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With $15,000 would you buy PV or improve your envelope?

Patrick Mccombe | Posted in General Questions on

Last night I went to an informational meeting sponsored by Solarize CT. This organization negotiates with solar companies to reduce installation costs for PV panels. They keep lowering the price in accord with how many people sign a contract. Currently they’re offering installed panels at $3.30 a watt. A 9 or 10kw array would likely meet all our electrical power needs. Also at the meeting were lenders who will finance the net cost (less 5% down) for 15 years at 6.5%. You can also lease the panels which involves no money down.
Currently the feds are offering a 30% tax rebate on PV installs and the state is offering up to a 35% rebate. In round numbers, at $3.30 a watt, combined with state and federal incentives, brings the cost of a 10kw array to $15,000. I’ve always believed that envelope improvements make more sense than PV, but the state and federal incentives and super low prices of PV coupled with our very high electric rates has me considering an installation. My question is, what am I missing? Am I silly for installing PV first without significant envelope improvements to my very small but not terribly efficient home. In the three years we’ve lived there we’ve needed 3 tanks of heating oil so our heating costs are much lower than most folks in New England. Our house is small and reasonably air tight. 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.
I’d be grateful for your thoughts.

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  1. GBA Editor
    Martin Holladay | | #1

    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. You didn't mention the cost of electricity in your area, but I'm assuming that electricity in Connecticut isn't cheap. I'm sure that your electricity costs will be lower if you take the deal. It's money sitting on a plate. So take it.

    Of course, if you later decide to borrow money from a bank to make further envelope improvements on your house, you can do that too. With the money you'll be saving on your electricity bill, you'll have some spare change in your pocket for such endeavors in the future.

  2. GBA Editor
    Martin Holladay | | #2

    One last point: check out the fine print on your proposed net metering contract. Some net metering contracts reset to zero every 12 months, even if you have accrued a surplus -- in other words, you can't get paid for electricity production beyond what you use. Other utilities will actually cut you a check if you generate more than you use. If your local utility won't pay you for surplus production, you don't want to buy a PV array that is bigger than your family's needs.

  3. GBA Editor
    Patrick Mccombe | | #3

    Thanks for your thoughts Martin. Our utility will buy surplus power at about half the market rate. Our bill is split into two parts (maybe everyone's is): distribution and generation. They credit the generation, which I believe is currently $.09/kW/hr. When all the taxes and fees are included, our total rate is slightly less than $.19 /kW/hr, which I think makes our electricity among the most expensive nationally. As you might imagine, creating a surplus is a problem I'd like to have.
    On top of our already high rates, the state utility commission recently approved a 20% rate hike

    Anybody else have thoughts?

  4. GBA Editor
    Martin Holladay | | #4

    You wrote that your utility will credit you for the electricity that is generated. But will the utility actually cut you a check at the end of the year if your system produces more electricity than your family uses?

  5. GBA Editor
    Patrick Mccombe | | #5

    Not sure, Martin. I'll ask.

  6. kevin_in_denver | | #6

    There may well be some easy envelope improvements that can be done.
    Your utility is probably promoting low cost energy audits as well.

  7. Expert Member
    Dana Dorsett | | #7

    "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"

    If you're burning 250 gallons of oil/a year, at $4/gallon recent-years' pricing that's $1K/year. It's VERY likely that for an investment of $4-5K you can heat with a ductless-mini-split at about half the cost of heating with oil (even at 20 cents/kwh) which would have an even better IRR than a 10kwh PV array at a post-subsidy cost of $1.50/watt.

    Whether you buy the PV or not, the ductless mini-split is a no-brainer type of investment. Heating solely with resistance heaters + PV wouldn't be nearly as attractive.

