Solar Primer: Where We Currently Stand, 7/28/2016

Solar Primer: Where We Currently Stand, 7/28/2016

A few numbers on the solar industry:

• The average household electricity usage is around 900-1,000 kWh per month. (911 kWh average).
• There are now more than one million solar installations in the United States. The industry passed this figure in early May.
• At the end of 2015 there was over 25 GW of solar, or about 0.6% of all electrical generation capacity. 29.4% of all new electric generating capacity came from solar in 2015.
• The US solar market is expected to grow 119% in 2016, with 16 GW of installations. In 2015 there was 7.3 GW of installed solar.
• More than 200,000 Americans work in solar currently. By 2020, that number is expected to double to 400,000.
• 255 companies in Ohio provide jobs in the solar industry. 56 of these have manufacturing facilities in the state. There are more than 4,800 people employed in solar in Ohio by the end of 2015. In 2015, 10 MW was installed in Ohio at a total of more than $25 million. Ohio is expected to install 510 MW of solar over the next five years, more than six times the total cumulative amount.
• In the world, 59 GW of solar were installed globally in 2015, a 34 percent increase over 2014's total. There was 262 GW of solar at the start of 2016 and by the end of the year this is expected to be 321 GW of solar worldwide.

 

How Much Does The Average Solar Array Cost in The United States?

According to Energysage.com, here are the average numbers per their semi-annual report: 

• Cost Per Watt = $3.69
• EnergySage Quote Price Distribution = 67% of installers are within $0.54 of the average Cost Per Watt
• Size of System = 7.8kW
• Expected Electricity Bill Offset of System = 84.3%
• Monthly Electricity Bill of EnergySage Shoppers = $189
• Payback Period of EnergySage Shoppers = 7.8 years

The size of the average system is generally quoted at 7.8kW which has remained steady for the past several years. The percentage of offset of electricity bills is 84.3%. A 7.8kW system is a good size and would be approximately 26 panels installed either on your roof or ground mounted on your property.

A system this size based on these averages would therefore cost $3.69/Watt  x  7,800 Watts = $28,782. The Federal ITC is 30% so there would be a rebate amount of $8,635. So the total cost of your system after the rebate would be $28,782 - $8,635 = $20,147.

So the average system of 7.8 kW would offset around 84.3% of your electricity bill and cost $20,147 with an average payback rate of around 8 years. In Ohio, we tell customers their payback rate is 9-10 years on average.

 

How Long Can You Expect Your Solar Panels To Last?

In 1997, Siemens Solar Industries announced a product warranty extension of its solar modules from ten years to 25 years. This was a landmark event in solar as it set the 25-year warranty as a basic requirement for anyone interested in investing in solar. Since then more and more manufacturers have been extending their product warranties to 25 years.

In 2012 Sunpower solar panels was the first solar manufacturer to offer a 25-year product and power warranty. That was September 10, 2012, and ever since, the 25-year guarantee has become standard for solar manufacturers in America. Another company, Canadian Solar, has a power performance guarantee of 30-years yet only a product warranty of ten years.

There is a slight degradation of the panels per year of 0.1%-0.5% since technology is never going to be pristine forever. So there are two things to look at here. First, manufacturer's warranty is generally 10 years. Generally, if something is going to go wrong with your panels and have a manufacturer's warranty, it will happen within ten years and the manufacturer will replace the panel. The power performance warranty guarantees a minimum amount of power will still be produced by the panels up to 25 years. Usually this percentage is 80-83%, but manufacturers are also very conservative in their numbers.

We tell customers that the majority of their panels will still be working at a high level of efficiency 35-40 years into the future. Solar panels are tough, durable pieces of technology. There are plenty of examples of solar panels that were manufactured and installed in the 1970s that are still going strong producing electricity to this day. 

