November 2009

Volume 18, Number 11

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Article Contents

Green Topics

Making Your Own Electricity: Onsite Photovoltaic Systems

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By Martin Holladay

SolarRoof.jpg

SolarRoof Membrane is a building-integrated PV roofing that marries Uni-Solar’s peel-and-stick PV product with a low-slope PVC commercial roofing membrane.

Photo: Solar Integrated Technologies

In 1980, after living without electricity for five years, I bought a photovoltaic (PV) module for $275. Once the 33-watt Arco panel was hooked up to a 12-volt car battery, my kerosene bill dropped significantly. For a few hours each night, I was able to listen to a radio and operate a tiny 12-volt fluorescent light.

Twenty-nine years later, I still live off the grid. The old Arco module has required no maintenance other than occasional snow removal, and has produced electricity every day without fail for all those years. I now have 16 PV modules on my roof; when the sun shines brightly, the solar array produces about 840 watts.

My PV array is both more and less dependable than the grid: more dependable because it’s unaffected by the ice storms that leave my neighbors in the dark, and less dependable because it produces very little power in November and December. The most significant fact about my PV electricity is its high cost. After paying for my PV modules, inverter, and batteries, I figure that electricity costs me between $0.50 and $1.00 per kilowatt-hour (kWh).

In the early 1980s, PV systems were quite rare, and the overwhelming majority of systems were installed on off-grid homes like mine. In the late 1990s, however, utilities and state governments, led by California, began to offer incentives for the installation of grid-connected PV arrays. Lured by these incentives, increasing numbers of homeowners and businesses began installing PV systems. By 2002, grid-connected PV users outnumbered the off-grid pioneers.

Building owners choose to invest in onsite renewable energy systems for a variety of reasons: to reduce greenhouse gas emissions; to limit their exposure to future increases in the price of electricity; or to obtain the public relations benefits associated with green energy production.

PV Modules and Systems

PV-System_chart.gif

The National Renewable Energy Laboratory maintains a useful online tool (www.pvwatts.org) for calculating the annual energy production of PV arrays.

PV modules are typically smaller than a piece of plywood and come in two types: crystalline modules and thin-film (amorphous) modules. Both types of modules produce DC electricity when exposed to light.

A crystalline PV module is a glass-and-polymer sandwich encapsulating thin wafers (cells) of crystalline silicon. The highest-performing, commercially available crystalline PV cells are roughly 20% efficient at converting solar energy into electricity.

Thin-film PV modules combine an amorphous silicon film or other semiconductor material with a flexible base material. Amorphous PV films can be integrated into roofing tiles or applied to metal roofing as peel-and-stick membranes. The efficiency of available thin-film PV products is only about 10%, so a larger roof area is required for a thin-film array than a crystalline array with the same electrical rating.

The DC power produced by a PV array can be used to charge a battery but is more commonly routed to an electronic inverter that converts the DC power to AC; the AC power can either be used by building occupants or fed into the grid.

Designing a PV system

Although a PV system can be sized to fit the available area or to meet a certain percentage of a building’s electrical use, it is far more common for a PV system to be sized to fit a certain budget. The basics of PV system design can be quickly summarized with a few rules of thumb:

  • Crystalline PV arrays have a peak rating of 10–12 watts per square foot (110–130 watts per square meter), while amorphous PV arrays have a peak rating of 5–6 watts per square foot (55–65 watts per square meter).
  • Solar electric potential varies by climate, from 0.029 kWh per square foot (0.31 kWh/m2) per day in Seattle to 0.049 kWh per square foot (0.52 kWh/m2) per day in Phoenix.
  • A 1-kW PV system will generate 970 kWh per year in Seattle and up to 1,617 kWh per year in Phoenix.
  • Most buildings have a roof that is too small to accommodate a PV array sized to supply all of the building’s electricity (see sidebar below).

Fortunately, the days when architects and builders had to research PV design issues on their own are behind us. The number of PV consultants and installers in the U.S. is rising rapidly. “The big development over the last few years, from my point of view, is that there is now such a good infrastructure out there for PV,” said Vermont energy consultant Andy Shapiro.