    Some napkin-math (to be corrected by your real numbers):

    250 gallons of oil in an 85% burner yields about 117,000BTU/gallon, or 30 MMBTU of annual heat delivered to the house, best case. Dividing the 30MMBTU by about 6000 heating degree days, that's 5000 BTU/HDD. Divided by 24 hours in a day gives about 210 BTU per degree-hour. Typicial design temps in CT are in the mid-single digits, but for yuks lets call it 0F, which is 65F heating degrees below the presumed base 65F heating/cooling balance point. Your heat load at 0F will be about 65F x 210BTU/degree-hour 13,650 BTU/hr, which could be covered by a 1-ton Fujitsu AOU- 12RLS2H (see: or the new M-series Mitsubishi MSZ-FH12NA (see: )

    Estimating conservatively, in a CT climate either of those would seasonally average about 10,500 BTU per kwh of power use. At 20 cents kwh that's the equivalent of $0.20 x (117,000/10,500)= $2.22/gallon oil. If the 1-ton costs about $4K ( which it should, unsubsidized, if recent central MA installed costs are relevant) and reducing your heating costs from about $1000/year to ($1000 x $2.22/$4= ) $555, that's a savings of $445/ year for an investment of $4K, an 11% internal rate of return (after taxes, no less!)

    To deliver the 30MMBTU at 10,500 BTU/kwh means the mini-split will be using (30,000,000 / 10,500=) ~2860 kwh/year, which would be roughly the AC output of 2kw of PV, assuming optimal shading factors & middle-of-the road inverter efficiencies. To deliver the same amount of heat with electric baseboards you're talking 6KW of PV or more.

    At $1.50/watt post-subsidy PV cost and about 1.3kwh/watt of annual output, at 20 cents/kwh that's 1.3 x $0.20= 17 cents/year for an investment of $1.50, which is also comes in an an IRR of ($0.17/$0.15=) 11% . But with the mini-split you have the upfront avoided cost of about (6KW -2KW=) 4KW of PV for covering your heating, at a cost of $1.50 x 4K= $6000. So in effect, by buying the mini-split for $4K you've cleared $2K in total reduced cost right up front, that could be applied to PV beyond your heating needs.

    This is a very rough cut, but it's the right ball-park. Assume that you'll replace both the mini-split and the inverter in 20 years, and the PV panels in 40 years- the short-term IRR 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 mini-splits, quite independently of the PV question. (Take a peek at this short policy piece from last spring: )

    Even at mini-split heating costs it's possible that blower-door directed air-sealing would have a comparable IRR. If you have clear-glass double panes adding low-E storm windows might too. But it's not at all insane to install 8-10KW of PV at a net-metered post-subsidy $1.50/watt, and heating with a mini-split.

  8. GBA Editor
    Patrick Mccombe | | #8

    Many thanks Dana. Good food for thought. The $4k cost of a mini-split has always scared me away.

  9. Expert Member
    Dana Dorsett | | #9

    If all you wanted it for was air conditioning, a $4K mini-split is a bit of a luxury in a CT climate. But it's THE low-first-cost (and cost-effective) solution for weaning New Englanders off the fossil-liquids habit!

    In VT they now subsidize cold-climate mini-splits (Fujitsu XLTH-series and Mitsubishi- FExxNA only- but the FHxxNA should soon show up on the list), but only for those currently heating with oil or propane. It's a substantial subsidy- $750 for the first unit, $500 for a second (!).

    In CT you'll get about 10% more heat per kwh on average than in northern VT. If the new-improved M-series Mitsubishi heating efficiency numbers scale with those of the FEs, you could expect meet or beat ground source heat pump efficiency with them in a coastal CT location.

    I'm currently looking at using 'splits to cover the low heating/cooling loads of apartments in series of buildings under design that I'm tangentially advising on in the Boston suburbs. Despite the availability of a gas main the mini-splits are better matched to the loads and cheaper to install than the gas-fired alternatives, and at local utility rates will have comparable heating costs, cheaper cooling costs, and better comfort levels. The developer is hesitant about high-end rental market acceptance of this technology though (but shouldn't be IMHO.)

  10. GBA Editor
    Patrick Mccombe | | #10

    I don't even have AC now. That's a bonus! I think mini-splits will soon be commonplace enough that developers won't be scared of them. Perhaps they'll even become the heating and AC renters seek out when condo or apartment shopping.

  11. user-1115477 | | #11


    Reduce your electricity footprint as much as you reasonably can, first, then add PV.
    What in the hell happened to the original shade of green, where people wouldn't dream of using PV without first minimizing energy use?

