The purpose of this Economic Series is to demonstrate with real numbers and basic analysis that an investment in a grid-tied PV system for home or business is a very economic proposition. Now! Yes now; not someday in the future but at the present.
In these writings, I have discussed important variables in determining a present value rate of return:
- PV as an avoided cost
- PV and residual value
- Payback is the wrong metric
- Determining electricity production from your PV system
- Calculating the value of your electricity production
- Performing the present value rate of return calculation
- Grid parity is here!
None of this analysis is based on local incentives, rebates, feed-inor performance tariffs, REC’s, and certainly not on any socialcost/benefit analysis . . . just simple numbers. There is oneexception; I do consider the beneficial 30% federal PTC or ITC forresidential and commercial PV installations.
I hope in the process, I have made PV economics more approachable. You should not simply rely on canned PV calculators to make yourdecision; understand the basics, and think through the analysisyourself.
Here are my assumptions and economic results for a 1.84kW (8 Schott 230W modules) residential installation in Fort Worth, Texas:
- A 1.84kW grid-tied PV system
- Fort Worth, Texas location
- 180° azimuth, and 32.9° tilt
- PV Watts power calculation (77% derate factor)
- $5.00/W installed costs
- 30% personal tax credit for installed costs
- Inverter replacement allowance at year 15
- 12.02¢ kWh electricity costs (average U.S. residential rate, EIA, 08. 2010)
- Efficiency loss based on module warranty (20% after 25 yrs.)
- After FIT (avoided cost) calculation (28% marginal tax rate)
- Residual value at 25 years: 10X annual savings
- All cash; no leverage
- Twenty-five years present value rate of return
- NO REBATE !!
*These are the primary variables for determining a present valuerate of return for your PV system. Your actual return will be more orless depending on site characteristics and your actual systemperformance. Remember, Quality Counts!
I recently attended a North Dallas Chamber of Commerce Energy Forum with a panel comprised of local utility executives. TheChairman of Atmos Gas, a large Texas-based natural gas utility, whileexpounding the virtues of producing natural gas by fracking tight shalerock formations from South Texas to the Adirondacks Mountains of NewYork, assured the audience of a 100 year supply of natural gas forelectricity generation. Really, 100 years? In the Q & A, whenasked about renewable energy, the notion was summarily dismissed with an authoritative response that renewable energy was ‘5 or 6 times’ moreexpensive than conventional resources. Really? Mr. Chairman, do themath please.
Chet Boortz, CEO
[The comments, positions, and opinions stated above are my ownand may or may not represent those of SES21 USA and its affiliatecompanies.]