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Early steps: Size matters when you’re installing solar

The views expressed are those of the author and are not necessarily those of Scientific American.

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Editor’s Note: Scientific American’s George Musser will be chronicling his experiences installing solar panels in 60-Second Solar. Read his introduction here and see all posts here.

The first step in installing solar panels, not surprisingly, is to call an installer. I contacted one through Home Depot and, on a Saturday earlier this month, Cameron Christensen of 1st Light Energy came by to give us a quote.

Here’s what I learned: The size of a subsidized system is limited by the size of your roof—more precisely, the portion of your roof that has the right orientation and illumination—or by your energy consumption, whichever is less. In other words, you may end up with less capacity than you need, but never more.

In my case, 24 panels, each spanning about 1 by 2 yards and producing 200 watts of electricity, will fit. My college friend Greg Feldberg has fit on about a third that many and tells me he has panel envy (but he has a swimming pool, so we’re even now). All of the panels would be on the back side of the house, away from the street, which is important as we live in a historic district. They’d point due south and have a tilt of about 10 degrees, which Christensen described as a compromise between squeezing as many panels as possible on the roof and maximizing their power output at our latitude in suburban New Jersey.

Unlike a solar hot water heater, which requires direct sunlight because you need to heat water to some minimum temperature for it to be useful, photovoltaic panels continue to produce some power even when it’s cloudy. For a seasonal average of 4.3 hours of sunlight per day — you can calculate your own situation here — and factoring in DC-to-AC power conversion losses, that means a total of 14 kW-hr per day, which is exactly what we currently consume. So the system would zero out our electric bill, which averages about $80 per month. (Unfortunately, we’ll still have to pay for gas heat, although I’ve also been working hard on insulating and weatherstripping—more on that in a future blog entry.)

The total cost would be just over $40,000. That’s for a full system, including the panels, power inverter, new electric meter, and plenty of blinking lights to show off. The installer handles all the permits and legal whatnot. The system does not include batteries for power storage. Whenever the panels produce more electricity than the houses uses, the grid absorbs the excess and we draw it back later, a concept known as net metering. How exactly the utility manages net metering is a technical challenge in its own right. I’ll tackle that in a future post.

Now we get into the tangled subsidy structure. The state ponies up $1.75 a watt, for $8,400. (There’s some disagreement over whether this is taxable.) The Federal credit kicks in 30 percent of the cost after the state subsidy, for about $10,000.

The tricky thing about this credit is that it is not refundable, which means that, at most, the tax credit will zero out your IRS bill. In other words, the credit will pay 30 percent of your solar system cost, or your full tax bill, whichever is less. So you can take full advantage of it only if your income tax bill exceeds $10,000. This makes the subsidy somewhat regressive. Be that as it may, I’m lucky enough to have paid at least this much tax. (That is the first time I think I have put the words “lucky” and “tax” into the same sentence.)

Our utility, Public Service Electric & Gas, offers an attractive loan program based on SRECs—solar renewable energy certificates. SRECs are sort of a baby step to a full carbon-trading system. They are used by states to meet their goals for generating a certain fraction of their electricity from renewable sources. A single SREC represents the generation of 1 MW-hr of energy and you sell it to help recoup the cost of the system. For the consumer, the trouble is that the price floats up and down depending on market conditions. The utility loan program eliminates this risk by putting a floor of $475 under the price. For this privilege, though, you have to pay the loan interest of 6.5 percent, and if the SREC price floats higher, the utility keeps 25 percent of the difference.

In my case, my panels would generate about five SRECs per year, for a total of about $24,000 over 10 years at the floor price. The utility will front this much money, less interest, for purchase of the system. So that comes to about $17,000.

The bottom line: For the $40,000 system, I need to come up with $5,500 out of pocket. I can put that amount on a Home Depot credit card at zero interest and later shift it to a home equity line and deduct the interest on my taxes. Because I now spend about $1,000 a year in electricity, that means the system pays itself off in about six years. It could be faster or slower depending on how the system performs, how the taxes shake out, and what the SREC price does.

These subsidies are what makes solar possible these days. If we had to pay the full cost, it might, in principle, still be worth it, depending on how long we intended to stay in our house and how much it added to the value of our home. The panels are supposed to last several decades. But the average person just can’t come up with 40 grand, no matter how wise an investment it might be over the long haul.