    Don't join the hundreds of thousands of people who have just thrown up PV just to get some SRECs and they could care less about doing the right thing in terms of energy efficiency. You said you had a small house; you probably don't even have enough roof for a 10kw system. 10kw is a huge system for typical residential. Think about this: the sun can provide ALL your electricity needs these days (while using the utility as a rechargeable battery) with just a relatively small roof--BUT only by reducing the electicity demand to a minimum.

    Ideally, you want the electric utilities out of the picture as much as possible. 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.

    My house is small too, and I wouldn't have dreamed of installing PV back when I used 16 megawatt hours of electricity per year. Now that I have done a deep energy retrofit, and use about 6 megawatt hours per year, and could meet that demain with a reasonably size roof, I would take some comfort in adding PV.

    I think it is disappointing that Green Building Advisor has to a large degree lost sight of the original shade of green.

  12. GBA Editor
    Martin Holladay | | #12

    Do the math. PV has gotten cheap. 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.

  13. GBA Editor
    Patrick Mccombe | | #13

    You make a good point about roof size, Sonny. My family and I have a 24' x 30' outbuilding with a big south-facing roof. The barn is a conditioned artist studio and project space. So my footprint, physically and carbon -wise is bigger than my house-size(700 sf) would indicate.
    My house would benefit from some air-sealing and perhaps can-light removal. But it was recently gut-rehabbed, so I'm disinclined to put foam on the exterior, replace windows or other invasive deep energy retrofit measures. The barn I mentioned earlier was only recently completed (by me.) This has prevented me from making some small improvements that could really help boost my homes efficiency. I plan to do the air-sealing, and perhaps some duct sealing in the near future.
    I don't want to speak for other posters, but I don't t think their sentiments are coming from a change of heart, but rather they're acknowledging It's just so darn cheap to buy PV panels right now. One thing I fear: the utilities will start charging PV owners surcharges or higher rates for grid power. Isn't their discussion of this in Ca?

  14. GBA Editor
    Martin Holladay | | #14

    It's happening everywhere. Today's news on the issue comes from North Carolina:

  15. Expert Member
    Dana Dorsett | | #15

    The crashing cost of PV has put utilities everywhere back on their heels. When the numbers of net-metered-houses reduce their net-power use by more than 50%, the cost of grid maintenance falls ever heavier on the non-solar customers, making PV even MORE cost-effective to install, and in short years as the grid costs go to more and more non-solar customers is unbearable, and the underlying financial model of the utility collapses. This is well understood (and often feared) by utility operators of all types & levels of vertical integration- it's an existential threat, and already at their door in high-priced electricity markets.

    The problem has has been dubbed "the utility death-spiral" by the wonks at blog (highly recommended if you care about grid issue BTW.) Different utilities and state commissions have addressed it differently. In AZ solar customers are now assessed a small flat-fee per kw of array to "pay their fair share" of grid use, but there is an argument that most rooftop PV arrays in AZ still provide more to the grid in the form of peak power at zero margnial cost than their "freeloaders" characterization by the utility operators had been spreading. The publicly owned utility in Austin TX did a fairly substantial analysis of the value of distributed solar that included everything deferred the peak-power /time-of-production issues to the deferred capital expense of not having to upgrade grid carrying capacity etc, and settled on a "Value of Solar Tariff" (VOST) that pays PV owners at a HIGHER rate than the rough-justice "run the meter backwards" flat-rate net metering.

    One thing is for certain: The simple net-metering deals available in most states won't/can't survive buck-fifty-a-watt grid-tied PV for too many years, since the lifecycle cost of that power is SO far below the retail rates. In CA there have already been adjustments, but the existing installations were grandfathered in. By 2020 it's widely anticipated that the installed cost of PV will be under $1.50/watt even without subsidy, but that doesn't mean it will pay to wait in locations where the flat residential retail rates are north of 15 cents.

  16. user-1115477 | | #16

    There's quite a bit of rambling discusssion, here, but, bottom line: In the name of true shade of green and to keep hands out of your pocket, get as energy efficient as you can and trust only the sun.

    If you don't want to get as energy efficient as you can, then come up with a way to provide your own storage (ah, good luck with that--I mean relatively cheap and maintenace free, not like lead-acid). 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. Storage is going to be a huge issue. Using the utility as a rechargeable battery is cheap now but it aint gonna stay that way.