Mounting options

A PV array can be roof-mounted, ground-mounted, or building-integrated. Most roof-mounted modules are installed on racks made of aluminum. These racks are best installed on an unshaded, south-facing roof parallel to the roofing, with an intervening air space of about 3"–4" (75–100 mm). The air space under the array helps lower module temperatures; cooler modules produce more electricity than hotter modules. Maximum PV production usually occurs on clear winter days; ideal conditions require snow on the ground (but not on the modules) and a few fluffy cumulus clouds to reflect additional sunlight on the solar array.

Roof-mounted arrays dominate the PV-retrofit market, but they aren’t the only option. Installing a ground-mounted array avoids one of the major drawbacks of a roof-mounted array—the need to disassemble the array when the roofing needs to be replaced. Ground-mounted arrays require a site without any nearby trees or buildings to the east, south, or west. Such an array can be installed at a fixed angle or on a pole-mounted tracker that automatically adjusts the array’s angle as the sun moves across the sky. Although trackers can increase the output of a PV array by 15%–30%, they add complexity, cost, and potential maintenance headaches.

Building integration

Kyrocea_AZ.jpg

Flat-roofed commercial buildings offer ample opportunities for the installation of very large PV arrays. These Kyocera modules are installed on the roof of a Gatorade distribution facility in Tolleson, Arizona.

Photo: Kyocera Solar

PV arrays can be integrated into a variety of building components, including roofing, vertical façade components, translucent glazing, and awnings (see EBN Mar. 2001). Of these, roof-integrated PV components are by far the most common.

“For residential and light-commercial construction, the focus has been on sloped-roof integration,” said Steven Strong, president of Solar Design Associates in Harvard, Massachusetts. “We’ve seen the emergence of what we might call standardized solar tiles for concrete tile roofs. Another option is standing-seam metal roofing with amorphous silicon that can be bonded directly to the roof.”

The owners of showcase green buildings often demand visible PV modules. “Building-integrated PV has by default become one of the most visible manifestations of green design,” said Strong. “There are literally hundreds of other green design strategies that can improve the performance of a building at a greater return per dollar invested, but most are invisible.”

The day when most new windows will also generate electricity remains just over the horizon. Although PV glazing exists, it is expensive and rarely installed. “The architects are excited about PV glazing,” said Strong. Many see glass as the easiest and most aesthetically pleasing way to integrate PV into a building envelope, and it can address glare concerns and cooling load mitigation. According to Strong, however, “there is a big problem with using PV glazing, summed up in two letters: UL. Underwriters Laboratories requirements are suffocating the industry.” Since PV glazing products must be customized for each application, any U.S. project with PV glazing needs to go through the UL listing process, which can take up to 18 months and can be quite costly.

The Financial Picture of PV

The financial case for PV systems is greatly helped by federal and state incentives. Although these incentives vary from state to state, every U.S. taxpayer is eligible today for a tax credit equal to 30% of the cost of installing a PV or wind generation system. In February 2009, the stimulus bill lifted the maximum cap on the tax credit (formerly set at $2,000), leaving no upper limit. “The ground has shifted under our feet since a year ago, when the federal government reauthorized the solar tax credits and took the cap off,” said Strong. “The tax credit has become meaningful to homeowners—especially to those who want to make a bigger investment.”

Federal tax credits are also available for businesses. The Section 48 business solar investment tax credit of 30% of the installed cost of “solar energy property,” which has no upper limit, is available until the end of 2016. Solar property is also eligible for a five-year accelerated depreciation allowance.

Kyocera.jpg

The main disadvantage of a roof-mounted array is that the PV modules must be disassembled when it’s time to replace the roofing.

Photo: Ed Stillings

In addition to these generous tax credits, potential purchasers of PV systems can benefit from recent drops in equipment prices. Anticipating a continuation of the recent boom, PV module manufacturers have ramped up production over the last two years. But module sales have been slowed by the recent recession, leaving PV manufacturers with an inventory glut. According to Ken Silverstein, editor-in-chief of EnergyBiz Insider, “solar panels have never been cheaper.”

Even with the recent drop in prices, however, unsubsidized PV systems have a very long payback period. The October/November 2008 issue of Home Power magazine noted that a 2-kW system in Richmond, Virginia, costs $16,000 to install—which comes out to $8 per watt. Such a system produces 2,453 kWh per year; assuming that electricity is worth $0.10 per kWh, the equipment has a simple payback period of 65 years. If prices drop to $5 a watt, the payback period would shorten—to 41 years.

