INTRODUCTORY SPECIAL INTRODUCTORY ... - PHOTON Info

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28 The 13 Solar Colonies PHOTON investigates the factors driving the economics of residential PV in 13 US states For most Americans interested in installing PV on their homes, one of the first things they ask is: is going solar a good investment? Given the prevalence of this question, we would be remiss in not trying to answer it in our inaugural issue of PHOTON USA. But before we answer the question, we have to acknowledge up front: homeowners in the US won’t find it easy to figure out whether a home PV system is a good investment. Take the case of an »average« California homeowner. To determine the return on investment for going solar, this homeowner would need to answer several questions. For instance, how much sunlight does her region in California get? What is the retail price of electricity in her utility district, and how quickly will that price go up over time? What tier (don’t worry, we’ll explain what a »tier« is short- ly) is she in the utility’s electric rate struc- ture? What is her time-of-use consump- tion during peak and non-peak periods? How quickly does the PV system degrade over time? What is the federal tax incentive, the state solar rebate, and the local city incentive? If your eyes glazed over after reading these questions you’re not alone. Yes, it’s No Joke: this formula really exists. US company Sunpower is using its website to help teach homeowners how to calculate the »levelized cost of electricity.« We tried ourselves – and we admit: it’s difficult to make an informed decision about whether to go solar in the US. In the end, we found 13 states with attractive conditions. complicated. Fortunately, in this article and issues to come, PHOTON will demys- tify the tangle of terms and issues that factor into making an informed decision about the purchase of a PV system. While a long list of factors determine whether a residential PV system is a good investment, readers should look for five key factors that have the strongest impact on whether a state can offer conditions for an auspicious rate of return. These factors are: good solar financial incentives, high electricity prices, plenty of sunlight, a decent local installer infrastructure, and low PV system prices. Later, we’ll explain why these factors are important and how they impact your investment. For now, the short answer to the question of whether solar is a good November 2009
Rolf Schulten / photon-pictures.com Politics investment for homeowners: it depends greatly on the state in which the consum- er lives. That’s because the five key factors mentioned above differ significantly from state to state. To gain insight into these key factors, PHOTON has collected and evalu- ated market data from all 50 states, and conducted interviews with solar financial analysts. The general consensus is that 13 states currently offer good financial conditions for buying a residential PV system. To get a better handle on the situation in these 13 »solar colonies,« we calculated the internal rate of return – a common met- ric for measuring the attractiveness of an investment – for going solar in the states (see graph page 30). Although we didn’t perform any calculations for the other 37 states, current data, in particular electricity prices and incentives, suggests that buying a PV system would not yield a good return in these states. But that could easily change in the near future. Finally, we must make an important caveat when presenting state by state com- parisons of solar financial conditions: the factors driving your return can vary not only by state, but by your utility company. Moreover, it can even vary customer to customer – i.e. your next-door neighbor could have a better or worse return on investment than you. How sunny is your state? Not surprisingly, the amount of sunlight where you live has a significant influence on how well the PV system on your roof will perform – in other words, how many kWh your system will crank out per unit of time. This, in turn, determines how much electricity you will avoid having to purchase from your utility, and there- fore how much money you will save over time. While irradiation does differ from region to region in the US, the amount of variation is remarkably small. According to solar radiation data from the National Renewable Energy Laboratory, Boston on average gets just 12 percent less sunlight than Miami. Data from select cities in the 13 solar colonies is presented at page 32. Apart from sunlight, there are many system design factors that can influence Solar friendly States PV performance, such as system sizing, shading, tilt, and orientation. For example, has the installer picked the best roof on the house, or considered the fact there is a big tree in the middle of the southern skyline? Shading is one example of a factor that can make your neighbor’s return on investment better than yours. These topics are beyond the scope of this article, however, but future issues of PHOTON will investigate them in depth. For now, it’s important for the prospective PV buyer to know that the installer has can control many of these issues – you have to ask the installer the right questions. Solar incentives: all shapes and sizes A homeowner interested in purchasing a PV system can benefit from financial incentives designed to improve the economics of going solar. In the US, solar incen- While a long list of factors determine whether a residential PV system is a good investment, readers should look for five key factors that have the strongest impact on whether a state can offer conditions for an auspicious rate of return. These factors are: good solar financial incentives, high electricity prices, plenty of sunlight, a decent local installer infrastructure, and low PV system prices. tives come in many shapes and sizes. Some are received up-front upon system installation, while others are spread over the system’s lifetime. Some are administered by utilities, while others are disbursed through state programs. Because the bud- gets for these programs vary widely, some incentives are much more generous than others. In our examination of the 13 solar colonies, we encountered a mix of incentive programs, including cash rebates, tax credits, renewable energy credits, and a feed-in tariff (see graph on page 32). Rebates are upfront cash payments disbursed by state agencies and utilities November 2009 29 » to ease the cost of installing a PV system. Most rebates reviewed for this article are calculated based on the size of the system being installed. Typically, they are listed in dollars per W. Massachusetts, for instance, offers a $1 per W rebate for residential solar, which would translate into a $5,000 reward for a 5 kW (or 5000 W) system. In many cases, the state or utility administering the rebate places a cap on the payment, and these caps can differ significantly. While Pennsylvania’s $2.25 per W rebate is capped at $22,500, Vermont’s $1.75 per W rebate has a much lower cap at $8,750. Colorado utility Xcel Energy offers a relatively hefty rebate of $3.50 per W, but low electricity prices in that state – to be discussed later in this article – dampen the financial attractiveness of PV there. Another common state-level incentive that can cut the cost of a PV installation is an income tax credit. Among the 13 states we examined, Arizona, Pennsylvania, New York, New Mexico, Massachusetts, and Ha- waii offer tax credits, which are usually ex- pressed in terms of percentage of installed costs. As with rebates, this percentage varies widely, and many states place a cap on the credit amount. The cap on Hawaii’s state tax credit is $2,250, while New Mexico’s cap is $9,000. A homeowner in New York that pays $40,000 for a PV system will not tap the full value of the 25 percent state tax credit because it is capped at $5,000. Most homeowners will only reap 65 to 85 percent of the value of state tax credits due
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