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Musings of an Energy Nerd

Thinking About Net Zero Energy

Do investments in photovoltaic arrays make sense?

High-cost solar equipment. This near-zero-energy duplex in Edmonton, Alberta, includes an 11.2-kW photovoltaic array and 412 square feet of solar thermal collectors. Each housing unit of the Riverdale NetZero Project was sold for $700,000.
Image Credit: Riverdale NetZero Project


UPDATED March 28, 2013

The average new home is so poorly built, it’s enough to make an environmentalist weep.

Windows are routinely installed without any consideration of orientation. As a result, south windows fail to take full advantage of free solar heat during the winter, while west windows worsen summer overheating. Windows are often installed in unshaded walls, even in hot climates. In the absence of legal requirements for high-performance windows, builders regularly choose windows with appalling U-factors and solar heat gain coefficients (SHGCs).

In the southern U.S., air-conditioning ductwork is still routinely located in attics. Most builders insulate walls by hiring a low-bid subcontractor to stuff fiberglass batts between the studs. In the U.S., unlike in Sweden, most new homes receive occupancy permits without ever undergoing a blower-door test.

Builders don’t pay energy bills

Yet the low standard achieved by U.S. builders is understandable — even logical. Many builders ask themselves, “Why should I pay for foam sheathing?” After all, builders don’t pay heating bills — homeowners do. In other words, the interests of builders and homeowners are not aligned.

This divergence of interest between builders and homeowners is best addressed by ratcheting up our energy codes — codes which currently allow new homes to be shockingly leaky and poorly insulated. Last summer, a coalition of partners — including governors, mayors, and the U.S. Department of Energy — gathered in Minneapolis to propose energy code changes that would reduce energy use in new homes by 30%. The proposal was defeated after vigorous lobbying by the National Association of Home Builders.

Now that you’re depressed …

Fortunately, some far-sighted builders are already implementing cost-effective measures that reduce homeowners’ energy costs, including:

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  1. furniturefarmer | | #1

    all electric house with renewables
    Martin, what do you think about this idea: design the home to be net zero with a reasonable hot water solar system. Use electric heat pumps (either ground source or air source) for all space heating, space cooling, and supplemental hot water. Use induction cooktops for cooking. Then forgo any on-site solar electric and instead enroll in the local utility's renewable energy program. Where I live one can opt to pay a small amount extra to purchase all electricity from renewable sources. Isn't this as good as net zero? After all, why not let the utility produce the renewable energy, with all the huge ecomomies of scale?

  2. GBA Editor
    Martin Holladay | | #2

    A reasonable approach
    Your suggestion makes a lot of sense. The homeowner ends up with a least-cost house, while still avoiding non-renewable energy sources.

  3. greenophilic | | #3

    PV does make sense, when it makes sense
    PV certainly can be cost effective. One simply needs to identify the point at which it becomes cost effective, in comparison with other efficiency upgrade options. The typical strategy that I've learned of is to implement efficiency improvements (shell upgrade, mechanical, siting, etc) up to the point where the additional cost of efficiency equals the cost of installed PV. At this point in the cost-benefit analysis, PV is more cost effective than other efficiency options. NREL's BEOpt software (not commercially available) seems to be a very interesting tool in such a design optimization process. Check out this overview:

  4. GBA Editor
    Martin Holladay | | #4

    NREL's BEOpt
    Thanks for mentioning BEOpt, which is certainly a great tool for anyone considering PV or net-zero-energy house design. For those who missed it, I wrote about BEOpt in a previous blog:

    However, you're still wrong about the cost-effectiveness of PV. Although it's true that at some point (after including various energy-saving measures in a home) "PV is more cost-effective than other efficiency options," it is NOT cost-effective compared to grid-supplied electricity — which for most Americans is routinely available without any hassle at all.

    In the future, two things might happen:
    1. PV modules might become cheaper, and
    2. Grid-supplied electricity might become more expensive.

    If either or both of these things occur, the economics of PV will of course change.

    However, I've given up prognosticating. I started making predictions about rising energy costs back in 1975, and I have been wrong far more often than I have been right. When I bought my first photovoltaic module -- a 33-watt Arco module -- in 1980, it cost me $8.33 per watt. At that point, everyone was predicting a fast drop in PV prices to $1 per watt. Now, 29 years later, prices are hovering around $4.50 per watt. PV is still much more expensive than grid-supplied power.

