PV Economics

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:

Assume*

  • 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 !!
irr calculation table PV Economics


irr calculations graph PV Economics

*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

SES21 USA

[The comments, positions, and opinions stated above are my ownand may or may not represent those of SES21 USA and its affiliatecompanies.]

Original Article on ses21usa