The back part of our roof, photo courtesy of Cameron Christensen

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Comments 14 Comments

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  1. 1. 1:58 am 02/27/2009

    Where is this installation in the country?

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  2. 2. EricF 8:29 am 02/27/2009

    So, you are paying $40,000 for a system that will save $80/year? Even if the system is 100% maintenance free, and lasts forever, it has a return of 2.4%. The reality is it will require maintenance, and the system will likely have a double digit negative return.

    This project likely would not have been undertaken if it weren’t for government subsidies. It illustrates why government should not offer these programs. They ultimately cause distorted investment choices.

    Want to get off of fossil fuels which have hidden environmental costs? Simple solution: tax unclean energy production methods for the amount of cleanup they require. This creates a pricing model where the full cost to society is taken into account. Then, consumers will naturally flock to whatever is the most cost efficient.

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  3. 3. EricF 8:30 am 02/27/2009

    Previous comment should be $80/month. The math in my post was done assuming $960/year

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  4. 4. ildenizen 9:06 am 02/27/2009

    Eric, generally I agree with you. Especially regarding the pricing that should include the full life-cycle of the product (including recycling, cleanup, etc.).
    That being said, we know that economy is not always the best answer. Some things require a little intervention when there is a higher goal than maximizing one’s investments.
    I hope this article helps (and it did me) people realize the costs of home solar.

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  5. 5. Nathaniel 1:41 pm 02/27/2009

    If the home was built efficiently, then it wouldn’t need as much electricity and you wouldn’t need a system nearly as big. I’ve done the math and its possible to build a home and use the right appliances to have your home use only 20% of the energy of your average home (heating and cooling included). That would mean that the system you would need would only cost you $8,000. I bet that’ll pay off much quicker. Granted… the building of such a home, at 1800sqft would cost about $300,000 because it’s custom built… but most of that cost can be covered by government grants as well as private and government low interest loans… not to mention the tax credits.

    If people would build efficiently first, then alternative energy systems would be much more reasonable.

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  6. 6. eoleen 5:04 pm 02/27/2009

    There is, of course, an addition little problem not mentioned so far: in generating (and possibly "selling back") power locally, WHILE STILL DEPENDING ON THE POWER COMPANY FOR FALL-BACK POWER – that is, requiring the power company to provide sufficient generation capacity to carry you if your own system can’t provide for you – think after a 6-inch snow-fall, such that your panels are covered over with snow with a nice thick crust on it. In this case you, of course, turn to the power company: that is what it is there for, isn’t it? But you haven’t been paying your pro rata share of the cost of being able to provide you with that power: the cost of everything from the generation plant through to the distribution lines and transformers which wind up hooking you up to the grid.

    In short: YOU ARE A FREE-LOADER!!!

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  7. 7. Tom_B 5:45 pm 02/27/2009

    This article highlights the problem with this sort of incentive program. While Mr. Christensen gets his payback in 6 years, the whole cost only gets paid back after over 40 years: far longer than the system will last. I think this additional money (which effectively comes from taxpayers), would be better spent on research improving renewables rather than installing systems like this which are so bad they have a net negative impact on the environment.

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  8. 8. billybugs 11:02 pm 02/27/2009

    You may want to take a second look at your roof ,it looks like it’s in rough shape. How do you replace your roof when it has solar panels on it ?
    You’re gonna have to pay someone to remove the panels to replace your worn out roof !

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  9. 9. Hillbilly 11:25 pm 02/27/2009

    We bought this place 2 years ago. It is total electric. The normal electric usage under the last owners was about 4,000 kwhrs month. We started on a power diet. Adding insulation, sealing leaks around pipes putting gaskets in the switch and outlet covers I cut from some throwaway foam packing, but they cost 50c ea at electric supply. When the dw and clothes washer died replaced them with HE models, installed CFLs then to LEDs,LCD screens, insulating curtains, too much else all small stuff costing less than 2500$ Including the dw and clothes washer, over 2 years, but saves us 100-175$ per month or from 3500 kwhrs to 2000 and 1200 in spring and fall months. Our goal is to get that usage down to about 500-800kwrs and then we can install a solar /wind hybrid system for about 15000$.
    And it is not just about the economy its about getting rid of coal and nukes which cost so much more than just $. If you ever see what WV looks like now after 1000 miles of river head streems and 500 destroyed mountains look like, places where people lived, sometimes for generations. They are thrown off their land because the fed and the state sell the mineral rights out from under the land they live on. I also live downwind from coal fired plants, about 150 miles I can smell it the ash gets all over everything and no I dont have a choice to move. I am disabled and cannot afford to move

