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Solar Photovoltaics (PV): The Truth, the Whole Truth and Nothing but the Truth

Updated on April 16, 2012

Solar Photovoltaics (PV):

The Truth, the Whole Truth and Nothing but the Truth


By


Dr. Darryl Winer


Recently there have been several articles about solar energy published here on Hubpages that have been incomplete, inaccurate, or downright misleading. To the extent reasonable, I have commented on these hubs, and answered questions. Now, however, I believe it important to provide something of a primer for the layperson to be able to use reliably and comfortably.


By way of background, I was, for nearly 15 years, the utility director of a large western city, until my retirement a few years ago, I had the opportunity to direct, initiate and be involved in several solar projects encompassing several megawatts (MW) of solar photovoltaics.


I would like to take this opportunity to provide unbiased information on commercial and residential solar photovoltaic applications. (For the record, I do not sell, nor represent any entity that does sell, solar products, installation labor, or materials.)


While I don't wish to burden the reader with an over- technical discussion, it's important for us to understand the technology, the electrical production capabilities, maintenance, environmental, and the financial matters.


A) The Solar Photovoltaic Technology


Though there are advances currently being made in the solar photovoltaic industry, the predominant technology today is a silicon-based product, built as a panel typically in dimensions of about 3’ x 5'. These panels are usually placed on rooftops in a south facing orientation and tilted optimally the number of degrees equal to the latitude of that application. As an example in Denver, Colorado with the latitude of approximately 40°, a solar array will produce the maximum amount of power when tilted at about 40°. This tilt can be achieved either through the slope of the roof or by the frame or by combination of both.


Most solar panels, and all of those installed on rooftops (which must be in good condition and un-shaded), are in a fixed position. Some ground-based applications may be suitable for single or double axis movement. In the case of a single axis array, the solar panels follow the sun from morning to night, and as a result, generate more electrical power than a fixed array. Double axis arrays not only follow the sun from morning to night, they also follow the sun throughout the seasons. These arrays produce the most electrical output.


In the case of single and double axis arrays, they incur higher initial acquisition costs, as well as a higher level of ongoing maintenance due to the mechanics involved in moving them throughout the day and throughout the year.


Solar panels are built tough since their life is spent outdoors and in direct contact with the elements. Most are warranted against typical weather-related peril, including hailstones of reasonable size. When a solar array is installed whether on business or residential application it's important for the owner to remember that they should insure that array just as they do any other portion of their home or business. For example, a $25,000 array in Denver, Colorado occasioned, a $36 year increase in homeowners insurance. As an aside, a solar array will increase the value of a home (or business), but not dollar for dollar. Until the real estate industry gets a handle on the value of homes with and without solar, the true value will not be known.


The next critical component of a solar array is the inverter. Inverters are responsible for converting direct-current into alternating current , which is usable by the home or business owner and also suitable to be sold back to the native utility and put on their electric grid. Among all of the solar array’s equipment and materials the inverter is the least robust. Whereas the solar panels themselves are likely to be warranted for as much as 20 or 25 years, the inverter generally carries a 10 to 15 year warranty. The balance of the solar system, the wiring, connections and conduits are inert and not particularly likely to fail.


In terms of installation, a process usually done by solar installers and licensed electricians, the system is attached to both the house electrical system and that of the native utility. It is in the case of the connections of the native utility that their specific codes and guidelines must be adhered to. (As an aside, the connection to the native utility is required to accommodate the receipt of power from them, for when your solar array is not generating as much power as you require, and also the sale of power back to them - this is usually referred to as net metering.)


Some folks assume that batteries are a common component in a solar array installation. This is typically not the case. As noted above excess power is typically sold to the native utility and not stored. This power is sold at retail up to a certain amount (usually a maximum of 10%) and anything beyond that is sold at avoided cost. Though batteries might be useful in storing the excess power, the cost of batteries and their associated maintenance does not make it a financially viable approach. Batteries of any reasonable size to actually carry the household electrical needs would be substantial, heavy, unwieldy and requiring a fair amount of space to house. With the use of batteries also comes loss, that is to say, converting from direct-current to alternating current and then back to direct-current (which is what batteries are) entails loss at every point. As a result, batteries, are very rarely used in normal residential or commercial applications.


