Solar Economics


If you're anywhere near Boulder, CO, it's hard not to be over-run with news about renewable energy, green energy, or as some like to purport 'free-energy'. I'm all for playing a bit nicer with the environment around me, but I always turn to the spreadsheet to ask 'is it really worth it?' before believing anything I read on the internet (kind of like you are now)...
http://www.sparkfun.com/tutorial/Solar/Solar.jpg
So I whipped up this spread sheet. Please take a look and tell me what I'm doing wrong. I included the sources for all my numbers. I would be shocked dead with a heart attack if my shoe-box apartment used anything near as much as 9000kWh per year, but it's a number to start with. SparkFun does have the benefit of having a Solar supplier, but anyone can actually search out a supplier (yeah internet!). Also, a 5kW system is a rather large PV (photovoltaic) array. I want to believe many home installations are smaller than this.

What is interesting is the rebate offered by Xcel (our local energy company). $4.50 per DC Watt is astounding. Without this rebate, the number of years to pay back $21,000 worth of solar panels would be over 22 years! The average panel life is 15-25 years. So as long as there is a hefty rebate (I'll believe it when I see it), we should cover every square inch of our roof. That is if you want to reduce your electric bill. Powering your car on solar energy is another calculation entirely.

Comments 35 comments

  • I don’t really have a comment, but I’d like to see that ones that are already here.

    • You can do so without posting a comment by clicking on the > next to Comments :)

  • What I would like to know is if PVs ever save enough energy to offset what it takes to manufacture them, including the diesel used to ship them and all the parts/materials in the manufacturing process, gasoline to power the cars for the workers to get to the manufacturing plant, mining raw materials, disposing the chemicals used properly, electricity at the plant, etc.
    I mean, we are trying to be sustainable, not just a few dollars…

  • You also need to add in two other considerations: How much would you have earned if you had invested the same capital ($26k) in something else–such as an interest bearing account. That should be deducted from your return as it is your opportunity cost. Also are those rebates actually available at the time you do this? States in particular set aside so much for rebates per year and once those are gone for the year they are gone.

    • P.S. All this complication makes solar as a service MUCH more attractive in a practical sense than a DIY install. With solar as a service you just buy solar power at a fixed price for a fixed term. The utility installs and maintains its equipment at your location and takes care of all these calculations. SunEdison has figured this out for commercial installs. Home installs/contracts are tricker since people move but solar as service for homes will sort itself out as a market.

      • You’re right. Solar service/off-site could be much more effective. I was talking with someone today who mentioned cleaning the panels was a serious problem. Small layer of dust could lower panel output by 30% or more. A service would take care of this and many other issues.

  • The prices listed shows the cost of the PV’s themselves, what about regulators, inverters, batteries, installation and a grid-connect system?
    However if you’re on the grid you can do without batteries, but will still need a load balancing system or device to feed excess power back into the grid.

  • Does it make (economic) sense to install a solar power system?
    Considering the real installation cost of about $40,000, If you put the $40K in a 10 percent investment program (they’re out there) the uncompounded simple monthly interest would pay $333.33 toward your electric bill and require no maintenance, no space in your back yard or roof. The income would be perpetual.

  • How do we store energy for night time use? How much energy do we need to store? Answer: If we consume 100A for a period of 4 hours, that works out to 400 Amp-Hours. To supply 400 Amp-Hours at 50 pct load current and 50 percent discharge, about 16 100 Amp-hour storage batteries are needed. This is an added cost of about $2000. We may expect the batteries will be replaced every 2-3 yrs. Power conversion here assumes 100% efficiency too. Battery cost over 20 yrs could be $20K.

  • Typical 60W panels run $300 each. A 4000W array of panels would require 67 panels x $300 = $20,100 for the panels. Have you included the cost of mounting frames, positioners, position controllers, charge control for DC storage, DC storage batteries, and power inverters for power conversion to AC?

  • Almost as if Ira was reading this thread, Science Friday on NPR yesterday did a long thing on solar. It included a part on putting solar on your home, and various costs and rebates.
    It’s podcasted here:
    http://www.sciencefriday.com/program/archives/200807181

  • I estimated the costs to install residential solar in an article I wrote for Solar Power Authority a few months ago. Since then, there was another posting about someone who employed a DIY approach that cost $2/watt after the rebates.

  • Typical grid tied home system
    For 15 panel 3kW peak = 20kWh/d or 7,300kW/y (AZ) NJ=60% of AZ
    Average home uses 10,000kWh/y
    Costs $9/W installed before incentives which vary by state (panels only $4.50/W)
    Expect >10year payback at today’s prices
    To see a typical live system go here SolarVu<a>
    </a>

  • Xcel has an exciting new pilot program, SmartGridCity, in Boulder. By upgrading the ancient electrical distribution system they are creating a more interactive system to help business and residential customers monitor and appropriately distribute power. This will also enable those with PV arrays on their homes manage how their power is added back to the grid. Check it out at-
    SmartGridCity

  • There is a CAP on the $4.50/Watt Rebate!
    “Xcel rebates customers $2 per watt of solar installed on premises, up to 10,000 watts."
    Further - "company will purchase Renewable Energy Credits generated for $2.50 per watt.” Thus the $4.50.
    In your example - a 5KW installation would earn $12,500 - still excellent)
    You cannot “break-even” immediately - however it seems wise to take advantage of these programs as laws CAN and DO change!