Some energy experts, including Shapiro, believe that investments in PV already make sense. “If your return on investment is 2% or 3%, right now that looks like a pretty good deal,” he said. “You get a non-volatile, tax-free rate of return on your highly responsible investment. And the federal tax credits improve the rate of return. If a PV system has a 20-year payback after tax credits, that’s a 5% rate of return.”

A great many energy-efficiency measures—including compact fluorescent lights (CFLs), efficient appliances, air sealing, and extra insulation—have a much faster payback than PV. The high cost of PV electricity leads many architects to recommend against installing the systems; instead, they advocate “PV-ready” designs. A PV-ready building should include all energy-efficiency measures—for example, advanced air-sealing measures, above-code insulation, and high-performance windows—that are more cost-effective than PV. In addition, the building needs a south-facing, sloped roof that is uninterrupted by chimneys or plumbing vents, as well as a large electrical conduit connecting the attic with a location near the main electrical panel. If PV prices drop low enough, the building owner can install solar equipment when it becomes a cost-effective option.

Matt Golden, president of Sustainable Spaces in San Francisco, recently calculated that existing California and federal incentives reduce a homeowner’s out-of-pocket expenses for a 3.5-kW PV system from $23,400 to $10,900. When it comes to a $10,800 weatherization job, however, the homeowner is eligible for only $624 in incentives. Golden wonders why the weatherization incentives, which reduce carbon emissions at a cost of $9 per ton, are so much stingier than the PV incentives, which reduce carbon emissions at a cost of $225 per ton.

According to Shapiro, PV and wind incentives are a good investment of public lands. “For many years I felt that we should be concentrating on stuff that is more environmentally cost-effective than PV—things like air sealing and insulation,” he told EBN. “But over the last few years it has been demonstrated that we are in such a deep hole on carbon that if we don’t dig out both ways—through conservation and renewable energy production—we don’t have a prayer for ending up with a planet that we would care to live on.”

In spite of the high cost of site-generated electricity, PV systems are now routinely installed on residential and commercial buildings from Florida to Alaska. In addition to the “big three” reasons that building owners install renewable energy systems—environmental concerns, green bragging rights, and worries about future electricity rate increases—school directors sometimes emphasize the educational benefits of onsite PV systems. “We’ve done a lot of work with schools and colleges,” said Strong. “From pre-K to graduate schools, there is a high perceived value to the pedagogical benefits of a PV system. The faculty gets excited.” He cites the example of a school in Boston where teachers use a solar array to demonstrate a variety of mathematic and scientific principles, from the cosine law to particle and wave theory.

Power purchase agreements

An increasing number of “solar service providers” (SSPs) offer residential and commercial customers the chance to lease a PV system through a mechanism called a power purchase agreement. In exchange for an up-front fee, the SSP will install a PV array on the customer’s roof. The SSP retains ownership of the array and is responsible for maintaining the equipment. The customer must purchase all of the electrical output of the PV array at rates that vary regionally (typically $0.15–$0.25 per kWh) for the duration of the contract, generally 15–25 years. At the end of the contract, the customer is given the option of purchasing the PV array at a discounted price.

For the customer, the main attractions of this method are the ability to obtain onsite power generation without a large up-front investment and the outsourcing of maintenance to the SSP. According to Shapiro, these power purchase agreements are very attractive. “For a low cash outlay, the owner gets renewable electricity,” said Shapiro. “It’s very exciting.” For SSPs, the benefits include several revenue streams. In addition to regular payments for the power produced by their PV arrays, the companies (or third-party investors) pocket solar tax credits, state rebates, and the tax value of the accelerated asset depreciation for solar equipment.

Sun Run, a San Francisco SSP, will install a PV array on a homeowner’s roof in exchange for $1,000 and a promise to pay Sun Run for the output of the PV array for 18 years. After the contract is up, a customer can choose to purchase the array for $1.80 per watt of installed capacity. When it’s time to re-roof the home, it’s up to the homeowner to pay for the cost of disassembling and reassembling the PV array. If a customer sells his or her house before the contract is up, the contract can be reassigned to the new homeowner. If the new owner balks at the arrangement, the original customer must either buy the PV array from Sun Run or pre-pay the financial obligations of the contract.

