Rooftop solar vs utility solar

[JBird]

http://www.wsj.com/articles/the-hole-in-the-rooftop-solar-panel-craze-1431899563

 

 

[constructive]

I made similar comments in a SolarCity thread. SC is a lot less physically efficient than utilities (including solar utilities), so they can only attract large amounts of customers by accepting far lower margins than utilities.

 

Great for the customer, not so good for the investor.

[ERICOPOLY]

http://www.wsj.com/articles/the-hole-in-the-rooftop-solar-panel-craze-1431899563

 

Those Tesla home batteries will get cheaper over time -- and they're pretty cheap already. 

 

People with those batteries won't be selling their excess solar energy to the utility at "wholesale prices".  Instead, they will consume that energy themselves, offsetting the purchase of electricity at far-above-wholesale rates.

 

So the "harm" to the electric utilities from net metering is exaggerated, IMO.  At best, net metering costs them the delta between daytime electric rates and nighttime electric rates -- if they differ.  For customers with batteries, that is.  And I expect those batteries would become rather commonplace if the utilities succeeded in eliminating net metering.

[ItsAValueTrap]

http://www.wsj.com/articles/the-hole-in-the-rooftop-solar-panel-craze-1431899563

 

Those Tesla home batteries will get cheaper over time -- and they're pretty cheap already. 

 

People with those batteries won't be selling their excess solar energy to the utility at "wholesale prices".  Instead, they will consume that energy themselves, offsetting the purchase of electricity at far-above-wholesale rates.

 

So the "harm" to the electric utilities from net metering is exaggerated, IMO.  At best, net metering costs them the delta between daytime electric rates and nighttime electric rates -- if they differ.  For customers with batteries, that is.  And I expect those batteries would become rather commonplace if the utilities succeeded in eliminating net metering.

 

There are other issues.

 

The infrastructure that delivers electricity to your house costs money.  With the current billing system, those who consume very little electricity (who underpay for the infrastructure costs) are subsidized by those who consume a lot of electricity.

 

Solar can also cause power grid fluctuations, so it takes money to solve that issue.  Solar gets a free ride from everybody else.

 

And of course, generating electricity at scale and storing it at scale is more efficient that doing it on a very small scale at each residence.

[Pelagic]

What's this nonsense about economies of scale existing in the renewable energy space. The author barely mentions what I think is one of the biggest factors leading to the installation of rooftop solar, perception. Yes, it makes some sense economically for most people and state and federal incentives certainly help, but there's also the fact that you get to say to your friends you've gone "green" and are doing your part for the environment. I've also seen studies that show rooftop solar adds value to a home's resale price far beyond the value of the electrical savings it provides for. There is also the perception of self-sufficiency which I think appeals to a lot of people although sans a robust energy storage system like Tesla's powerwall (probably several in reality), this is mostly wishful thinking. Ultimately, utility company's need to get better at explaining to their customers that yes, they can produce energy at utility scale cheaper than they can generate it themselves, trying to legislate a shift isn't going to happen.

 

Bridging the gap between utility scale solar and rooftop solar is something called community solar. It offers resident's the opportunity to participate in or subscribe to a local solar farm while achieving some of the economies of scale seen at larger solar plants. http://www.forbes.com/sites/uciliawang/2015/01/30/what-is-community-solar-its-coming-to-california/

[Liberty]

Sometimes the perfect is the enemy of the good.

 

I'd rather have many extra gigawatts of solar power that are less efficient per unit than not have those and wait around for utilities to pick up the slack. All those extra panels and systems are helping drive us down the price curve through higher volume and everyone will benefit.

[constructive]

What's this nonsense about economies of scale existing in the renewable energy space. The author barely mentions what I think is one of the biggest factors leading to the installation of rooftop solar, perception.

 

You are right that perceptions are important. But if the perception doesn't align with reality, it's certainly not a good long term foundation for a business model.

[ERICOPOLY]

Solar can also cause power grid fluctuations, so it takes money to solve that issue.  Solar gets a free ride from everybody else.

 

I thought it was the opposite.  Solar reduces the need for costly peak-load generators.  (assuming the solar power is consumed on-site rather than sold back to the utility under net metering).

 

Reasoning:

Solar generates power during the time when all the air conditioners are turned on.  This reduces the need for additional power plants that are utilized only during those times (peak demand load times).

 

Therefore the net metering arrangment shouldn't be replaced with "wholesale pricing", but rather something far above that price to account for the fact that peak-load electricity costs more (due to these extra power plants that are idled the rest of the day and night, and only utilized during peak load).

 

Bottom line is solar provides that peak-load electricity.  Which is one reason why one can't just compare the cost of solar to the cost of coal/gas, apples-to-oranges.  It needs to be compared to the cost of a peak load power plant.