The vast majority of solar installations are considered grid tied. This means that they are connected to the native utility's electrical grid. This connection allows for excess power to be metered and returned to the grid with the homeowner receiving credit/payment for it. Perhaps more importantly, being tied to the grid effectively precludes the solar array from being used as any sort of backup for the homeowners needs. The grid tie connection must be designed to automatically go off-line if it senses that the grid has gone off-line. In this manner the utility repair folks, involved in repairing an outage, will not be surprised to find power being generated and introduced back into the line.


Building permits and inspections are usually required.


Since the purpose of today's discussion is not to actually create a specification on which to bid or to make a direct purchase, I will not take the time to describe all the technical attributes one should seek in acquiring a solar array. Suffice it to say higher efficiency and longer warranty should be weighed against differences in pricing. By the way it is usually in the home owners or business owners best interests to seek multiple bids for a solar project.


B) Electrical Production Capabilities


Generally speaking, a typical residential application will be between four and six kilowatts (KW), generating approximately 7,500 kilowatt ( kWh) of electricity per year and needing about 300 square feet of rooftop. The desired production should represent no more than about 80% of the total household use annually. (Some folks get caught up in the idea of generating all of their power and either being utility independent or be in a position to sell back power to the utility on a regular basis. This is not a financially attractive proposition. Not only does the utility have rules as to how much of your excess power they will purchase, the power that they do purchase is not paid for at a retail rate but at avoided cost, which is generally about one third that of retail. As to being utility independent, since normal household consumptions occur both day and night and may vary widely, or exceed your production capability, it remains necessary to have the native utility as your baseline provider.)


Solar panels, as most electrical equipment, will degrade over time. Generally speaking the degradation is approximately 1/2 to 3/4 of 1% per year. In most cases panels will see no more than 20% total degradation over a 20 year period. Higher efficiency panels currently claim they will not experience more than 15% total degradation over 20 year period.


C: Maintenance


Maintenance of a solar photoelectric array is actually quite simple and direct. An occasional hosing down of the panels to remove caked on dirt or bird droppings is a worthwhile maintenance effort. There is, however, no need to climb up on the roof to wash, scrub, dry, buff, polish, or do any other intensive cleaning. There is no need to climb up on the roof to remove snow. There is no need to climb up on the roof to do any caulking of the array or to inspect any of the electrical connections, wires, or conduits. If such an inspection is needed it should be done by professional. Furthermore, using any tool to clean or adjust the array may just as easily damage it as benefit it. This includes attempting to shovel or brush snow off.


In most areas normal rain and snow does an adequate job of keeping the panels clean and operating within their performance parameters. The solar array is, pure and simple, an electrical system. It is not suitable for amateurs to be performing maintenance. Additionally, in sunlight, the solar array will be quite hot to the touch and is best left alone. For most folks, the thought of climbing up onto the roof is not an attractive idea to begin with.


The other area involving maintenance of a solar array is replacement of the inverter, typically in the 10 to 15 year range. This is a project that should be completed by a licensed professional, and is not suitable for a do-it-yourselfer.


D: Environmental Impacts (over the life of the array)


Air pollution reduction: 339,667 pounds of CO2

1,596 pounds of NOx and SO2

Water pollution reduction: 302,287 gallons

Comparable to the salutary effects of planting 45 acres of trees

Comparable to the salutary effects of permanently removing 22 automobiles

An integral part of any solar array, over and above its financial implications, are its environmental impacts. In the case of our 5 KW array we can see tangible pollution reductions in both air and water and how these reductions translate into planting trees and offsetting the pollution from automobiles. Simply put, a single array on a single home is comparable to planting an urban forest of 45 acres of trees.

Although the financial impact of pollution reduction and water conservation and natural resource conservation of coal or oil and all the mining, drilling and transportation attributed to them, is hard to quantify, there is no doubt there are palpable savings. Indeed, in some cases the environmentals can be a driving force in the decision-making. More often than not, however, they are the icing on the cake.

Solar arrays on schools, for example, convey multiple positive effects. Not only is there community leadership, and leadership by example, there can be direct curriculum enhancements. Children are able to view, firsthand, responsible community actions and see them incorporated in their educational environment.


E: Financial Matters


The acquisition cost of solar arrays has fallen steadily over the past several years. At present it is not uncommon to find completely installed systems available for between four dollars and five dollars an installed watt. This pricing would represent the total cost of the array. From the total cost there are several deductions available from the utility, local government, or the federal government. Also, offsetting the cost of the array is the value of the electricity that it generates. This electricity directly offsets retail cost from the native utility. (Current retail electric costs, depending upon location, range from about $.10-$.20 per kilowatt hour.)


