Until now, Patrick McCombe has believed that improvements to the envelope of his home should come before an investment in photovoltaic panels. Now he’s weighing a deal that seems too good to pass up.
McCombe lives in Connecticut (he’s an associate editor at Fine Homebuilding magazine) and he recently attended an informational meeting sponsored by an organization working to lower the cost of PV. Panels could be purchased or leased, but the bottom line was that with federal and state incentives, McCombe could buy a 10-kilowatt array for $15,000.
“I’ve always believed that envelope improvements make more sense than PV,” he writes in a Q&A post at GreenBuildingAdvisor, “but the state and federal incentives and super low prices of PV coupled with our very high electric rates has me considering an installation.”
McCombe heats his small house with fuel oil, a relatively expensive fuel common to New England. Even though he doesn’t use that much oil, the prospect of weaning himself from this fuel entirely is very attractive.
“Am I silly for installing PV first without significant envelope improvements to my very small but not terribly efficient home?” he asks. “In the three years we’ve lived there we’ve needed three tanks of heating oil, so our heating costs are much lower than most folks in New England. Our house is small and reasonably airtight. If we lowered our plug loads, it’s conceivable we could also heat our house with heat pumps or resistance heaters using our 10 kW array.”
As the installed cost of solar electric continues to fall and subsidies remain in place, this is a choice many other homeowners could be facing. That’s the topic for this Q&A Spotlight.
That’s too good of a deal to pass up
GBA Senior Editor Martin Holladay finds it hard to argue with the numbers. “Given the figures you have just been quoted, you’d be nuts not to jump at the chance to install the 10-kW PV system,” he writes. “It’s money sitting on a plate. So take it.”
McCombe could always borrow money later to make energy-saving improvements on his house, and the money he’s saving on his power bill should make that easier to pull off.
Holladay’s one caveat is to check the fine print on the net-metering contract with the utility carefully. Some contracts reset the clock every 12 months, so homeowners won’t get paid for electricity produced above and beyond what they use. Other utilities will pay homeowners for the excess power they generate.
“If your local utility won’t pay you for surplus production,” Holladay adds, “you don’t want to buy a PV array that is bigger than your family’s needs.”
Use that money for a ductless minisplit
The offer may be very attractive, writes Dana Dorsett, but installing a type of air-source heat pump called a ductless minisplit would be a better deal.
“If you’re burning 250 gallons of oil a year, at $4/gallon (recent-years’ pricing), that’s $1,000/year,” Dorsett says, “It’s very likely that for an investment of $4,000 to $5,000 you can heat with a ductless minisplit at about half the cost of heating with oil (even at 20 cents/kWh) which would have an even better [internal rate of return] than a 10-kW PV array at a post-subsidy cost of $1.50/watt.”
Whether McCombe buys the PV system or not, a ductless minisplit is a “no-brainer type of investment,” he adds, that’s a better option than heating with electric resistance heaters powered by PV.
As Dorsett sees it, McCombe could meet his heating needs with a 1-ton Fujitsu or M-series Mitsubishi minisplit. The electrical power consumption of those units would be the equivalent of fuel oil at $2.22 per gallon, and McCombe could reduce his heating costs by $445 per year.
“This is a very rough cut, but it’s the right ballpark,” he says. “Assume that you’ll replace both the minisplit and the inverter in 20 years, and the PV panels in 40 years — the short-term internal rate of return isn’t the same as a lifecycle cost. But there’s no up-side to sticking with oil heating at the current price/performance point of minisplits, quite independently of the PV question.”
For further thought, Dorsett refers McCombe to a a research paper published by the Rocky Mountain Institute.
Hold the phone: What happened to green?
“What in the hell happened to the original shade of green,” writes Sonny Chatum, “where people wouldn’t dream of using PV without first minimizing energy use?”
His advice: reduce his electricity as much as possible first. Then add the PV. “Don’t join the hundreds of thousands of people who have just thrown up PV just to get some [solar renewable energy certificates] and they could care less about doing the right thing in terms of energy efficiency,” Chatum says.
A 10-kW solar system is “huge” for a typical house, he says, and if McCombe has a small house he may not even have room for the panels on his roof. He could meet his electricity needs with a PV installation, but only by reducing demand to a minimum and using the utility as a “rechargeable battery.”
“Ideally, you want the electric utilities out of the picture as much as possible,” he says. “Use them for a battery for now, but minimize that use partly by, again, minimizing your electricity need. This is because the utilities are starting to complain about being a free battery service, and, trust me, they will start getting heavily paid again for heavier battery use, so use them as little as possible.”
A deep energy retrofit helped Chatum cut his electricity use almost by two-thirds, and he’d probably be able to meet the demand with a reasonably sized rooftop array.
