Saturday, September 25, 2010

Solar Panel Saga

Now that we've been in the house for a while and life is getting somewhat back to normal, I thought I'd fill you in on our solar panel saga. In the beginning it all seemed so simple. Build a super efficient house, add solar panels on the roof, and then watch the meter to see how close we are to net zero energy. And with all the federal and state incentives for solar panels right now, it seemed like there would be a good number of companies to choose from. I'm still not exactly sure why this process turned out to be so darn difficult.

We started thinking seriously about solar panels when the state of Pennsylvania announced its Sunshine Program.  This program put aside one hundred million dollars to subsidize photovoltaic (PV) systems in a tiered structure.  The residential portion of the program would subsidize the first 10 Megawatts (MW) of installed PV systems at $2.25 per Watt, the next 10 MW at $1.75/W, then decreasing to $1.25/W and finally dropping $0.75/W for the final two 10-MW steps.  To give some insight into the cost savings for this program, consider a typical residential system of 5 kW that might have a retail cost of $40,000.  A $2.00 per Watt subsidy would be $10,000.  When you factor in the federal Government's 30% tax credit, the subsidies total around $20,000.  Thus, you can purchase a PV system for about half the actual cost.  Of course, whether you qualify for the state's program at $2.25/W or less depends on how quickly you get in your application.  Each $.50/W decrease amounts to a $2,500 decrease in the subsidy, so time is of the essence.

Additionally, Pennsylvania has what are called Solar Renewable Energy Credits (SRECs).  For each thousand kilowatt-hours (MW-hr) of energy produced by a renewable energy system (such as a PV array), you earn one SREC.  On average, a 5-kW PV array should generate approximately 7 SRECs in a given year.  By law, Pennsylvania energy producers must generate a certain percentage of their total production by renewable means.  If they don't do so, they can purchase SRECs to account for the difference.  Thus, there is a market for SRECs that make them worth approximately $300 each at the present time.  Thus, our hypothetical PV system would generate over $2,000 per year of income from selling SRECs, in addition to the cost savings that comes from having to purchase less electricity from the power company.  When the federal and state incentives are factored together with the estimated utility bill cost savings and SREC income, the payback time for the PV system drops down to around five years.  After that, the system will generate income for its remaining lifetime (estimated to be around 20 years).

As you can see, it really makes a lot of sense to purchase a PV system in Pennsylvania right now.  We designed our house to accommodate a PV system on the upper roof and early in the construction phase, we talked with a good number of PV installation companies.  I was surprised to find quite a wide range in prices running from about $32,000 up to around $47,000 for a 5.5 kW system.  It is still not clear to me why there is such a price discrepancy from company to company.  Anyway, by the time we had settled on a company (SunLion Energy Systems) and they had made the appropriate measurements on the roof of the house, the state rebate program was still in the $2.25/W tier.  We were measured up for a 5.46 kW system that would be installed beginning in July.  That seemed like a long ways away (it was March when we got the estimate), but apparently business was booming for PV installers.  Unfortunately, by the time all the paperwork was filled out and ready to be sent to the state, we were told the program had dropped down to the $1.75/W tier.  Yikes!  There went nearly $3,000.

I was assured by SunLion there was plenty of time left in the Tier 2 phase ($1.75/W) and not to worry.  The most important thing was to fill out the paperwork carefully to make sure there were no problems with the application.  This is when we started to have some major problems.  First off, the original application and contract that was sent out to me had some incorrect information on it.  Looks like someone had copied and pasted from another contract but forgot to update everything appropriately.  Oh well, not a huge problem.  I guess this could happen to anyone, but it didn't give me a whole lot of confidence on the "attention to detail" front.

The next issue what that the size for the PV system was larger than the estimate (5.88 kW instead of 5.46 kW).  Of course, this larger system had a larger price tag as well.  In fact, this was good news because we wanted as large a system as our roof could handle.  But then I was told that there was some issue with the State Sunshine program such that new construction projects would only qualify if the house was going to be a certified Energy Star home.  This shouldn't have been a problem because our initial energy audit demonstrated that our house was going to far exceed the Home Energy Star standards.

