Economics of Photovoltaic Systems

Economics of Photovoltaic Systems

Original Presentation by J. M. Pearce, 2006 Updated in 2010 by J.M. Pearce and M. Pathak Email: [email protected]

PV Economics Basics • Solar Photovoltaic Cells convert sunlight directly into electricity • They are sold on a $/Wp basis or $/power • Wp is the power in Watts for Peak sun hours -- the equivalent number of hours per day, with solar irradiance equaling 1,000 W/m2, that gives the same energy received from sunrise to sundown. • To convert power to energy simply multiply by the amount of time that the cell is illuminated – W * hr = 1 W-hr

• Electricity (energy) is normally billed $/kW-hr

PV Economics Terms • kW = kilowatt = 1 000 Watts • MW = Megawatt = 1 000 000 Watts • kW-h/kW/ * – * year or month or day – Amount of power predicted to be produced from a 1 kW solar panel in the desired location

• Payback = minimum time it takes to recover investment costs.

Economics of a Solar Electric Home • A typical American uses ~11,000 kWhrs/year • A well-designed U.S. home needs 4kW5kW of PV to provide for its energy needs averaged throughout the year – Depends on location (solar flux) – Energy use of home – Because calculating on /Wp basis you do not need to worry about efficiency

How much for a Solar Electric House? • The 2nd presentation discussed the components of a grid-tied solar home system • The price tag for the complete installed system including all labor as of 2010 is between $5/Wp to $10/Wp • For a 4kW system: – 4000Wp x $5/Wp = $20,000 – 4000Wp x $10/Wp = $40,000

Financing PV • For new homes a PV system can be folded into the mortgage – long term low interest loan • For retrofits of existing homes PV can be economic with: – Financial assistance through grants, subsidies, or other incentives – High costs of electricity in your area – Green power purchase agreements – Off-grid Applications

PV Incentives • One stop shop for financial incentives is www.dsireusa.org/ • The Database of State Incentives for Renewable Energy (DSIRE) is a comprehensive source of information on state, local, utility, and federal incentives that promote renewable energy. • Lists includes: – – – – – – – – – –

Corporate Tax Incentives Direct Equipment Sales Grant Programs Leasing/Lease Purchase Programs Loan Programs Personal Income Tax Incentives Production Incentives Property Tax Incentives Rebate Programs Sales Tax Incentives

Feed-In Tariff • Solar FIT rates for Ontario: • Rooftop – Less than 10 kW - 80.2 ¢/kWh – 10 - 100 kW - 71.2 ¢/kWh – 100-500 kW - 63.5 ¢/kWh – Greater than 500 kW - 53.9 ¢/kWh

• Ground Systems – Less than 10 MW - 44.2 ¢/kWh

• You are guaranteed these rates for 20 years.

Where PV makes Economic Sense Now • Remote sites that are too far from power • Or where the power is too unreliable for a given application (e.g. internet server) – Costs for power lines range from $8000 to $75,000 per mile. – As a general rule, if you are more than ½ mile from a line, solar is probably the best alternative.

PV : Cheap Electricity for Road Work In areas that have grid power, where the cost of tearing up the streets and/or other construction are expensive.

Portable Radio Station

The Developing World

Stand Alone Systems

Coast Guard Stations and Aircraft

Bus Stops and Emergency Phones

Solar in Space

Parking Lights

Running Trails and Lighthouses

Solar powered monaste ries!

When will PV make economic sense for me?

Economy of Scale

$3.12/Wp to $3.56/Wp

0 subsidies Grid-tied Market

Module Costs

Component Costs

Industry-Developed PV Roadmap

World PV Module Production (MW) Increases

512.2 World PV installations in 2004 rose to 930MW -500 growth of 62 % Consolidated world production of PV now 1.15 GW+ 390.5 400 U.S.

300

Japan

Europe Rest of world

200

100 33.6 0

69.4 60.1 57.9 55.4 40.246.5

287.7

201.3 154.9 125.8 77.6 88.6

198819891990199119921993199419951996199719981999200020012002 Source: PV News, March 2003

World PV Module Production (MW) Increases

World PV Module Installation (MW) Increases

So Why Can’t We Do It?

PV System vs. Electricity Costs 44

Cost of Generated Electricity (cents/kWh)

40 Capacity Factor = 0.2 (U.S. Average)

36 32 28

Japanese Retail Rate

24 20

German Retail Rate

Capactiy Factor = 0.25 (South West U.S)

16

Pennsylvania Retail Rate

12 8 4 0 $9.00

Additional Assumptions: System Lifetime = 20 years Real Interest Rate = 6% O&M = 0.1 cent per kWh $8.00

$7.00

California Retail Rate

$6.00

$5.00

$4.00

$3.00

Installed PV System Cost ($/Wp)

$2.00

$1.00

$0.00

New Technology Could Play a Role • Heterojunction with Intrinsic Thin-layer • Sanyo • 18.5% SANYO, plans to continue to grow its unique solar business, aiming to reach a production scale of approximately 2GW for HIT solar cells by 2020.

New Technology Could Play a Role

Built-in Incentives Building Material Replacement Value Material Credit

Material avoided by BIPV Installation

$1/sq-ft

Asphalt Shingle roof, monolithic glazing Laminated glass w/coatings metal roofing/cladding Roofing slates, clay tile, high performance coatings Stainless steel, photochromic glass

$5/sq-ft $10/sq-ft $20/sq-ft

$/W Value $0.10/W $0.50/W $1/W $2/W

Utilizing Financial Incentives

Subsidies for Fossil Fuel • Fossil fuels and nuclear energy receive 90% of the government money, (with PV receiving