring, should that be available in his area.
Consider the lifetime costs of power
Dana Dorsett suggests that Timmerberg get out a calculator and consider how much PV-generated electricity would cost over the long term — say, 20 years.
“At $3.50/watt installed cost (the U.S. average) less the 30% tax break, using a 4% discount rate (your cost of money) and an 18% capacity factor (about right for northern Ohio), you’re looking at a levelized cost of electricty of 11.7 cents/kwh based on a 20-year analysis,” Dorsett writes. “The cost of PV is still falling fast, but it doesn’t sound like it’s the best place to park your $5,000 this week.”
As the cost of solar continues to fall, the equation will change. “Stay tuned,” Dorsett writes. “Two-fifty PV is happening in Florida right now, and it’s under $2/watt in mature markets like Australia and Germany. Buck-fifty PV is a realistic world price average possibility before 2020, at which point it would be price-competitive with grid power even without the tax incentives, at about 7.2 cents, a 4% discount and 18% capacity factor. That’s your current retail price. The tax incentives don’t step back until after 2020, and with that incentive the buck-fifty installed cost boundary can happen sooner.”
He suggests that Timmerberg visit a couple of web sites for more information, including an online calculator from the National Renewable Energy Laboratory for the levelized cost of energy (LCOE), and another that estimates the capacity factor of solar systems in cities around the country. (More sun equals more electricity.)
Planning for a future installation
Juggling those values will help Timmerberg decide whether the investment makes sense now. If the numbers don’t work, he wonders how he might plan for an installation in the future.
Check with a solar installer and an electrician, Sheehy suggests. “A lot will depend on the layout of the house,” he says. “You’ll need space on the roof, a place for the inverter, maybe a chase for wiring.”
Dorsett advises Timmerberg to orient the house so the ridge of the roof runs in an east-west direction, and make the roof a simple gable with no dormers or other interruptions on the south-facing pitch that would interfere with the eventual installation of solar panels. Roof pitches lower than 4-in-12 would hold snow for weeks at a time, he says, while a 6-in-12 or steeper roof would shed snow quickly and improve the production of solar electricity in mid-winter.
“If it’s a lightweight trussed roof design,” Dorsett adds, “make sure that the truss spacing and top chords have sufficient capacity for the additional 3 to 4 lb. per square foot dead load weight plus wind loading of a PV array. Beefing up the load capacity [of the roof framing] later is more expensive than doing it now.”
In addition to roof design and orientation, Rick Miller says that Timmerberg might consider a standing-seam metal roof rather than a shingle-clad roof. Even better would be a ground-mounted array. “If you have the land, keep it off the roof,” Miller says. He lists these advantages:
- “A lot of roof penetrations are needed for roof installation — sooner or later, things could leak.
- “It might be easier to orient the array to solar south with a ground mount.
- “Ground mount can easily be set for the optimum tilt, whereas roof pitches are often a compromise.
- “Easier to clean snow with a ground mount — trust me.
- “Easier to clean and inspect any time of year.
- “Probably cheaper to insure than roof mount — not sure about that.
- “Easier conduit runs, typically.”
Think ahead with truss design
Daniel Young, a solar installer who works in Timmerberg’s area, has some additional suggestions to make a future installation easier. They include asking the roof truss manufacturer to not only add capacity for the solar panels but to indicate that has been done (along with including an engineer’s stamp) on the truss drawings. That could save an expensive extra step in the future.
Also, he says, run metallic conduit from the attic to a spot next to the main panel, leave an open area near the breaker box, and keep the roof pitch between 4-in-12 and 7-in-12.
“Lower than 4/12 with shingles and your roof is more prone to ice dams and other roof leaks (totally separate from the solar install, shingle roofs leak more when they are low slope) and 8/12 and higher become harder to work on and the solar labor number goes up after you get to 8/12,” Young writes. “The ideal year-round roof pitch for northern Ohio is usually 8/12, but the difference in production between 4/12 and 8/12 is less than 2% in most cases. The labor increase for 8/12 will overpower the extra production given today’s prices.”
Our expert’s opinion
Here’s how GBA technical director Peter Yost sees it:
I decided to check in with GBA zero-energy home expert Ann Edminster. I also contacted Jim Timmerberg directly. Here are some considerations:
Start by visiting DSIRE. This web site is a great national/state/local directory of renewable energy incentives, subsidies, rebates, and policies that you can filter geographically. For instance, filtering by state — Ohio — and by county — Huron — yields 45 programs that Jim might consider.
Even better than a ground-mounted system is an optimally configured utility building or structure. Jim has a big enough lot with enough good solar exposure to design a carport, shed, or other utility building that offers the best orientation, roof angle, and height for a PV system. It would combine the best aspects of a rooftop system and a ground-mount system, in terms of installation and performance.
Alternative financing arrangements are becoming increasing available. As Ann emphasizes, leases, power-purchase agreements, and various financing alternatives are more common, making it possible to get rooftop PV with very little or zero money upfront.
Finally, remember that Community Choice Aggregation is coming to many areas, and it will likely make it possible to buy into clean renewable energy without having to install PV on your own property. That’s another argument in favor of stalling for a while.
The main thing for folks like Jim to consider: Anyone building a new home should investigate federal, state, and local PV incentive programs and should compare the pros and cons of a site-based renewable energy system to off-site options.