To make a long story short (too late I'm guessing), there were some paperwork problems, then it turned out that the 5.88 kW system actually couldn't be installed on our roof so we had to refile some of the paperwork.  Lastly, I was told that even though our home was going to be a certified Energy Star home, they still couldn't install the PV system until we had a Certificate of Occupancy.  In other words, after months of waiting, our application to the State Sunshine program had never been made, and at this point the program had dropped to the $1.25/W level.  This means another potential loss of almost $3,000 through no fault of our own.  Furthermore, I get an email from SunLion stating that the person I had been working with is no longer with the company and someone new was now in charge of my account.

I pretty much blew my top at this point.  I called and complained bitterly, but tried hard not to completely lose my composure.  I felt like pulling our business and going elsewhere, but then we'd have to start the whole process over again and it would likely take a few months to get all the paperwork done.  By then the state program probably would have dropped down another tier or even two.  It seemed like the best thing to do was to calmly try to work something out with SunLion.

So where do we stand now?  The new person I'm working with seems quite sympathetic to our situation.  They lowered the price of the system to more than make up the $0.50/W we lost from the state rebate program.  We signed a new contract with an install date of November 15 and I'm told our application has been sent in to the state sunshine program.  So for now things look good and we're cautiously optimistic that everything will go smoothly from here on out.  I'm certainly not happy that the system is running almost six months behind schedule.  On the other hand, the additional cost savings helps take the sting out a little.  We'll see how this saga plays out come November.


Edward Robins said...

Another thing to remember about utilizing solar panels is that they have zero emissions and cannot harm the environment in any way possible.

Solar Panel

David and Virginia Jackson said...

Edward: I agree that solar panels are a great way to be "good" to the environment, but I wouldn't go quite so far as to say they cannot harm the environment in any way possible.

First off, they must be produced. This is energy intensive and results in both carbon emissions and pollution. Secondly, they must be disposed of after their useful life. This can lead to heavy metals leaking into the environment. As with many things, a true analysis of how "environmentally friendly" solar panels are is a very complicated endeavor.

Unknown said...

Solar panels installation companies that assure you it is VERY worth the cost. In addition, you can also make a tidy sum of free money every year selling the extra energy your solar panels generate.

solar panels

David and Virginia Jackson said...

Sally: That is true, but for us, it is unlikely we will produce more than we use on an annual basis. However, we should make money selling the Solar Renewable Energy Credits (SRECs). At the present time these are worth quite a bit more than what the electricity sells for so we will make more money on the SRECs than we are saving on our electricity costs.

Unknown said...

So basically the notion of any real solar efficiency is a false one.

The only reason you can indulge your vanity (and that's what it is given the absence of any real efficiency) is because you are being subsidized with your neighbor's taxes.

Well, bravo you. Perhaps you should hope they don't catch on.


David and Virginia Jackson said...

Robert: Not sure exactly what you mean by "the notion of any real solar efficiency is a false one." I assume you mean that solar energy cannot yet compete with traditional energy sources from an economic standpoint. That's true and that's why there are governmental subsidies to try to get people and companies to invest in renewable energy. You might not agree with the government for this type of subsidy and that's fine; there's plenty the government does that I don't necessarily agree with.

As an example, the government subsidizes the airline industry in many different ways, from building and operating airports and air traffic control towers to literally paying the airlines for the use of the aircraft should the need become available. So like it or not, every time someone takes a flight somewhere, they make use of our tax dollars. Is it fair? That's debatable and this blog isn't the appropriate forum to begin such a debate.

In terms of being subsidized by my neighbor's tax dollars, I'm sure you realize that yours and my tax dollars are also at work here. Furthermore, I certainly do hope that everybody *does* catch on. I would love to see everyone taking advantage of the government's generous subsidies for renewable energy. It is precisely these types of investments that will hopefully build up the solar energy industry into a viable and self-sustaining enterprise. Of course, only the future will tell how it all plays out.

Lastly, I don't see how investing in solar panels indulges my vanity. I suppose there is something a touch vain about writing this blog to begin with. But since building a house is such a huge endeavor and energy efficient houses are not the norm, finding useful information was not easy. I'm thankful for the information I've found on the web and on other people's blogs so I thought others might find our story to be useful in some ways. If not, well, there's certainly no one forcing them to read it.


David and Virginia Jackson said...

Well as I said before, economically speaking, solar panels are not a direct threat to conventional power production. But with the tax incentives, it is *very* attractive right now. As I mentioned before, our payback is estimated to be only four-and-a-half years. Even if that is a "best case" scenario, it is unlikely to be longer than about six years.

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