  • What is a W/hr?
    I am a cheapskate, but even for me, if the out of pocket cost is under $5k, the total cost is more important than the years to pay off. Give some more metrics, why not calculate square footage? Also, account for sale back of unused power.

  • Installation, inverter etc costs are not mentioned at all - $10/pk watt is a more realistic cost

  • You may want to check if Solar installation by Licensed Electrical company is Required, I believe in CA that is a requirement for rebate. That will raise cost a lot.

  • Your calculation does not include the cost of storage batteries or an inverter, which is often about equal to the cost of the panels.
    Xcel Energy says “A common size … for systems in Colorado is 2-3 kilowatts, and total payments to customers for this size would be in the $9,000 to $13,500 range … typical photovoltaic systems are priced at $8,000 to $10,000 per kilowatt."
    However, a 2-3 kW system probably won’t cover your electrical needs, unless you are very frugal.
    Jim

  • There is a article in the July 2008 issue of Circuit Cellar about living off grid. Worth a read.

  • You could save money quicker and at less overall cost if you focus on the conserving. Better insulation, CFLs, shut things off, more efficient appliances, using natural breezes more often(it’s Colorado, I love the outdoor air there), wear a sweatshirt in the winter, etc. Spend a fraction of the solar estimate on energy star appliances, and you’ll end up way ahead, with no maintenance headaches.
    Not that I don’t envy a solar system, but who wants another mortgage in this financial market?

  • I think your $/W number is too low for an installed system. I asked a friend who installs solar systems up here in Fort Fun about a small residential system and was quoted a budgetary price of about $8/W installed.

  • I’ve been looking to add solar to my home (Denver).So far the real math is much less compelling. For my house we’d need ~11Kw system with installed cost of +/-55K. Even after all the rebates,it still leaves out-of-pocket costs at 10-15K with ROI in around 20 years. Reducing the size of the system to just partial needs reduces the cost but ultimately the ROI is about the same. For me at least right now the ROI just isn’t there. Until price of panels comes way down the numbers just don’t work.

  • Also, distributed power generation IS NOT good for the power grid – it’s a nightmare that is driving grid operators crazy all over the country. The grid must always, always balance: the exact same power must go in as comes out. This is very difficult when you don’t control what goes in. Texas almost had a major outage in March 2008 because the wind died suddenly in west Texas and took about 4,000 megawatts of generation offline in a few minutes.

  • You did the math right. There’s an online calculator at http://findsolar.com/ that leads to similar conclusions. The payoff is about 20 years, even for the most optimistic assumptions (eg, that the solar panel itself adds value to your house, even though it is a depreciating asset).

  • I haven’t gone thoroughly the above spreadsheet, but Xcel has a similar spreadsheet and cost calculator here
    “http://www.xcelenergy.com/XLWEB/CDA/0,3080,1-1-2_41004_43476-23075-2_23_66-0,00.html"
    Based on their estimates for my 4 bedroom house, I would save about $250 yr. With rebates and tax credits, it would pay for itself in about 25 yrs +/- 3 yrs. Contrast that to about $7000 out of pocket NOW. But efficiencies will increase, along with fuel costs…

  • I think the last two lines are a bit confusing, leading to things like negative years.
    Your point is that the rebates means that the solar panels basically cost nothing to install, although the rising cost of the cells means that it’s not as economic attractive as it used to be, right?

  • When I priced out the cost of using solar cells, it would have taken 30 years (best case scenario) to pay off the original cost, about the length of a morgage. The efficiency (~10%?) is simply so poor that it doesn’t “pay” to bother with solar energy unless you’re not attached to the grid.
    MIT has built a large reflector array to directly boil water for turbine electrical power. It’s more efficient than using solar cells directly, which is kind of sad when you think about it.

  • Distributed energy generation has lots of advantages for the grid but I never realized that the power companies would pay this well.
    Solar is also well timed for aiding in air conditioning (unlike wind) and is easier to find than here in Cleveland.

  • $4.65 is low installed cost, especially if installed to code. Figure at least 25K-30K for a 4kW system, which after rebate would be 7-12K, still very cheap.
    The site, http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/
    has a calculator for solar panels. A 4kW system is not nearly enough for even the smallest modern home. You can expect to produce about 6K kWHr per year in Colorado, only 2/3 of your consumption.

  • The rebate amounts vary from year to year. For 2008 you should expect the rebate to be about ½ of the cost of the system if you live in Colorado or Arizona. If you have net metering, you can then sell power back to the grid during the day. The rate for electricity you sell back to the grid is a little less than the rate you pay to buy it from the grid. Plus you have to pay a monthly fee to be connected to the grid. The power company always wins, but you can cut your costs significantly.

  • I’m not sure how Xcel’s rebate works, but most power companies only rebate money on electricity you send back to them because they re-sell it. If this is how Xcel does it, then you need to subtract the amount of energy you use from the amount that your solar system produces. The difference (the extra power you send back) is what you get the rebate on. It still sounds like a great deal if you can afford the $20K up front. Too bad I just spent my last $20K on a tank of gas.

    • The rebate is a one-time check payment from Xcel to you, $4.50 per Watt installed. I’ve also heard of people ‘selling’ power back to the grid or running their meter backwards but that’s a different, grayish area.
      Gas? Buy a Tesla Roadster :) http://www.teslamotors.com/

  • Interesting numbers.
    I’ve heard a lot, recently, about the differences between photovoltaic solar panels and thermal solar panels (mainly that thermal is where the action is). Different technologies with different uses, I suppose. Are these numbers are for PV cells? Is there a difference for thermal cells?


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