 

How Much Rooftop Solar Could Potentially Be Installed In the United States:

In a report from the National Renewable Energy Laboratory (NREL) published this past month, the total potential for rooftop solar in the U.S. could potentially account for at least 38.6% of total U.S. electricity creation. This does not include ground mounts, canopy, building facade, or any other type of solar installation. This is just purely a quantified estimate of solar that can be installed on small, medium, and large building rooftops for a total installed capacity of 1,118 GW. Currently the total installed solar capacity in the U.S. is 27 GW.

The Biggest Takeaway:

• 83% of all small buildings have a suitable location for solar installation.
• The large potential of small buildings is 65.4% of the total rooftop market (731 GW).
• If the residential market for solar reaches its potential, it could account for 25% of the total US electricity generation.
• Ohio's potential installed capacity is 46.8 GW, the fourth highest total in the nation. Currently as of Dec 2015, we have installed 130 MW of solar, so we have not even scratched the surface of our potential yet.

 

Ohio Solar Raw Numbers: Where We Currently Stand

Ohio is forecast to install 15 MW in 2016. The next several years are expected to be high growth years across the country. In Ohio, the Solar Energy Association is forecasting 25 MW in 2017 and 43 MW in 2018.  Prior to 2010 there was a cumulative total of 2 MW installed capacity in Ohio. In many ways the solar industry in Ohio did not really start until 2010. Here is a chart of how Ohio looks:

 

A great deal of installed capacity has come from utility solar. The city of Minster recently constructed a 4.3 MW array as a community project that went online in April of 2016. In 2010, to kick off Ohio's solar birth, the largest utility array in the state was constructed, a 12 MW array called The Wyandot Solar project in Upper Sandusky. That array by itself was around two thirds of total installation in the state for 2010. In 2012 a tremendous solar boom occurred as commercial and utility projects were buoyed by the high price of SRECs. The SREC market and instability in our state capital caused the solar market to crater by 2014. The political turmoil that caused the suspension of the RPS in 2014 has been devastating. It caused a great contraction in the industry as solar companies were forced to cut their workforce.  As of today, Ohio is the only state with a renewable portfolio standard to suspend their state plan.  

The driving force behind solar growth comes from two sources: the increasing cost of carbon fuels such as coal and natural gas, and the environmental awakening that is taking place across the globe, symbolized in the historic Paris Climate Change Talks of December, 2015.

It is unclear at this point which force will prove to be more powerful in the adoption of solar worldwide. Here in Ohio the driving force will most likely be the economics of fuel prices in spite of the fact that Ohio has consistently ranked among the most polluted states in America. The guess here is that in Ohio it will be the increasing costs of fuel that will drive more people to solar than the environmental conditions that result in air and water quality.

 

How Much Sun Does Ohio Get?

We used the NREL PV Watts Calculator to look at Columbus, Ohio and Miami, Florida. We found that Columbus gets 4.23 hours of solar insolation (peak sunshine) per day while Miami gets 5.25 hours of peak sunshine per day. So Ohio gets around 80% as much sunshine as Miami. During the summer, Ohio actually gets slightly more sun than Miami, from May through August. Unfortunately we get around half as much as Miami from November through February.

We also found that Columbus gets 23.7% more sunshine than Munich, Germany on average over the course of the year. Munich is the largest southern city in Germany and they get 3.42 hours of peak sunshine per day. Why is this important? Germany is currently ranked 2nd in the world in total solar installation and get nearly 7% of their electricity from solar. They get less sunshine than Ohio and yet have made solar work for them.

 

How To Measure the Home Equity of a Solar Energy System

A 2015 study by the National Renewable Energy Laboratory (NREL) places a price premium of $3.11 a watt for solar power systems added to residential properties. For those with a typical 8kW system, this means the added resale value to your home is around $24,880.

What about depreciation? Well, the general rule is taking a cost approach which would value a solar electric system as a 25-year going concern. For every year you have the system, it would be depreciated at around 4% per year. So if you have the system for 10 years you would depreciate it 40%. Here is an example of an 8kW system valued brand-new at $24,880. (The system would be around $20,000 after the 30% Federal Investment Tax Credit, $28,000 before applying the credit):

 

Adding Solar To Your Homeowner's Insurance

Homeowners may be exempt from increases on their homeowner's insurance or just face a minimum increase on their insurance premium of a few dollars a month.