Many utilities offer both rebates and renewable energy credits (REC) as part of a solar installation incentive. Usually the rebate is an upfront payment and is paid when the system comes online and is approved by the utility. Such rebates range from $1-$2 per watt. The renewable energy credits are typically paid over time commensurate with actual electrical production. Renewable energy credits are generally reimbursed at $.10-$.20 per kilowatt hour. The term of reimbursement for renewable energy credits is usually about 10-15 years. After that any production is no longer reimbursed by the utility though the homeowner still receives the energy offset for all kilowatt hours produced.


Some local government entities, municipalities or counties, offer rebates for the installation of energy conserving technologies. These rebates tend to be relatively small, but are nonetheless worth pursuing.

Presently, the federal government offers an investment tax credit (ITC) for solar technology, which is 30% of the cost of the array. So, if the array cost $25,000, the ITC would be $7,500. Now, it’s important to note that this is a tax credit and would be used by an individual with an appropriate tax appetite against their tax liability. Depreciation, also federal tax treatment, though it is not a tax credit, still has application in lowering tax liability. The amount is dependent upon the individual’s tax circumstances.

If all of the various generated electricity, rebates, refunds, renewable energy credits, and tax treatments can be applied and consumed by the homeowner or business owner, the out-of-pocket expense for a solar array can be recouped in as little as two years. Such a payback is quite attractive and meets almost any “time of money" metric. Without any or all of these monetary incentives the payback of a solar array begins to approach the life of the project. In such a case, there would have to be other persuasive issues to justify the expense.

Below is a simple analysis demonstrating the financial case of a solar array: (25 year analysis including .65%/year output degradation)

Income/savings:


Value of electricity: 168,219 KWH @ $.10/kwh $16,822

Renewable energy credit: 20 years, 168,219 @$.12/kwh$16,434

Rebate: 5000W @$1.50/watt $ 7,500

ITC: 30% of 22,500 $ 6,750

Depreciation (MACRS): 15% bracket $ 3,375


Costs:

Construction cost : $4.50 per watt $22,500

Maintenance: inverter replacement $ 1,965

Tax: (on the rebate) 15% bracket $ 1,125


Summary:

Internal rate of Return (IRR): 21.64%

Net Present Value (NPV): $17,397

Payback (in years): 4.97


In the table above, we see the simple analysis of 5 kW solar photovoltaic system. We can see each of the items that generate income or savings broken out for 20 or 25 year as appropriate. In the case of the value of electricity that's for 25 years. The renewable energy credit is a 20 year income stream. The rebate is an upfront payment. The investment tax credit is a first-year credit and the depreciation is the MACRS 5 year accelerated depreciation against a 15% tax bracket.


The costs for the project are shown in the lower half of the table. The construction cost. in this case at $4.50 per watt. is $22,500. The maintenance over the 25 year period is not quite $2,000. The last item is the tax that accrues against the rebate in the amount of $1,125.


In the financial summary, we find that this project produces a very attractive 21.64% internal rate of return. The net present value, which is a time sensitive financial metric, produces a positive $17,397. The calculated payback for this project is slightly less than five years. After that time the homeowner or business owner has been fully reimbursed for his out-of-pocket expenses and continues to receive the generated electricity, depreciation, and the renewable energy credits for their full terms.


Just for comparison purposes, should the homeowner or building owner not be able to avail themselves of the investment tax credit, or the depreciation, the internal rate of return drops to less than 7% and the payback period rises to nearly 12 years.


Conclusion:

When looking at a complete solar array installation project, and weighing all of the financial and environmental benefits, the tax treatments and rebates, renewable energy credits and refunds against all of the costs, a reasonable case can be made to pursue such a project. Should any of the rebates or credits, however not be available or applicable, the financial argument becomes far less persuasive.


There will be those however, who will pursue environmentally sensitive projects in spite of, or lack of, reasonable payback periods, returns on investment, or net present values. Their goals in such cases may be community leadership or simply leadership by example.


Regardless of your goals in pursuing a solar photovoltaic array on your home or business, it is important that you do so clearly understanding all of the components. Once you have all the data you need in which to make an informed decision, you can identify the path appropriate for you.


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      win-winresources 5 years ago from Colorado

      Thanks Edam-

      Yes, indeed, this hub is pretty "meaty". But, recently, with so many hubs on solar energy that are incomplete, inaccurate or just plain wrong, I wanted to present an unbiased relatively comprehensive article that people could really use.

      Thanks for dropping by and I hope it will help you in your decision making process.

      -DW