  17. Expert Member
    Dana Dorsett | | #17

    There are MANY grid storage schemes that work, battery technologies are just one. Many solutions for load management are known and affordable, and don't have a huge impact on cost. The overlap of PV output to peak demand is quite good, and the fact that those PV kwh come at no marginal per-kwh cost means that even with the cost of grid storage it's still a net-win. Currently local storage on the ratepayers side of the meter is prohibited by most state regulations, but that's rapidly evolving in states that have a clear need for developing that capacity (such as CA.) Whether the utility owns the storage or whether the PV operator does, it's cheaper that most analysts were thinking even as recently as five years ago.

    The shift of the grid-maintenance cost to the non-PV customer is still a much bigger problem for the utilities than managing intermittent distributed sources like PV. The stickiest problem to solve is still the business & financial models of the utilities, and not technical shortcomings or costs related to managing a highly distributed high-renewables grid.

    The now-famous "duck curve" describes what's happening in CA as PV is becoming ubiquitous:

    The toughest grid management problem is the ramp rate that needs to be met as PV sources start to fade just as people come home from work and kick on the oversized air conditioning to chill the house out. While this ramp can become potentially quite steep, it can be managed in any number of several straightforward demand-response methods, not all of it has to be from spinning up peakers or massive storage (though storage already seems to be the cheaper and greener method than gas peakers anyway.) Soaking up the belly of the duck and slowing both the rate and magnitude of the ramp will be pretty easy with "smart" car-chargers, once there is a sufficient fleet of electric vehicles on the grid, even without making that a two-way proposition (which has also been studied), using the cars as the energy store for peak shaving.

  18. GBA Editor
    Rob Wotzak | | #18

    If someone takes the plunge and finances a large PV system for their home, is there any inclination that they might get burned in the near future if their utility company changes the way they charge for distribution and pay for homeowner-produced power?

  19. user-1115477 | | #19

    First, Rob, I probably already answered your question, depending on what "burn" means to you.
    That someone won't get "burned" as far as I'm concerned but, like I said, that someone will be paying more in the future on the distribution portion of their electric bill then they do right now, even if they are
    "net zero," meaning they turn the meter backwards as much as forwards during the course of a year.
    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. 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 (discussed more, below).

    Dana, you took off on the point I started about how the utilities will get paid for being used as a rechargeable battery by PV owners, and you went on and on with lot of rambling and words. You haven't really added anything, and you confused a few things. In your comment 17, you say local storage on the utility side is currently prohibited, after I brought up storage. You missed the point which is the fact that the utilities will be getting paid for being a storage medium, and the only way around that is to provide your OWN storage--OFF the grid (and, again, good luck with that.) So, the point was and is that if you are going to be connected to the grid, you still want to use the least amount of utility power which, it turn, means reduce your energy footprint first, before adding PV, just like "green" used to mean.

    Dana, your second paragraph in 17 is nothing more than a re-hash of the point that I brought up first. "The shift of the grid-maintenance cost to the non-PV customer" IS a big problem for the utilites, and they are fighting back to get PV owners to pay for GRID STORAGE of power when the meter runs backward--and they will get that payment.

    Dana, then you start talking about "the toughest grid management problem is the ramp rate...." and on and on. No, that's not the toughest problem, but it IS part of the reason why utilities are beginning to add storage, as I brought up in the first place. The intermittent distributed generation is only one of the problems that will be addressed by utility storage. Like I already mentioned, also and equally problematic are load management not only as related to the demand side, but management of distributed generation as it effects system protection schemes (fusing, reclosers, sectionalizers, distribution automation) and power factor. Utility storage schemes will also act as buffers to help
    alleviate these affects.

  20. heidner | | #20

    Patrick since the incentives you mentioned may have expiration dates attached to them, that may move the solarPV further up the list. However several of the other comments also are really important .

    Even with the incentives - by time everything is installed running and paid for... the effective levelized cost for the solar PV you install is likely to be sitting at about $0.18/kWh. That's pretty close to what you are paying now with the other fees added in. If you are sizing the array to meet the current loads for today - you could be spending more of your capital then you really need to...