“I think it’s disappointing,” he adds, “that Green Building Advisor has to a large degree lost sight of the original shade of green.”
Responding to Chatum, Holladay notes, “If a PV array provides residential electricity for cheaper than it costs to buy the electricity from your local utility, it’s obvious that homeowners will choose it. Remember, I advised Patrick not to install an array that is any larger than necessary to meet his family’s annual needs. And if you read GBA regularly, you’ll realize that we still stress conservation and efficiency.”
McCombe explains his motivation to Chatum: “It’s just so darn cheap to buy PV panels right now.” But he adds, “One thing I fear: the utilities will start charging PV owners surcharges or higher rates for grid power. Isn’t there discussion of this in California?”
Net-metering rules are bound to change
Grid-tied photovoltaic systems draw on utility power when output is too low to meet demand, and put electricity into the grid when the system makes more power than the house can consume. That’s where the battery analogy comes from, but there’s a point where this arrangement makes utilities nervous.
“As PV penetration rises, and utilities struggle with real time loading and the effects on their distribution system protection schemes as related to heavy penetration, they will be (already are) adding storage/buffer schemes and they are going to want more money,” Chatum writes. “Storage is going to be a huge issue. Using the utility as a rechargeable battery is cheap now but it ain’t gonna stay that way.”
Duke Energy plans to ask North Carolina regulators to reduce net-metering rates for homeowners, and utilities have raised concerns about the effects of net-metering rules in Arizona and California as well.
In the future, Chatum says, even net-zero energy houses could see the distribution portion of their power bills go up.
“The reason is because they are effectively using the utility as a storage battery, sending power to the ‘battery’ on sunny days and drawing power from the battery at night or on cloudy days,” he writes. “Well such PV systems are pretty much using the grid as much as non PV customers, so even if they are net zero and currently only paying something like $7 a year as a ‘customer’ fee, they wont continue to get away with paying that little.
“In addition to being expected to pay for grid maintenance like regular customers do, they will be asked to help pay for changes in the distribution system that are needed to accomodate PV.”
Our expert’s opinion
GBA Technical Director Peter Yost had these thoughts:
I decided the best thing to do on this one was check in with Mark Sevier, my good friend, former colleague at Building Science Corp., and now an energy efficiency and renewable energy engineer in Massachusetts. In his “spare time,” Mark has built a zero-energy home, and is currently working on an electric car conversion project based on the original Honda Insight. Most of his efforts at work and home have been related to understanding the key criteria to reducing environmental impact for the good of future generations.
Here is Mark’s cut on this issue:
“I agree that it makes sense to review the cost of conservation in relation to generation, especially if a home is in reasonable shape from an energy perspective and applicable enclosure retrofits pencil out as very expensive.
“I first came across this issue on a superinsulation retrofit project, where the addition of 4 inches of foam on the top of the roof (increasing the assembly from about R-40 to 60) yielded only an additional ~$20 per year in energy savings, for what was probably $10,000 of capital cost (a fairly complex roof assembly, as you might expect). Take that same $10,000 and spend it on $4/watt PV today (even with no incentives) and it would roughly yield ~$500/year in electric savings in Massachusetts vs. the $20/year in gas savings from the extra roof insulation. PV paybacks can be short in comparison to “over-conservation.”
“Conservation measures like insulation have diminishing returns, while generation from a PV system yields nearly linear returns. The conservation returns curve is steep at low R-values, but is rather flat by the time it gets to R-20 or 30. Each doubling of R-value provides half the savings of the previous one, so it’s worth looking at what it costs for each next R, and comparing it to PV on a lifetime basis. Because this isn’t simple, it isn’t usually done; “expert” intuition takes its place.
“If your house has insulated wall and ceiling cavities, double-glazed windows or single-glazed windows with storms, and all reasonably accessible and major hole air sealing has been done, it’s probably time to look into PV if you have good solar access. My intuition is that Massachusetts code is probably close to optimum on conservation (that is, if builders actually and completely meet the code), and the next step is on-site generation. But don’t take my word for it, take a look at the math on the projects you’re looking at.”
Mark made one last point:
“It is true that someone has to pay to maintain the grid infrastructure and keep the lights on when it’s nighttime, so the current net metering situation will have to change at some point. If people don’t want to pay for grid support, they can go buy the hardware necessary to get along without it, and in so doing realize how cheap it was to just pay for the grid.
“Consider as well that PV penetration is so small right now — and the utilities and their regulators are slow moving entities — that most PV installations that go in today will probably have paid for themselves before the rules change, and the rule change probably won’t be retroactive to those who put in systems under the past scheme.
“In Massachusetts, regulators specifically changed the net metering structure in 2010 to help get more renewables in place faster, so I don’t see this being reversed anytime soon in states where there is a push to add renewable generation.”