The economics of solar panels

My Journey to Purchase Solar Panels

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Agenda

1. How to pick a system

2. How to calculate your payback

3. How to choose a qualified integrator

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Here’s very little about me

• I’m an Economist*

• I like key lime pie

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* Masters of Science in Economics from Florida State University, 1983

I don’t worry about my carbon footprint

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* Unless it pays to be “green.”

Important entities recognizes my reluctance to “save the planet”*

Federal Government tax credit

North Carolina State tax credit

Progress Energy utility rebate

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* So they provide incentives to install a Photovoltaic Solar Energy System.

30%

35%

$4,700

My selfish priorities

• An extraordinarily high return on investment

• A short payback period

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* Show me the money

PICK A SYSTEMStep 1

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Important Questions

• How many Kilowatt-Hours do you want to generate a year?

• Where will the unit be installed?

• Do you want to leave surface area on your roof for future panel expansion?*

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* If so, then you may need higher efficiency panels depending on your roof area

Some things won’t matter to you

• Panel aesthetics is a lower priority purchase criteria for me.

• This should be obvious by looking at my dog Andy.

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Some things will matter a lot

• Warranty is important to me.

• However, the financial stability of the company must also be considered.

• What good is a warranty if the company goes out of business?*

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* My recommendation: Pick a tier 1 solar panel vendor

Line up the options side-by-side

SunPower 230 LG 255 REC 240Price $$$$ $$$ $$ Panel Conversion efficiency 18.5% 15.8% 14.5%Number of Panels* 22 24 22kilowatts 5.10 6.12 5.28Kilowatt-Hours 6,224 6,925 5,975Dimensions Length x Width Length x Width Length x WidthWarranty 10 year 10 year 5 year Inverter SunPower SMA SunnyBoy

7000SB SunnyBoy

7000

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* This is the number of panels my installation requires to achieve my energy goals.

Does panel size matter?

• A low conversion factor likely means a larger / heavier panel.

• Impact:– Larger panels limit the total Kilowatt-Hours you

can produce with a fixed amount of space on your roof

– Larger panels leave less real estate on your roof for future expansion

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SHOW ME THE MONEYStep 2

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Total Savings

+ Lower Monthly Energy Bill

+ Solar Renewable Energy Credits (SRECS)

+ Lower Off Peak hour utility charges*

= Total Savings

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* If you change your behavior

What’s an SREC?

• Your Photovoltaic Solar System will be creating Solar Renewable Energy Certificates (SRECS) that your utility company will purchase back from you.

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* Our Federal Government mandates that a percentage of their energy portfolio be from renewable energy.

Progress Energy hates SRECS

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* Utility companies paying you for your energy credits must be like biting into a habanera with no water chaser.

Then why do they pay you for your SRECs?

• Answer: Because the government forces them to balance their energy portfolio with renewable energy sources.

• North Carolina has a Renewable Energy & Efficiency Portfolio Standard (REPS) that requires Progress Energy Carolinas to have 0.02 percent of its 2010 retail sales come from solar power.

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.02%

You almost feel bad for Progress Energy

• Utility companies build plants to satisfy peak energy demand

• They produce an “always on” current of electricity to each outlet in your house whether you need it or not

• Your PV system will not change the amount of energy that the utility company must produce and have available to your house, i.e. they don’t benefit directly by your PV energy production.*

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* However, if enough people install PV Systems, then Progress energy won’t have to build another plant.

Plug in your numbers

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2012 2013 2014 2015 2016 2017 2018 2019 2020Initial Cash Outlay $ Utility Company Rebate:

Rebate $ Tax $

Net Rebate [Calc]

Fed Tax Credit [ 30% ] State Tax Credit [ 35% ] Fed Tax on State Credit $ -Maintenance $ - $ - $ - $ - $ (100) $ - $ - $ -Yearly SREC revenue $ 254 $ 254 $ 254 $ 254 $ 254 $ 949 $ 992 $ 1,037 Yearly Production Savings $ 413 $ 427 $ 442 $ 458 $ 474 $ 491 $ 508 $ 525 Total Cash Flow [Calc] [Calc] [Calc] [Calc] [Calc] [Calc] [Calc] [Calc] [Calc] Accumulated Cash Flow [Calc] [Calc] [Calc] [Calc] [Calc] [Calc] [Calc] [Calc]

My numbers met my goals

• Payback period in years

• Return on investment %

• Internal Rate of Return

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Other benefits of the system had little value to me, but might be important to you

Tons of CO2 Offset per year

Added Value to Property

What am I going to do, brag to my friends about how I’m saving the planet?

I intend to die in the house*

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* If you don’t intend to die “under the panels,” than the US Appraisal Journal indicates that you can add $20,000 to your

home’s value for every $1,000 saved in utility costs.

One more side benefit from this assessment is that it teaches you to change your behavior

Month Off Peak Utility Rates March – September Before 10:00 am After 9:00 pm

October – February 1:00 pm – 4:00 pm After 9:00 pm

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• Progress Energy requires that you “voluntarily” subscribe to their residential service time of use program

• The utility specifies different rates for electricity usage throughout the day, i.e. Peak and Off Peak Rates

• So you should perform your high electricity usage activities during off peak hours since this will lower your electric bill!*

* You can enjoy this benefit today even if you don’t install PV panels

To benefit from off peak rates, you need to change your behavior

• Identify high electricity usage appliances, e.g. Laundry Washer/Dryer and Dishwasher

• Do your laundry on the weekends or on off peak hours

• Set you dishwasher for 4 hour delay after you eat dinner so that it runs after 9:00 pm.

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CAREFULLY CHOOSE A QUALIFIED PV INTEGRATOR

Step 3

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Look for “signals” that the company is reputable *

• I posted a comment to a company’s blog post and received a response the same day.

• The company I choose has 120 employees

• The company I choose has installed 11,000 + panels in both commercial and residential environments

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* These guys are going to be putting holes in my roof.

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No Jacklegs allowed• The employees arrived in company branded vehicles and

were wearing company branded shirts.

• Their savings worksheet puts the rebates in the proper year, e.g. you don’t get the Federal Rebate until after your file your taxes in the following year.

• The Company quotes multiple brands of panels.

• Some of the quotes include recognized brands that have no history of financial distress.

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* Jackleg: Southern expression for “Jack of all trades and master of none.”

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More Signals• Can they describe how they will protect your roof tiles?

• Will the installer be around to service their work in 10 years, i.e. are they financially stable?

• Will they assign a project manager?

• Will they handle all of the paperwork with Progress Energy?

• Do they have many commercial and residential references?

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Contract Signed

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If you get the right signals, you can sign a contract

A Happy Economist

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Presentation Author

The contents of the presentation are sole intellectual property of John Langlois and are not to

be distributed without prior written approval.

Sources for pictureshttp://www.projectez.com

http://www.istockphoto.com

Useful Links

• Sunsense Solar PV Programhttps://www.progress-energy.com/florida/home/save-energy-money/energy-efficiency-improvements/sunsense/solar-pv.page

• The PVWatts Solar Calculatorwww.pvwatts.org

• DSIRE State Renewable Tax incentives

• DSIRE Federal Renewable Energy Tax Incentives

• Consumer Guide to Energy Efficiency and Renewable Energy

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