    1) So one of the steps should be looking at where you currently use the energy resources. If those loads are coming from incandescent lights - count them up.. and plan on the bulbs switching to LED's within 5 years. If the loads are baseboard heat, look at the alternatives. Build a spread sheet that includes the loads and when the appliances are likely to be replaced and updated. If you have a great refrigerator that you like today... and it uses a lot of energy.. you might find out that in several years you've replaced it with a model that uses 1/3 the energy. Populate the spread sheet with the energy use for as many devices you can find in the house (including cellphone chargers) and then look at what you might expect for those appliances in one, two, five or ten years.

    2) Look at your heating costs - whats driving them? If you have a full house of teenagers now... in five years they may be off at college and the heating costs are lower. Make sure you get an GOOD comprehensive energy audit done soon... preferably before you have to make a decision. You might find some unsuspected heat loads that if fixed - also reduce your demand for electricity. We often forget that inside those furnaces there is a blower motor... that if it is an older furnace can easily be one of the major increases in your winter time electric bills. Make sure you understand your winter time heat use.

    3) Look at your summer time bills, since you don't have air conditioning now... these should be your minimum. The energy use will be partly lighting, food storage, clothe washing, possibly hot water, and then mostly the discretionary electrical loads -- like the TV and computers. High summer time bills are something you would really want to understand... If you can make your house envelope energy efficient - the goal would to make the energy used in the winter time approach the summer time loads as close as possible... its a target.

    Whether your state or utility will change any net-metering program will be something that can not really be predicted. The current push to challenge net-metering is mostly being driven by the investor owned utilities (IOU). They are profit driven and a reduction in energy use by the end customers is a loss of revenue stream. Loss of revenue streams means loss of profits. FWIW - energy efficient homes, energy efficiency programs are also viewed as threats by some investor owned utilities! The fears of the IOU are covered in a white paper called "Disruptive Challenges". That paper is specifically for investor owned utilities. If you are in a coop or a municipal utility they may have very different views of the impact of net-metering. In some cases they may be very supportive because it reduces their need to buy energy on the spot markets.

    As mentioned - even energy efficiency may be a target of future utilities. If so, you might also see increases even if you've made your building envelope better. Here is a quote about efficiency from the white paper. "Generators in organized, competitive markets are more directly exposed to threats from new technologies and enhanced efficiency programs, both of which reduce electricity use and demand." <-- from the edison electric institute report "disruptive challenges", published january 2013, by author peter kind of energy infrastructure advocates. investor owned utilities are very concerned about drop in sales and general public interest moving away centralized generation model past one hundred years.

    A 9kW or 10kW array still might be useful even if you find areas to make the house more efficient... it can be useful if you have a long term goal of moving to an electric vehicle (EV) and plan on using the surplus to charge the batteries.

    It was suggested that you verify what happens with the excess power you generate over the year. In some states (and utilities) you might receive a payout at a wholesale price. In others, Washington State for example.... any energy banked on April 30th... goes to the power company. The goal in Washington State is not to over produce.

  21. Mica239 | | #21

    What I suggest you do (and I have done) is spend the $15000 on shares of a "green" electrical power generating company. I have invested in a North American company that specializes in water (they have 6 water power generating plants in my neighbourhood) and wind power and they pay a 5% dividend. Your $15000 would pay $750 a year to put towards your heating/electric bills.
    I have gone that route (plus I have invested in the private company that distributes the power in my neighbourhood and they also pay about a 5% dividend) because my house is in the shadow of hill for most of day and wife won't let me cut down the trees that block the sun. Also, there is no maintenance work with owning stock and I don't have to deal with the environmental challenge of what to do with solar panels when they are at the end of their life.

  22. PAUL KUENN | | #22

    Patrick, you can get quite a huge house blanket for $15K and hardly need to heat it or cool it. I've been installing solar electric and thermal since the early 80s and have to push in the direction of efficiency first. PV panels are not as comfortable as a super insulated house and you'll feel your dollars at work as soon as the sealing & insulating work is done.

    Yes, my original PV on the earth home I built in 82 still runs even without me (I stay in touch with the owners) but it was the perfect house in a sunny state that made it work well.

  23. user-227802 | | #23

    Has anyone seen this type of offer with similar price in the midwest or anywhere else? We are still seeing $4.50 to $5.00 per watt installed here, before a public benefits incentive and federal tax credit.

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