The California Solar Center has written a useful document, “The Customer’s Guide to Solar Power Purchase Agreements,” that is available online at www.californiasolarcenter.org/sppa.html/.

Net metering

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The southeast and southwest façades of the U.S. Mission to the United Nations in Geneva, Switzerland, include building-integrated PV arrays designed by Solar Design Associates in Harvard, Massachusetts.

Photo: Solar Design Associates, Inc.

Net-metering regulations, which compel utilities to offer two-way electricity meters to customers with renewable energy systems—meters that credit the customers for excess electricity production—vary widely from state to state. There is currently no federal mandate requiring utilities to provide net metering. “Many people in the solar community would appreciate a federal net-metering standard,” said Rusty Haynes, a project manager at the North Carolina Solar Center. “For years, legislators in Washington have been introducing federal net-metering legislation, without any luck. It hasn’t got any traction.”

But 42 U.S. states have established net-metering mandates or guidelines. “Utilities very rarely offer a net-metering program voluntarily,” said Haynes. “So the states are calling the shots.”

The Network for New Energy Choices, a New York nonprofit group, issues an annual report, “Freeing the Grid,” that rates states on the friendliness of their net-metering laws and interconnection standards. According to the most recent report, the five states with the best net-metering regulations are New Jersey, Colorado, Florida, Pennsylvania, Maryland, and California, while the seven worst states are Georgia, Idaho, Michigan, North Carolina, South Carolina, Texas, and West Virginia.

According to Hayes, most states require utilities to credit customers for electricity generated by PV systems at retail prices. For example, if a customer’s PV array generates 200 kWh during a month when the customer uses 500 kWh, the customer would receive a bill for 300 kWh. During a sunny month, when a PV array might generate more electricity than the customer uses, the customer generally gets a credit on the bill rather than a check from the utility. Some states roll over credits indefinitely, but most only allow credits to roll over for 12 months. “The entire point of net metering is for the renewable system to match the load exactly. With net metering, there’s usually no advantage to oversizing the system,” said Hayes.

Feed-in tariffs

AllSun.jpg

A Vermont wind-energy company, NRG Systems, recently installed this large ground-mounted PV installation near Hinesburg. The PV modules are installed on 36 rotating trackers that follow the sun’s path through the sky.

Photo: Paul O. Boisvert

The feed-in tariff system, a type of PV subsidy developed in Germany, is fundamentally different from the net-metering approach. Net-metering regulations are designed to give credit for electricity produced onsite, with the assumption that the credit will be used up by the customer in a year or less. Feed-in tariffs, on the other hand, provide a payment structure that rewards owners of renewable energy systems who produce more power than they use. Feed-in tariffs provide producers of renewable electricity with long-term contracts that ensure that utilities will purchase 100% of their electricity production at above-retail rates.

On May 29, 2009, Vermont became the first U.S. state to establish a statewide PV feed-in tariff. Vermont utilities will pay owners of PV systems $0.30 per kWh for 100% of the electricity generated by their solar arrays, while owners of small wind turbines will receive $0.20 per kWh for their electric production. These feed-in tariffs are guaranteed for 20 years though the tariffs are limited to a total of 50 MW, divided among four technology areas, with 12.5 MW designated for PV. (Proposals for 14 times the allocation came in the day the offering opened; a lottery will determine who wins contracts.) Other states that are expected to pass similar feed-in tariff legislation include Oregon, California, and Hawaii.

Activists who work to reduce the paperwork required to connect a PV array to the grid see room for improvement. Haynes tells of a presentation given by a German solar representative at a conference in California last year: “One slide showed the number of pages of paperwork required to get a PV system approved and hooked up in Germany: just two pages. The next slide showed the number of pages of paperwork required in California: 25 or 30 pages, including the construction permit, the interconnection agreement, the rebate application, the tax credit forms. The bureaucracy can be mind-boggling here.”

Final Thoughts

Most energy consultants agree that an onsite renewable energy system is not a prerequisite for green construction. “I always tell clients that solar is the last thing I want you to do,” said Strong, adding that efficiency is the first priority. “Build the envelope with the best materials you can. Buy the best windows—don’t even tell me what they cost. I don’t care. Shut up.”

Even if a building has an impeccable envelope, many architects would still argue that energy generation is best done on the scale of a neighborhood or town rather than a single building. Few building owners want to be in the business of maintaining energy-generating equipment; most are content to leave that job to their local electric utility. That’s just as well, since utility-scale solar-thermal generating plants are far more cost-effective than PV equipment installed on individual buildings.