 

 

[ERICOPOLY]

Yes, it makes some sense economically for most people and state and federal incentives certainly help, but there's also the fact that you get to say to your friends you've gone "green" and are doing your part for the environment.

 

IMO, there's a reason much bigger than social status -- taxation.

 

It's just as efficient for me to generate rooftop solar energy at a cost of 20 cents per kWh than it is to buy it from my local utility for 15 cents per kWh if the tax rate is 25%.

 

This is because the electricity generated from a rooftop solar installation is imputed income -- it offsets a bill that I otherwise must pay with after-tax dollars.

 

In California your income tax rate could be as high as 50%.

 

Paying 20 cents per kWh for rooftop solar is equivalent to buying electricity from the utility at just 10 cents per kWh -- if your tax rate is 50%.

 

So purely looking at economics, rooftop solar potentially is far more economically effective (for the consumer) than buying electricity from the grid/utility.

 

You have to consider tax rates in any of these decisions. 

 

Solar generates tax-free imputed income.  I can't stress enough how much this affects my thinking on this issue when I approach the cost/benefit of solar for my own home.

 

[netnet]

Although the discussion has moved on from the article, the article itself is riven with distortions and inaccuracies, as one would expect from a utility lawyer. (One would expect the same distortions from a solar city lawyer as well.)  Frankly, the utilities are worried.

 

Just read the last paragraph to get a flavor for it: he calls roof top solar a "losing" and less green(!) technology.  Really? Where is a Jon Stewart send up when you need it.

 

Per public policy, we let corporation, particularly utilities depreciate, read expense their capital projects.  Is there any reason why this is per se a bad idea when a consumer is 'adding' power to the system?  Both are subsidies, as is mortgage deduction.

 

Net metering, probably results in cost shifting, but there are studies that claim otherwise, see the report to the Nevada Utilities Commission.  Furthermore, clearly a solar customer does not demand as much from the grid as a non-solar customer, by definition, and when the Tesla batteries come....

 

I'm not inclined to dig enough to find out, but it would not surprise me if it was one of this lawyer/lobbyist's utility clients, who urged states to charge residential solar users whether or not they used the grid. You want to talk about subsidies?

[Pelagic]

Solar can also cause power grid fluctuations, so it takes money to solve that issue.  Solar gets a free ride from everybody else.

 

I thought it was the opposite.  Solar reduces the need for costly peak-load generators.  (assuming the solar power is consumed on-site rather than sold back to the utility under net metering).

 

Reasoning:

Solar generates power during the time when all the air conditioners are turned on.  This reduces the need for additional power plants that are utilized only during those times (peak demand load times).

 

Therefore the net metering arrangment shouldn't be replaced with "wholesale pricing", but rather something far above that price to account for the fact that peak-load electricity costs more (due to these extra power plants that are idled the rest of the day and night, and only utilized during peak load).

 

Bottom line is solar provides that peak-load electricity.  Which is one reason why one can't just compare the cost of solar to the cost of coal/gas, apples-to-oranges.  It needs to be compared to the cost of a peak load power plant.

 

Solar usually doesn't correspond that well with peak load. Load ramps up dramatically starting around 5pm and peaking around 8pm in most areas. In general rooftop solar is optimized to take advantage of sunlight throughout the day rather than specifically pointed westward to offset evening usage, when load is highest. What solar IS excellent at is offsetting AC units during the day and it matches this function almost perfectly since areas where AC use is high usually have better solar resources available. Utility scale solar will most likely replace base-load (coal) generation leaving peak load to nat-gas plants or hydro.

 

Concentrated solar power does have the ability to offset peak load demand since it has the ability to retain heat in the fluid it uses. These plants are definitely not something you'd be putting on your roof though!

 

 

[ERICOPOLY]

Load ramps up dramatically starting around 5pm and peaking around 8pm in most areas. In general rooftop solar is optimized to take advantage of sunlight throughout the day rather than specifically pointed westward to offset evening usage, when load is highest. What solar IS excellent at is offsetting AC units during the day and it matches this function almost perfectly since areas where AC use is high usually have better solar resources available. Utility scale solar will most likely replace base-load (coal) generation leaving peak load to nat-gas plants or hydro.

 

My utility is Southern California Edison.  Their Time-of-Use rates are cheapest between 10pm and 8am.

 

Presumably they begin charging more after 8 am because the cost of delivering electricity after that time begins to rise.  The rate peaks after 2pm and continues at that super-peak rate for 6 more hours.

 

There must be some generators that are idle during the night and only get switched on somewhere around 8am.  Otherwise, what's the point of charging more after 8 am?

 

Then you have more generators that are only needed after 2pm.

 

The attempt of the utilities to charge merely "wholesale rates" should incorporate an attempt to take time-of-use-wholesale prices into account, but I didn't see that mentioned in the utilities' proposal.

 

In spirit the current net metering arrangement is fair because the utilities previously argued that peak load pricing is higher due to the cost of underutilized capacity during other times.

 

The time-of-use price of electricity at my utility triples after 8 am.  This is either the utilities ripping people off, or electricity genuinely costs a heck of a lot more after 8 am.

 

So if the electricity doesn't in fact cost 3x more to generate after 8 am, the utilities could solve their net metering problem by merely dropping their prices closer to the real cost (in other words, they could stop ripping us off).

 

 

[ERICOPOLY]

We had our last "brown out" around 10 am -- it was in early October. 

 

The temperature was already in the 90s at that time (hit 100 that day and I'm less than a mile from the coast).

 

So I think rooftop solar mitigated the impact of that brown-out.  On that day the utility proved that they are incapable of providing reliable service and made the case that additional rooftop solar is necessary.

[HJ]

These guys may be biased, but pre friends who live there, it is certainly true that German retail electricity prices are multiples elsewhere.

 

http://instituteforenergyresearch.org/analysis/germanys-electricity-market-balance-must-pay-flexible-back-power/

[kab60]

These guys may be biased, but pre friends who live there, it is certainly true that German retail electricity prices are multiples elsewhere.

 

http://instituteforenergyresearch.org/analysis/germanys-electricity-market-balance-must-pay-flexible-back-power/

You can't really use retail electricity for anything. Denmark has some of the lowest wholesale electricity in Europe but the highest retail prices due to 400 percent taxes slapped on top - which is actually a good thing because it makes people save on electricity. I think Germany is alike.

[Pelagic]

If you're interested in some of the challenges Germany is facing with renewables, particularly rooftop solar, this is one of the better analyses I've read on it. It's important to point out though that Germany is not the Southwestern US in terms of solar resources, or even much of the rest of the US.

 

http://www.forbes.com/sites/quora/2013/10/04/should-other-nations-follow-germanys-lead-on-promoting-solar-power/

[Guest longinvestor]

If you're interested in some of the challenges Germany is facing with renewables, particularly rooftop solar, this is one of the better analyses I've read on it. It's important to point out though that Germany is not the Southwestern US in terms of solar resources, or even much of the rest of the US.

 

http://www.forbes.com/sites/quora/2013/10/04/should-other-nations-follow-germanys-lead-on-promoting-solar-power/

Wow , simply fantastic reading. Thanks for sharing this. So much urban mythology laid bare.

[orthopa]

FWIW the "solar roads" you tube idea is fascinating. May not happen in my life time (34y old) due to costs but i would love not having salt and shoveling up north where I am.

[ERICOPOLY]

If you're interested in some of the challenges Germany is facing with renewables, particularly rooftop solar, this is one of the better analyses I've read on it. It's important to point out though that Germany is not the Southwestern US in terms of solar resources, or even much of the rest of the US.

 

http://www.forbes.com/sites/quora/2013/10/04/should-other-nations-follow-germanys-lead-on-promoting-solar-power/

 

It's also useful to mention that natural gas is very expensive in Germany (compared to the US), so it's less competitive versus coal:

 

http://www.statista.com/statistics/253047/natural-gas-prices-in-selected-countries/

 

Germany chose to turn to coal instead of natural gas -- why?

[yadayada]

I read a study in the netherlands that if more then 20% of population would have solar and sell back electricity, costs for traditional grid will skyrocket, and it would hurt, not help. And it would not be greener.

 

Wish I could find it.

 

So battery power really is crucial if solar wants to get out of the niche (allthough 20% might not be a niche anymore.

 

You can imagine, that if most people use solar during the day, and the weather suddenly changes, you have a massive spike in demand. Same at night. So you would always need spare coal and gas plants running that let their electricity go to nowhere, just to make sure you dont have constant power cuts.

 

Nuclear power would become completely useless in this situation, as it takes more then one day to start up a nuke plant. So with massive volatility in demand, they would just end up running a lot when not needed. And coal is also less useful as it takes longer to fire up a coal plant. Gas plants have the lowest start up time.

 

A recent discovery of perovskite crystals could make good solar panels, improving efficiency. So far they are cheaper, could be used to upgrade current silicon panels and have already passed the 2000 hour test at 85% humidity and constant very high temperatures (85 degrees as well i think).

[Liberty]

Whoever said that utilities are scared and trying to shoot down their new competition had it right.

 

On some days, countries like Denmark and Germany can be almost entirely powered by wind and solar, something that not so long ago the scaremongers said was impossible and the grid couldn't handle.

 

Sure the grid was designed for centralized power. But we can change the grid. We'd still be in horse carriages if we couldn't move forward once in a while...

[rayfinkle]

Yes, it makes some sense economically for most people and state and federal incentives certainly help, but there's also the fact that you get to say to your friends you've gone "green" and are doing your part for the environment.