  5. greenophilic | | #5

    Apples to oranges
    Martin, I appreciate that quick response, and I'm sorry I missed your previous post about BEOpt. I've been unable to find it for download or purchase, have you? I'd love to have access to it and experiment with its capabilities.

    On a different note, I agree that PV per KwH is more expensive than grid supplied power, but how does that factor into a conversation about NZE Homes? If the goal is simply to produce a terrifically efficient home, then it can be done cost-effectively without PV.

    "Cost-effective" means to me that it is an investment with a return that meets the investor's expectations. It is not an objective number that is just "out there"--it is subjective, mostly. The only objective "cost-effective" definition, as far as I know, is that the item should pay for itself over its expected life-span. I believe PV is capable of doing that. PV has a low return on investment, possibly as low as 1% or 2%. But that is the chosen threshold when one chooses NZE construction. Obviously, some other valuation, other than monetary payback, is tipping the cost-effectiveness scale. This is exciting stuff. I just don't know of any other solution for reaching NZE, as Miscellaneous plug loads, appliances, etc. must be accounted for in some way.

  6. GBA Editor
    Martin Holladay | | #6

    I agree
    I agree with your analysis. When you write, "PV has a low return on investment, possibly as low as 1% or 2%. But that is the chosen threshold when one chooses NZE construction. Obviously, some other valuation, other than monetary payback, is tipping the cost-effectiveness scale," you are basically saying that PV systems aren't cost-effective, but anyone building a net-zero-energy house is willing to choose a very expensive source of electricity because "this is exciting stuff." Right. It's not cost-effective, but it's exciting.

    That's all fine and good as far as it goes. If wealthy Americans want to choose an expensive source of electricity because it's exciting, no problem. But when our government structures tax incentives and rebates to favor the installation of PV on the homes of middle-class and upper-class Americans, it raises a political question: is this the best investment? Or are there other investments in energy efficiency that would yield a better return?

    I have just sent an e-mail to Ren Anderson, one of the NREL engineers who helped develop BEopt, asking whether the BEopt software is available. I'll let you know what he says.

  7. greenophilic | | #7

    grid and NZE don't mix
    Thanks so much for contacting Ren at NREL, I've been searching and been unable to find BEopt for download. Though, reading their paper on it (which includes instruction for interfacing with the software) seems to suggest otherwise.

    I totally agree with you that the larger incentives that exist for PV installation are distorting the market. This could be related to the government's interest in furthering market penetration and R&D for PV, and not only to its current economic or environmental value. I would be surprised if those structuring these credits were totally unaware of the low return coming from PV installs...though maybe I'm naive. Still, our money can certainly be spent more effectively. But what tax credits are supporting NZE construction explicitly?

    I guess my overall point here is that NZE homes are not cost-effective, unless some other emotional valuation, R&D need or market transformation goal is considered. I wouldn't specifically target PV as the problem. The very concept of NZE means that site-generation or some other offset, is accounting for site energy use. As a rule, this cannot come from grid-sourced electricity, unless it is sustainably generated by the utility...unlikely. So, I don't feel that the price of grid-sourced energy can even factor into this discussion, as a cost-effectiveness comparison. It's not a fair comparison, because its use will almost certainly create a non-NZE home.

    I'm glad to be discussing these matters with you. The internet apparently can facilitate quality, interesting discussion. Thanks for your posts and I'll look forward to hearing what Ren has to say.

  8. GBA Editor
    Martin Holladay | | #8

    I guess we'll have to be patient
    Here's Ren Anderson's answer to my BEOpt question:
    "Hi Martin.
    Good to hear from you. We don't have a version to distribute yet — Should have this available in the next year."

    It sounds like we are coming around to agreement on these issues. Obviously, if the current investments in PV lead to R&D breakthroughs that lower the cost of PV, we'll all benefit eventually. Let's hope that proves to be the case.

  9. furniturefarmer | | #9

    PV is a Prius, efficiency is a bike
    This is my take-away: solar electricity and "net zero energy" is exciting, but requires lots of capital and is a bad investment; Super efficiency and reducing consumption is not very exciting (to most people) but is the most sensible use of capital and the most achievable goal for sustainable energy use, and will be into the foreseeable future.

