Saturday, April 19, 2008

Saving money on solar: the Renewables Obligation

Image: Matthias Loster, from wikipedia. Text accompanies the image:
"Solar power systems installed in the areas defined by the dark disks could provide more than the world's 2006 total primary energy demand (assuming a conversion efficiency of 8%). That is, all energy currently consumed, including heat, electricity, fossil fuels, etc., would be produced in the form of electricity by solar cells. The colors in the map show the local solar irradiance averaged over three years from 1991 to 1993 (24 hours a day) taking into account the cloud coverage available from weather satellites."

I've been waiting to see how a combination of more aggressive government grants and a more aggressive Renewables Obligation policy would work out for solar power development in Europe, particularly for ordinary householders. This article here is a good introduction, and sums up the finances for an ordinary householder in Britain.

If the government is going to encourage the switch from fossil-fueled electricity to solar power, and in doing so intends to take advantage of household economics and existing buildings, then a Renewables Obligation is a good policy. Obligating power companies to buy household-produced solar power at a decent rate, and possibly adding an obligation for power companies to sell a mix of renewable power and regular power through the grid to other households, helps ensure a return on investment for householders who install grid-tie systems. But the RO is currently insufficient, because of the present high cost of a solar-electrical system, so a grant or tax credit is also needed.

Because solar power is only produced when the sun shines, new grid-tied solar power capacity can't help your household make power in the night-time when houses typically use most of their electrical power. But if you live in a region with a Renewables Obligation and thus can sell solar power to the grid for, say, 12 ¢/KWH, and buy it back when you need it at, say, 15¢/KWH, then the power company can make the cost of it's power lines, and a small profit, and you can begin to recoup the investment of several thousand dollars worth of solar gear by paying a smaller electricity bill, or even getting paid for your surplus power.

You've become a utility!

Added to this savings is the savings for the power company and power grid by not having to build peak load power stations to provide power to industrial customers who need it during the day, as well as the savings on hardware when panels are simply installed on an appropriately tilted already-existing south-facing roof, instead of on custom posts and brackets.

A householder with good home equity credit worthiness and existing home equity can leverage the installation by getting a new loan or extending an old one. The finance is cheap -- 6,7 or 8 percent interest is perfectly normal and reasonable. If you have the average household electricity consumption of 4,000KWH or thereabouts, and therefore install a 4KWH peak system, essentially 40 100WH panels, for about $30,000 installed costs with inverter, then your house in most US regions will easily make as much power as it consumes.

Do the math: fun and family friendly:

The map above shows the solar energy that falls on the different parts of the planet. Taking into account cloudiness and rain, the sun shines on average for a few hours each day in each region. In our region we get useful sun for 2.5 hours on average in winter and 6 hours on average in summer, so say 3.5 hours a day for 365 days a year times the 4KWH of the system gives 5,110KWH per year. The return on your investment is in abated energy bills of 4,000 KWH total, plus 1,110KWH surplus. Assuming all power is used NOT when the sun is shining, you have to pay 3¢/KWH for the first 4,000KWH (your electricity consumption), and you make 12¢/KWH on the next 1,110KWH, you make $12 on your electricity production over the course of the year, but abate $600 of electricity bills, or $50/month. Not enough to pay the cost of hiring $30,000 of new home equity: you will need more like $350-400/month.

But if you can get a grant or tax credit for half of that cost, and if the value of the solar panels is recouped when you sell the home, then you're looking at a better deal. If I could be solar-powered for about $150/month and in so doing add $30,000 in inflation-proof assets to the value of my home, I'd go for it. Wouldn't you?

The government intervention is just needed to get the ball rolling. If the price of fossil power goes up, as it is likely to do because we make it with oil and coal and natural gas which are currently increasing in price, and if the price of solar panels comes down as it is likely to do because of new thin film technology and because of increasing economies of scale in production, then the two ends of this calculus will begin to meet by themselves, and we will be looking at a solar boom.

So understand that the economics of a Renewables Obligation plus solar grants or tax credits would be not only a short-term boon for US credit, solar, and electrical installation companies, but a long term investment for the US economy and US employment. In Maine, presently, we have an obligation for the power company to buy your home-produced power, but the rate is set at a miserly 2¢/KWH. There is also an obligation for the power company to sell 30% renewable power back to every customer through the Standard Offer, but this isn't enough to stimulate solar when we have so many hydroelectric plants in-state already.

I think we can do better than this. A lot better.

No comments: