About Those Solar Panels on Your Roof…

As a pragmatist you want to know what solar panels do to your pocketbook. Is a solar project’s lifetime cost lower than the cost of electricity you avoid buying plus electricity you can sell back to the local power company?   You might also want to know if regulators tweaked the power grid prices to subsidize their sustainable power pretensions.

In the 1970s, silicon wafer solar panels cost $70 per watt.  Great progress! They dropped to $0.80 per watt today and are expected to hit $0.25 per watt eventually.  But solar panels account for less than half the total capital cost. Cables, supports, and labor are large costs and less prone to innovation.

The amount of daylight you enjoy, the sun’s angle to your roofs, sunlight intensity, temperature, and photovoltaic material efficiency determine the amount of electricity generated.  Some roof areas don’t warrant solar panel investment.  Residential solar systems usually don’t store power in batteries, but batteries could make economic sense if grid power is very high in price.

Estimating the potential for watts of production and cost is a complex exercise.  Major cities across the US offer solar maps where a resident can enter an address and receive an annual estimate of electric bill savings.  For a pragmatist, that is a great place to start.

In 2011, the U.S. average residential price of a kilowatt hour (KWh) was $0.1188.  If your solar project is right-sized for your electric consumption and you can beat the power company’s 12 cent cost, then you can save money.  Furthermore, if the Feed In Tariff (FIT) price you will receive for your excess solar production is higher, then you earn a bonus as a net power producer.  But, when you receive more than you pay per KWh, regular consumers are forced to subsidize your solar production.  For example, Dominion Virginia Power sells a retail KWh for 10.5 cents per KWh, and buys a solar KWh for 15 cents.   Subsidies in Germany and Australia are even more extreme.  Germany pays $0.32 per solar KWh today and at one time Australia paid $0.50 per solar KWh.

The irony of these subsidizes is that they implicitly tax lower-income consumers who are dependent on the utility for power, while benefiting those who can afford to buy solar panels.  It is robin hood in reverse.

Most consumers are in no position to make the big investments that residential solar power requires.   We certainly don’t want subsidies taken from our pocketbooks to help politicians buy green votes.   We all want solar to succeed – fair and square.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

 

 

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