    PV is like buying a Prius; Efficiency is like riding your bike. Driving a Prius is easy, exciting, and relatively expensive. Riding a bike is hard, prosaic, and relatively cheap. Not only is the bicyle cheap, it is low-tech, hardly ever breaks down, will last a lifetime with minimal maintenance, and gets the equivalent of 2,000 miles per gallon. Just like good windows, good insulation, air-tight detailing, and good energy design. so it depends on what one's goals are.

    But I am still left with this question: Why can't utilities sustainably generate electricity? If the government can incent homeowners to put panels on their roofs, then they can incent utilities to produce sustainable power. And although there are large transmission losses in getting that power to buildings, there are also huge economies of scale that allow utilities to operate more efficiently, not to mention the existing infrastructure and the convinience of not having to install/maintain a bunch of hardware on your roof. Personally, I love the idea of a building generating power on its rooftop, but does it really make sense?

  10. GBA Editor
    Martin Holladay | | #10

    Thanks for your comments
    I like your Prius/bicycle analogy.

    As you probably know, there are many programs providing incentives for utilities to generate sustainable power. These incentives include utility-scale wind generation tax breaks, and mandates by states for utilities to provide a certain percentage of their electricity from renewable sources.

    At this time, utility-scale wind generation is fairly competitive with other generation methods — far more competitive than PV.

  11. GBA Editor
    Martin Holladay | | #11

    Matt Golden takes up the same theme
    In a recent blog post, Matt Golden looked into the distortions caused by PV incentives. Matt wrote,

    "The photovoltaic system would net a total of $12,439 in government incentives, reducing the homeowners' upfront investment from $23,380 to $10,941. For the more cost-effective efficiency retrofit, they would receive only $624 in incentives, so their out-of-pocket expenses would total $10,176 – only $765 less than the solar panels.

    "Crunch the numbers to calculate actual performance – measured in tons of carbon abated over the lifespan of these measures – and the results are shocking. We find that the current incentives available to our Sacramento homeowners value a ton of carbon abated through efficiency measures at less than $9, while the same ton of carbon abated by solar generation is worth a whopping $225 of public funding.

    "Clearly there's something wrong with this picture. If carbon abatement from efficiency retrofits is more effective and more affordable, why should we place such an artificially high value – 25 times higher, in fact – on carbon abatement from solar power generation? Wouldn't it make more sense to reward consumers for reducing wasteful fossil fuel consumption even as we make long-term investments in renewable energy?

    "The answer, of course, has everything to do with politics, business interests and public perception – and it is only by addressing these three factors that we can level the playing field for residential carbon reduction and achieve our national clean-energy goals."

    Those who want to read Matt's entire blog can check it out here:

  12. dr.heibati | | #12

    need a BEopt software
    dear sir
    i am a researcher in the university i need a BEopt software for energy modelling an optimization enrgy element of design building.please help me for this way
    thanks a
    i am waiting for sending a new version of BEopt software to my email.

  13. GBA Editor
    Martin Holladay | | #13

    BEopt software
    Dr. Heibati,
    As I wrote above, BEopt software is not yet available for distribution. It is available only to researchers at the National Renewable Energy Laboratory (NREL).

    By the way, Dr. Heibati: it doesn't make much sense to wait for someone to send you the software by e-mail if you don't provide your e-mail address.

  14. dr.heibati | | #14

    dear martin holladay please
    dear martin holladay please help me.
    i find equest software for building energy modelling.
    i need a software for zero building energy parameter with by a result of equest modelling and optimization enrgy element of design building
    please send me information for this project
    thanks a lot
    my email is: [email protected]

  15. GBA Editor
    Martin Holladay | | #15

    I don't know of such software
    Dr. Heibati,
    I don't know of any available software that provides zero-energy building parameters other than BEopt.

    As I'm sure you know, optimizing a building for zero-energy performance depends on a variety of factors that are location-specific. House design will vary depending upon the local price for an installed PV system, local net-metering regulations, and the local cost of high-R walls and high-performance windows.

    Sometimes there's no substitute for old-fashioned calculations and construction-cost estimates. My advice: model a few buildings for energy performance, and then do construction-cost estimates for the most likely models.