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  10. 10. Hillbilly 1:26 am 02/28/2009

    I neglected to mention that we will also be replacing the shingle roof with a metal one, that the solar panels can be mounted on. A metal roof lasts up to 100 years, and so far those solar panels will last MINIMUM of 30 that we know of so far, they may well last 50 years, and they are almost totally recyclable and we will have back up batteries on site so we will not have to depend on the grid for back up during inclement weather. The power out here in the boonies is not really dependable from the grid anyway. Batteries are recyclable at any rate. The system will represent a lot of co2 not released. The house will be very efficient, and the improvements we have made so far have made our place more comfortable so it is not like we are living primitive. As is we use solar gain during the day when the sun shines I turn off the heat even down to 35 degrees F and it stays 65-73 degrees and we only need the heat overnight when the temp drops below 35. We lose about 1/2 degree per hour. Though when it drops into the 20s we need the heat or it will drop 3 degrees per hour when the temp difference is about 30 degrees from inside to out. Next year we will do better as we hope we can double the R value of the insulation.
    Even today when it was 40s out and cloudy I used the solar gain to keep the inside 70 dropping to 63 in late after noon so I ran the heat for an hour, it has been off since. It is currently 53 out and 68 in.

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  11. 11. pgtruspace 2:22 am 02/28/2009

    All of those above say it all, "nathaniel" has been educated beyond his inteligents and a "hillbilly" knows the facts and puts his money where his mouth is. Nothing has changed in 30 years. Hey "hillbilly" way to go!!

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  12. 12. eoleen 8:07 pm 02/28/2009

    Hillbilly says;;; >and so far those solar panels will last MINIMUM of 30 that we know of so far, they may well last 50 years, and they are almost totally recyclable and we will have back up batteries on site so we will not have to depend on the grid for back up during inclement weather.<

    Fact: a solar panel will last until the glass cover gets cracked by an errant baseball or tree limb or something, and water leaks in and freezes and…

    …or a hailstorm manages to break them: I’ve seen it happen.

    Fact: recycling lead-acid – or any other sort of battery for that matter – consumes lots of power… And lead-acid batteries (which weren’t figured into the cost of your system) – or any other known type of battery – wear out and need to be replaced.

    Fact: you will – assuming half your power is consumed AFTER you have stopped generating power for the day – require MORE than twice your load in solar generation: charging and discharging batteries is NOT 100% efficient, not by a long shot.

    Fact: yes, the local grid is less than 100% reliable – even in the middle of NYC – BUT are you going to have enough battery capacity and generation capacity to last through a two or three day lack of generation? I really doubt it: it gets very expensive.

    Fact: added all up your cost per kilowatt-hour is far greater than that from a base-load power plant: the subsidies you get aren’t going to be there for everyone: they can’t be.

    Now – just as an arm-chair exercise – think of what is going to happen when all your neighbors have PV systems and don’t pay the power company for power: who is going to provide the fall-back?

    I still say you are free-loading on the rest of the population.

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  13. 13. SVPA (Stillaguamish Valley Pioneer Assc.) 9:12 pm 03/1/2009

    Passive Solar for heating is how we apply the use of the sun. . We are located in Washington State and built the museum with standard materials, glass panels and flat black painted roofing material. Our building was orientated to the sun when placed. Mid-winter the face of the building is at 45 degree slant to the winter sun. During the summer it goes over the peak of the roof. We estmate we save over 20% of our heat bill annually. Basicly maint-free… We needed a front on the building and this one you don’t need to paint !!!

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  14. 14. largo 6:51 pm 03/2/2009

    A passive solar panel is the most sensible form of water heating. No valves. no pumps, no controls makes for simplicity and cost effectiveness. I had one for a number of years (I sold the house, it was still there last time I looked.
    Now this was in Florida and I wasn’t concerned about freezes (Not on an 80 gallon roof tank).
    Worked well enough and was pretty much maintenance free with it’s fiberglass glazing. Washed it about twice a year.
    Highly recommended solution. Pricing was high but I saved maybe 20/mo for 15 years for a 2K investment (after tax incentives). Was much better than my 401K.
    I thought in a southern clime that these should be a mandatory part of the building code. I suspect the cost could be easily optimized (minimized) on a 100,000 unit scale.

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