- Our base estimate is 1200 kw/month and I've been advised to aim for a system that would provide for 100% of our top three Tier electrical rates, a 5kW system in our case. I'll get into this dimensioning later.
- I contacted a local solar provider. They answered a lot of my questions and gave me a quote. They sent a person out to do a visual inspection of our roof to determine where the array will best be placed and have the least blockage from other structures nearby or trees. In my case, we have a nearly perfect unobstructed South/West facing section of our roof.
- Since mine is a new house, I provided them with the CAD drawings from our architect and from that they are determining where to exactly place them and they will provide drawings on how the installation will work.
- My contractor wants to become certified in their product so they agreed to give him a tutorial. He doesn't need a special permit since he already has the appropriate general contractor license.
As far as planning goes, my contractor will need to run electrical cabling from the roof array back to the main junction box where I will have two inverters mounted next to my main junction box. The inverters will then feed into two circuit breakers in the panel.
In California, we can use PG&E's electrical grid as a giant battery. PG&E installs a special meter (either a Net Metering type or a Time of Use (TOU) type). You can pick whichever is more advantageous. The way to understand it is to try to estimate what your usage is during peak hours - take a meter read at noon and then one at 6pm, a couple of days to get an average use and probably best during summer if you use AC. Then compare this to your average daily use - divide your total typical monthly electrical usage by 30.
If you use anything more than 25% during those noon to 6pm peak hours, then it probably does not make economic sense to go with a TOU meter and instead choose a Net Metering type. It only costs $300 to switch out the meter with PG&E so you can always try one way and switch if you think you can save more. Basically, the difference is that TOU meter rates are much higher so if you can generate more power than you use during those peak hours and "sell" these back to PG&E at the highest rate, then buy back power at night or in the morning at the lower rates, you will be better off. Under Net Metering, you simply get a credit for each Kw you generate and send back to the grid and are allowed to take the credit back any time later on your normal average Kw rate.
As far as the economics go:
There is currently a California rebate of $2.80 per rated AC Watt. What does that mean? Well a 5KW system produces 5,000 watts DC and you multiply that by a factor of approximately 0.83 for equivalent AC so 5,000W x 0.83 x $2.80 = $11,666 should be my rebate. This is only an approximation as the real rebate is calculated based on the specific pieces of equipment that comprise my system and their efficiencies.
Unfortunately, the 7.5% CA state tax refund expired end of 2005.
There is a Federal tax credit and here is what my tax accountant sent me on it:
- The residential alternative energy credit is 30 percent of the cost of eligible solar water heaters, solar electricity equipment (photovoltaics) and fuel cell plants. The maximum credit is $2,000 per tax year for each category of solar equipment, and $500 for each half kilowatt of capacity of fuel cell plants installed per tax year. Eligible equipment must be placed in service after December 31, 2005 and before January 1, 2008. In general, a qualified fuel cell power plant converts a fuel into electricity using electrochemical means, has an electricity–only generation efficiency of more than 30 percent and generates at least 0.5 kilowatts of electricity.
- The residential alternative energy credit is a nonrefundable personal credit. It can be used to offset the excess of the individual's regular tax liability over any AMT liability, but cannot be used to get a refund if the tax liability drops to zero. Unused credits may be carried forward and added to a residential alternative energy credit for the succeeding tax year.
My tax accountant clarified to me that the credit only offsets any EXCESS tax you have for your regular tax bill over any AMT. If you are like a growing number of people hit with AMT, the tax credit does nothing for you except that you can carry it forward to use it in the future if ever your tax bill is higher than AMT.
The first step in dimensioning our system was to break down our typical 1200 Kwh monthly electrical bill by Tier:
- Tier 1: Baseline 390 Kwh x $0.1143 = $44.58
- Tier 2: 101-130% of Baseline 117 Kwh x $0.12989 = $15.20
- Tier 3: 131-200% of Baseline 270 Kwh x $0.21314 = $58.19
- Tier 4: 201-300% of Baseline 390 Kwh x $0.29007 = $113.13
- Tier 5: Over 300% of Baseline 30 Kwh x $0.33039 = $9.91
You basically want to dimension the system to provide enough power to eliminate the three last Tiers, anything above 130% of baseline, since this will provide the best payback on the investment.
Here was how my dimensioning works:
- Average hours of sun exposure/day = 5.5
- Average days per month = 30.4
- Number of Kwh system (DC) = 5.0 (this is the capacity they are recommending for me)
- Average Kwh/month (DC) = 5.0 kW x 5.5 hours x 30.4 days = 836
- Average Kwh/month (AC) = 836.5 x 0.83 = 694
So my 5Kw system should on average produce 694 Kwh which should cover everything in my Tier 3, 4 and 5 bands = 693 Kwh out of my total 1200 Kwh monthly usage.
By sizing my system this way, I should save all the cost in my Tier 3-5 bands = $58+$113+10 = $181/month or $2,172/year.
To calculate your payback or IRR, I looked at it this way:
- Base cost of system $33,000 less CA rebate for 5kW system of $11,666 (see above for rough calculation) less federal tax credit of $2,000 = about $21,000 net
- Annual savings of $2,172/year
- Historical energy cost inflation of 5% per year
- 30 year life of equipment
My IRR is about 15% (usually it's not as good as this but I got a deal on my system) and my simple payback should be about 8 years assuming the 5% growth in electrical costs.
You might also consider staging your installations. Everything I see in the venture capital world is that the costs of these solar panel arrays should come down 50-70% in the next 5 years with a whole bunch of new semiconductor technologies under development in various start-ups. So maybe buy 3Kw now and add 2 more later. It might also make sense to stage it over two years to simply get more of a Federal tax credit - you can do $2K/year as long as the equipment costs at least $7K (30% x $7K = $2K).
Click here for a really good article on payback that I liked a lot by Andy Black.
As for reliability, I talked to a friend who has had a solar system for several years and he said his experience has been very positive in terms of reliability and savings. He has batteries installed to avoid outages but I don’t think we will go that route as our grid is pretty reliable. He also mentioned we might consider the latest technique to heat water on the roof and run the heated water through pipes throughout the house which heats things up nice and cheap.