  16. Whetstone Green | | #16

    more on nze concept
    Martin, thank you for a passionate article that reinforces the obvious (at least, obvious to me). I try to educate builders every day on these issues. Even more difficult is educating mechanical contractors who aren't prepared to deal with a homes that require 1/2, 1/3 or even 1/4 as much capacity as they typically install. In fact, oversized HVAC systems, already endemic in conventional construction, is becoming an epidemic in high performance homes.

    Even furnace oversizing, once considered a non-issue, is creating comfort issues in super insulated homes, especially in the southern tier of the country. In most southern states, heat pumps are a no brainer in tight, efficient structures, yet the gas companies tend to force developers to install furnaces if they want to offer popular appliances such as gas ranges and water heaters.

    I am fortunate to live in an area (SE Arizona) where the subsidized cost for PV is already equal or lower than current electric rates. One can argue about the macro benefits of solar subsidies (vs. efficiency improvements). However, from the homeowner's perspective, those arguments are irrelevant. Assuming a 6% discount rate and a conservative 20 year life, PV costs about 11 cents per kWh in my locale vs. 13 cents for grid power. With net metering now enacted in AZ, net zero energy gas suddenly become cost effective before ever considering electric rate inflation.

    In this situation, the marginal cost of additional solar capacity serves to limit which efficiency improvements deserve consideration. In markets where the out-of-pocket cost for PV is greater than the anticipated future cost of grid power, then the latter becomes the threshold for efficiency improvements. The trick is to properly value and prioritize efficiency improvements, which often have a complex interactive affect. I too look forward to the release of BEOPT.

  17. Diego | | #17

    Passive House Planning Package available
    The Passive House US Institute is providing their software on their website for $225.

    You need some experience with the software. A manual comes with the software.

  18. lutro | | #18

    How about now? (March, 2013)
    Since Martin has just linked this article to the March 27, 2013 GBA eLetter, perhaps it is time to look at what has changed in the last three years. Martin, would you modify anything from your 2009 article at this point in time?

    I tend to agree with much of Whetstone Green's posting above. In terms of Martin's article, I would like to separate the public policy decision from the private homeowner question. Does it make sense for society to subsidize residential solar installation? I think the answer is a resounding YES. I think this is some of the best money our government has ever spent. An equally valid interpretation is "no". You can't get an objective answer to social policy decisions, unless you can agree on a bunch of values, assumptions, and priorities.

    I can certainly agree that there are a few better ways to spend public money. But there are much worse ways, which are consuming massively greater amounts of money. So, my view is, let's not advocate killing a good program because there are better ideas around, especially since some of those will never be funded. If we believe in aiming at low-hanging fruit, let's try and fund some of the better ones in addition to solar, and cut some of the really stupid programs first. Leave "merely" good ones like solar subsidies in place, for the moment. I don't see much logic in the complaint that subsidies distort the market. That is their intent, and the reason that they work, if they work. Our market is filled with subsidies, causing endless distortions. Again, let's kill the really stupid ones before we get rid of solar.

    The second question is whether residential solar is cost effective for the home owner under the existing rules. I think the answer is yes. We just put in a system that should supply 100% of our electricity consumption. We should break even in about four years, and be making a pleasant set of savings and profit after that. The picture would be different without subsidies, but the picture on driving, grid-power, coal plants, oil imports, nuclear power, and everything else would also be different without subsidies. For many home owners, PV panels are an economically prudent choice, as well as an attractive way to meet personal goals and values.

  19. GBA Editor
    Martin Holladay | | #19

    Response to Derek Roff
    Thanks for drawing my attention to this 2009 article. (I'm not responsible for choosing the articles that appear in GBA's e-newsletter, by the way.) I agree with you that the article deserves to be updated in light of falling PV module prices. So I added an "Author's note" (in italics) in the middle of the article.

    Concerning PV subsidies: I still have a few objections to PV subsidies and incentives. My main objection is that these subsidies reduce carbon emissions at a much higher cost (per ton of carbon) than other measures. A carbon tax (or a cap-and-trade system) would be far more efficient from an economic standpoint.

    My second objection to PV subsidies is that it is the type of government program that mostly benefits upper-income families. Very few low-income families can benefit from this pot of free money offered by the government. In that respect, PV subsidies are similar to the mortgage interest deduction -- using tax money to benefit high-income families.

    Nevertheless, it's worth repeating that the oil and natural gas industries benefit from all kinds of government subsidies. I'd much rather see PV subsidies than oil industry subsidies.