For some building owners—especially those willing to make a significant investment to reduce their carbon footprint or those living in states with generous PV subsidies—investing in a PV system already makes sense. As PV prices continue to drop, more and more homeowners and businesses are likely to be convinced of the logical advantages of onsite PV.

Continuing Education

Receive continuing education credit for reading this article. The American Institute of Architects (AIA) has approved this course for 1 HSW Learning Unit. The Green Building Certification Institute (GBCI) has approved the technical and instructional quality of this course for 1 GBCI CE hour towards the LEED Credential Maintenance Program.

Learning Objectives

Upon completing this course, participants will be able to:

  1. Explain the difference between crystalline and thin-film photovoltaic technologies, and the uses of each.
  2. Describe the ways in which PV installation can be optimized to ensure maximum efficiency of the system.
  3. Explain how tax credits impact the financial return on investment for photovoltaic systems.
  4. Explain the difference between net-metering and feed-in tariffs.

To earn continuing education credit, make sure you are logged into your personal BuildingGreen account, then read this article and pass this quiz.

Comments (3)

1 payback posted by William (Joe) McNally on 12/02/2010 at 11:00 am

"Some energy experts, including Shapiro, believe that investments in PV already make sense. “If your return on investment is 2% or 3%, right now that looks like a pretty good deal,” he said. “You get a non-volatile, tax-free rate of return on your highly responsible investment. And the federal tax credits improve the rate of return. If a PV system has a 20-year payback after tax credits, that’s a 5% rate of return.”"

This is utter hogwash! Why is it that very few, if any, discussions on payback include the cost of money, i.e. interest on the loan you need to construct whatever it is you are building? If the interest rate on the "20-year payback" scenario is over 5%, then the system will NEVER pay for itself! Get real! Just because interest rates vary is no excuse for excluding the very real cost of money from a payback calculation.

2 Response to William McNally posted by Martin Holladay on 12/02/2010 at 02:32 pm

William, I tend to agree with you.

Let me preface my remarks by saying that I am a journalist, not an economist or accountant. I know that there are several ways to calculate payback, return on investment, and the cost of borrowing, and that clever people can use different accounting methods to prove almost any point they want to make.

If you are contemplating investing $20,000 in a PV array, there are two scenarios: either you have $20,000 cash already, or you need to borrow the money.

If you already have the cash, then Andy Shapiro's accounting method is one way to think about the return on your investment. However, after a certain amount of time -- perhaps 35 or 40 years -- the PV modules will be ready for the Dumpster, while the person who put his $20,000 into government bonds will still have his capital. That's a big difference.

If you have to borrow the $20,000, then you are right: of course you have to balance the cost of borrowing the money against any possible financial return attributable to your PV array.

PV electricity is still more expensive than grid power. If you want to minimize your expenses, don't invest in a PV array.

3 True Pay Back posted by Jamal Merza on 09/04/2011 at 06:58 am

I cannot help but agree with the "hogwash" sentiment below. In addition to the time-value of money (which is woefully short-changed in most calculations I've seen), what about the additional maintenance, replacement, and efficiency degradation costs for these systems over the project life expectancy? The old formulas issued in the ASHRAE manuals that are invoked by the NIST LCCA program in no way shape or form even come close to the actual or probable costs of maintenance for these systems. Even the actual energy modeling of PV arrays is a "manual" deduction in current energy modeling software. They are modeled as a seperate "plant" and deducted from the overall annual energy use of the facility. % of PV energy contribution vs. cost of energy deferred by PV is dependent on many different variables, it is very dangerous to make assumptions of "1-to-1" type savings.

Ultimately PV is headed the way of a "check-the-box" approach (PUE calcs for data ctrs. anyone?) to acheiving energy savings. Anyone or any organization that believes the true installed cost of PV systems (manufacturing, installation, and maintenance) are even remotely close to approaching a break-even point with grid-source utilites, is simply got their head in the sand and does not want to dig deeper into current utility costs, rate structures, and grid operations. The actual applications where it makes sense are a lot less than current discussion might lead us to believe.

The fact that this debate is occuring, however, does speak volumes about the progress made in energy efficiency awareness in the last decade.

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