 

IMO, there's a reason much bigger than social status -- taxation.

 

It's just as efficient for me to generate rooftop solar energy at a cost of 20 cents per kWh than it is to buy it from my local utility for 15 cents per kWh if the tax rate is 25%.

 

This is because the electricity generated from a rooftop solar installation is imputed income -- it offsets a bill that I otherwise must pay with after-tax dollars.

 

In California your income tax rate could be as high as 50%.

 

Paying 20 cents per kWh for rooftop solar is equivalent to buying electricity from the utility at just 10 cents per kWh -- if your tax rate is 50%.

 

So purely looking at economics, rooftop solar potentially is far more economically effective (for the consumer) than buying electricity from the grid/utility.

 

You have to consider tax rates in any of these decisions. 

 

Solar generates tax-free imputed income.  I can't stress enough how much this affects my thinking on this issue when I approach the cost/benefit of solar for my own home.

 

Hi Eric-

 

Can you explain this a bit more? My thinking is that the tax impact is not what you describe. Specifically, imagine you buy (not lease/PPA) a system for cash. This purchase uses after tax dollars. So a 5 kW system purchased @ $4 / kW would cost you $20k after tax, or $40k pre-tax @ 50% marginal tax rate. This means that your "avoided cost" rate for kWh, which is not tax affected, is created using a higher investment, which means your ROI is not as high as (I think) you're describing. Would love your thoughts on what I'm missing...

 

Separately, is there a website that shows when brownouts are scheduled?

 

Thanks,

 

Matt

 

[ERICOPOLY]

Yes, it makes some sense economically for most people and state and federal incentives certainly help, but there's also the fact that you get to say to your friends you've gone "green" and are doing your part for the environment.

 

IMO, there's a reason much bigger than social status -- taxation.

 

It's just as efficient for me to generate rooftop solar energy at a cost of 20 cents per kWh than it is to buy it from my local utility for 15 cents per kWh if the tax rate is 25%.

 

This is because the electricity generated from a rooftop solar installation is imputed income -- it offsets a bill that I otherwise must pay with after-tax dollars.

 

In California your income tax rate could be as high as 50%.

 

Paying 20 cents per kWh for rooftop solar is equivalent to buying electricity from the utility at just 10 cents per kWh -- if your tax rate is 50%.

 

So purely looking at economics, rooftop solar potentially is far more economically effective (for the consumer) than buying electricity from the grid/utility.

 

You have to consider tax rates in any of these decisions. 

 

Solar generates tax-free imputed income.  I can't stress enough how much this affects my thinking on this issue when I approach the cost/benefit of solar for my own home.

 

Hi Eric-

 

Can you explain this a bit more? My thinking is that the tax impact is not what you describe. Specifically, imagine you buy (not lease/PPA) a system for cash. This purchase uses after tax dollars. So a 5 kW system purchased @ $4 / kW would cost you $20k after tax, or $40k pre-tax @ 50% marginal tax rate. This means that your "avoided cost" rate for kWh, which is not tax affected, is created using a higher investment, which means your ROI is not as high as (I think) you're describing. Would love your thoughts on what I'm missing...

 

Separately, is there a website that shows when brownouts are scheduled?

 

Thanks,

 

Matt

 

I don't have earned income.

 

In other words, I approach this strictly as an investor would.

 

Scenario A:

I could invest $20,000 in solar panels and reduce my utility bill.

 

Scenario B:

I could instead invest $20,000 in taxable bonds or equities and harvest gains to pay the utility bill.

 

Scenario A: no taxation (inputed income offsetting the energy bill)

Scenario B: after-tax investment income pays the utility bill

 

 

The higher the tax rate, the more capital I need to invest under Scenario B.  Once the tax rate is high enough, I might need $25,000 or $30,000 to generate enough after-tax income to pay the utility bill.  Maybe $40,000.  I don't know, it depends on the tax rate.

 

The tax rate is key.

 

 

 

 

[ERICOPOLY]

Actually, if I invested it securely in Treasury bonds I would need hundreds of thousands of dollars worth of Treasuries in order to generate enough after-tax income to pay my solar bill.

 

Or, much more favorable, I just invest $20,000 in solar panels.

 

Solar is "capital light" in this regard.  Compared to a 30 yr treasury yield, I think solar panels require 1/10th the amount of capital investment to generate the same return.

[rayfinkle]

Actually, if I invested it securely in Treasury bonds I would need hundreds of thousands of dollars worth of Treasuries in order to generate enough after-tax income to pay my solar bill.

 

Or, much more favorable, I just invest $20,000 in solar panels.

 

Solar is "capital light" in this regard.

 

Got it. I agree that if you're comparing solar to other investments then the return to you is tax advantaged.

 

For folks who are in middle income brackets and thinking about this as "solar vs. utility" the calculus is different, and I think the taxes are not as big of a factor.