INTRODUCTORY SPECIAL INTRODUCTORY ... - PHOTON Info

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 condi-
tions 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 electric-
ity 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 in-
vestment than you.
How sunny is your state?
Not surprisingly, the amount of sun-
light where you live has a significant in-
fluence 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 exam-
ple, 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 fac-
tor 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 in-
centives designed to improve the econom-
ics 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 instal-
lation, 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 incen-
tive 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 in-
stance, offers a $1 per W rebate for resi-
dential 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 sig-
nificantly. 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