    Unfortunately, our country lacks a coherent energy policy. There are so many things wrong with our current system of incentives and tax breaks, that it's hard to cut through the brambles and find a policy to support.

  20. user-884737 | | #20

    PV installations are worth it: some considerations not mentioned
    First of all, thanks Martin for updating your article for March 2013. Prices are getting within the range of it "making sense (cents?)" to install PV arrays.

    In the discussion regarding value or payback of PV systems, there are two types of considerations I have not seen taken into account.

    The first relates to the “Big Picture” of the contribution that residential and small business PV makes towards the reduction in energy requirements from the grid. Applying the metric, "what if everybody did this?" it stands to reason that government incentives to install PV do in fact contribute to a reduction of demand from the grid, which can, with enough clean energy installations (of whatever type) affect utilities' decisions regarding sizing of regional energy infrastructure and overall demands on it, which affects construction costs, non-renewable resource consumption, and utility costs at every meter. In an ideal world, government-based incentives should encourage behaviors, economic activity etc. that are beneficial to society as a whole. Addressing your comment, "PV incentives disproportionately benefit middle-class and upper-class homeowners," I disagree. They benefit all strata, because the cost of the grid is borne by all strata. Clean energy is unquestionably beneficial to society as a whole, because it reduces our dependence on non-renewable energy sources and their concomitant pollution, spills, environmentally disastrous accidents and climate change – costs which are never really factored into the economic equation. In my opinion, it is well worth our tax money to incent clean energy and does benefit all of us. In fact, although we invested in a PV system for our home, we are still willing to contribute towards the state- and federally-funded incentives to encourage others to do the same. We all breathe the same air. I think it’s unfortunate that so many decisions made by individuals and businesses are based solely on considerations that stop at their own personal property lines and pocketbooks.

    States are now passing legislation permitting PACE financing for home and small business improvements that reduce energy use (retrofits, insulation) and install clean energy systems (Maine is one of them). These are low-interest loans that make such improvements entirely affordable.

    The other consideration I haven’t seen discussed does relate strictly to “payback” to the PV system owner. I firmly believe that a PV array on a home increases its resale value. I have never seen this element of economic payback considered. This increase in basis (home equity) should be factored into the economic payback experienced by the homeowner when considering installing a system. Sure, the payback is deferred until resale, but it is real nonetheless because it becomes a part of the homeowner’s “investment portfolio.” You’d have a hard time convincing me that a prospective buyer would not value – and pay more for - a home whose monthly electricity costs amount to only the cost of being connected to the grid. Is it unrealistic to consider that the payback in basis would be equivalent to about a third of the cost of the system?
    As an example, our 3.29kW system’s “true” cost, all said and done (2011), was just under $16,000. After 30% federal tax rebate and $2,000 (Maine) state rebate, and a $5,000 increase in basis (yes, that’s a total guess), that brings the cost to us down to $4,200 for 14 solar panels, installed. As mentioned above, our state also provides PACE financing whereby low-interest loans are provided for such energy efficient installations.

    A PACE loan combined with the other incentives, to say nothing of the “Big Picture” considerations, make solar PV installations a sensible decision both economically and environmentally.

    As an aside, I find it interesting that there are certain investments that seem to “require” a 100% payback, and others that do not. Do we expect 100% payback for…dishwashers, stoves, dryers, cars, new furnaces etc.? Or are their costs factored into the overall cost of our quality of life choices? And, should we care about the quality of life of a coal miner with lung disease, a neighbor of Three Mile Island, an oil-covered bird, a Sandy Hurricane -devastated homeowner?

  21. GBA Editor
    Martin Holladay | | #21

    Response to Anita Brosius-Scott
    You wrote, "As an aside, I find it interesting that there are certain investments that seem to “require” a 100% payback, and others that do not. Do we expect 100% payback for…dishwashers, stoves, dryers, cars, new furnaces etc.?"

    I agree with your point; in fact, I have written an article on the topic: Payback Calculations for Energy-Efficiency Improvements.

    In that article, I wrote, “Some home performance contractors and solar equipment installers are sick and tired of hearing payback questions. The usual reaction from the sick-and-tired crowd is, 'Nobody ever asks what the payback period is for a granite countertop or an SUV!' ”

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