Monday, July 21, 2014

Solar Power

Now that we are settled in our new house, we are starting to make long-term investments and upgrades that we expect to serve us well into the future.

A recent example is the installation of a PV (solar) array on our roof.  We expect this will provide us with most if not all of our energy needs for years to come.  However it required a significant initial cash expenditure, so we will not realize the savings from this investment for a number of years.

A few days ago we received our first electricity bill since having the new PV system installed.  It was the lowest electricity bill we've ever seen.  We have a grid-tied system with a net meter, which means that when we are producing more electricity that we are able to consume, the electricity feeds into the grid and our electricity meter spins backwards.  When we need to draw from the grid (for example at night or when it is really cloudy outside) the meter runs forward.  Therefore we are not an "off grid" system, so we still have to pay a minimum monthly bill to our electric utility company so that we can use the grid as a storage facility for our surplus electricity.  (To truly go off-grid, we would have needed to buy an expensive bank of batteries which need replacing every 8-10 years and which are tricky to dispose properly.)

As it stands now, we will see our original purchase price returned to us in the form of electricity consumption savings over many years.  However I expect to accelerate the payback by making another change to our house.  We currently have a radiant heating system which is fueled by an oil boiler.  I would like to swap this out in favor of electric equipment which could heat the water to be circulated in the radiant system.  (We also have a domestic hot water supply which is heated by oil as well.)  Once this is done, we can eliminate purchases of heating oil in the future.  Of course cost of the work on the heating equipment will need to be added to the price of the PV equipment to get the most accurate idea of when the return on investment will occur.

In addition to eliminating the future requirement to pay for energy, this investment serves a secondary function as a form of insurance against rising prices.  The PV equipment installation was a one-time known cost, but the future cost of electricity or oil is an unknown.  Although I am not an expert in forecasting energy prices, I can see a steady upward trend in both the cost of electricity and oil over he recent past.  It is nice knowing that some variability has been removed from our future expenses.  As long as the sun continues to shine, we have an energy source for the next 25-30 years (expected life of the PV equipment).

10 comments:

  1. Sounds awesome! But how about specific? Who provided the equipment? How much did the initial installation cost? Who did the installation? We want details? Details! How did you go about analyzing your needs and know how to meet them? You get the picture.

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    1. Ha, I hadn't meant to get to that level of specificity when I wrote this entry. I like to maintain a certain level of anonymity that can be jeopardized with too many details. However I do plan to write a follow-up post at some point in the future where I'll provide some of the information you are looking for.

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    2. OK, I wound up adding more detail after all. See my response to the next comment below for specifics. Hope this helps.

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  2. How many days of sunshine do you need to make the PV cost effective? What is the cost of the equipment, compared to the current annual cost of electricity?

    What do you have to do on cloudy days?

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    1. We are grid-tied, so if there is ever an instant when the solar generation is lower than our consumption, we draw power from the grid. It happens automatically so there is no way to know when that happens, other than really obvious times like the middle of the night. Surprisingly even on cloudy days our production has typically matched or surpassed our consumption because our array size is pretty large. We did this with a mind to bank as much production during sunny months so that we have a reserve to draw from in the cold months (some time in the future when we start to use an electric system for home heating).

      We spent about 29x the cost of our current annual electricity usage for the PV system, which means all else being equal, our system would break even in 29 years. However, things are not otherwise equal. There are a few other factors at play:
      1. We installed far more production than we would have if we were simply trying to offset our current electric consumption. If we had been trying to offset our current system, we would have probably installed no more than one-third to one-half of our current production capacity. We installed the extra production capacity to help generate enough power to run an electric heating system to be installed in the future (at which point we can stop buying heating oil).
      2. We expect our electricity use to increase, because of the aforementioned electric heating system.
      3. The cost of electricity is not guaranteed to remain constant. While it is possible that it will decrease or stay flat, I expect to see the cost of electricity rise in my lifetime.

      As a very rough guesstimate, if we modify the equation to add in the cost of the electric heat system installation and the annual current expected cost of heating oil (also likely to continue to rise), I expect we'll break even sometime about 9 years down the road. If we start using more electricity, or if the cost of energy (electricity and/or heating oil) increases, the break even point will occur sooner than that.

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    2. For comparison, ours was about 18x the yearly cost. But after state and few tax credits, it is about 7x.. So 7 years to payoff about.

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    3. Not a bad investment for you. Well done.

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  3. just getting solar installed myself and a thought occurred..
    Solar is like a Roth IRA.. bought with after tax money and returns are tax free (decreased utility bill)

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    1. Really great comparison. I like it! I will probably borrow this comparison in the future.

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  4. I just pulled the trigger on a PV system. I elected to go with a 20 year lease, since it was cheaper than a purchase even after the 30% federal tax credit. They will replace anything that goes bad during the lease term and since the inverter has a life expectancy of 15 years, that sounds like a good deal to me. I can't expect there will be enough residual value at the end of 20 years for them to spend the labor to remove the system. I anticipate a 19% annualized return which will only improve as electric rates increase. I live in SoCal, so we get lots of sunshine for great production.

    Deets (freedom595.com)

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