National insurance companies now have standards in place to deal with insuring solar across the country. In the past there were challenges in finding insurance to cover your panels because the industry was so new and nobody knew what to expect. This mostly had to do with the insurer's unfamiliarity with solar technology and a general lack of historical loss data (insurance claims).

The good news now is that if you're buying a solar panels for your home, your standard homeowner’s insurance policy is usually adequate to meet the utility’s requirements. Solar panels are almost always included in your Home Insurance Dwelling Coverage, though the coverage type and cost may vary. Homeowner's insurance covers something striking your house (example: a bolt of lightning or a tree branch) or any other problem, so it would automatically extend to your panels and cover the bill for repairs up to your established limits. In most cases solar is seen as something akin to building an addition to your house such as a deck or a porch.

After installation, contact your homeowner’s insurance company and have your policy amended. This often has to be done at the time of utility interconnection. You will face an increase on your property insurance of probably less than $10 a month, but protecting your system is critical. In a lot of states, if a property assessment is triggered, the additional of solar panels are exempt from property taxes. 

 

Commercial Depreciation On A Solar Energy System

For commercial businesses that go solar, they are eligible to depreciate their systems at an accelerated rate under a 5-year MACRS depreciation schedule. They are also able to use a MACRS bonus depreciation schedule. This can add up to thousands of dollars off using a present value of savings over the course of the depreciation schedule.

 

Does A Solar Energy System Raise Property Taxes?

The answer is no! In fact the better answer would be that solar is exempted from property taxes in the vast majority of states. In order to stimulate the solar industry, there have been many programs passed by local and state legislatures to provide for a tax exemption for installed solar energy systems on residential and commercial properties. So you don't have to pay additional money for property taxes after you have gone solar? That's great news! The questions we should ask are why and how much do you save?

Systems are exempt from property taxes. The tax burden for a potential property tax decreases as time goes on. For an average system price of $21,770 at 1.52% property tax would be $4,301.75 over the life of the system. When you factor in the time value of money and set this total taxed amount of $4,301.75 at an interest rate of 3% over 25 time periods, we can change this future value to a present value. The total amount of money that you are saving on taxes with the property tax abatement program on green energy systems comes out to be $2,054.54. So this is the amount of money a homeowner saves from no property tax on solar.

 

Sales Tax Exemption:

Systems have a sales tax exemption. For an average system of $21,770 and an average sales tax rate of 5.75% in Ohio, a homeowner will save $1,252 they normally would pay for any other high-priced item.

 

The 30% Federal Investment Tax Credit: What You Need To Know

The ITC is called two different things. It is called the Residential Renewable Energy Tax Credit as well as the Solar Investment Tax Credit (ITC). Perhaps the best definition comes from the SEIA: The Investment Tax Credit (ITC) is currently a 30 percent federal tax credit claimed against the tax liability of residential (Section 25D) and commercial and utility (Section 48) investors in solar energy property. The Section 25D residential ITC allows the homeowner to apply the credit to his/her personal income taxes. This credit is used when homeowners purchase solar systems outright and have them installed on their homes.

The ITC was created as part of the Energy Policy Act of 2005. In 2008, during the height of the economic recession, the Emergency Economic Stabiliization Act added an eight-year extension. In December of 2015, the ITC was extended yet again, this time for five years. People who want to take advantage of the investment tax credit at the 30% rate have through December 31st of 2019 to do so. After December 31, 2019 the percentage drops to 26% in 2020 and 22% in 2021. After 2022 it drops to 10% for commercial and utility credit while the residential credit drops to zero.

If the average system is 8 kW and is around $3.50 per watt, this would be a total price of $28,000. The 30% Federal tax credit will therefore reduce the cost $8,400 so the final cost would be $19,600.

 

Electric Vehicle Offset

A 3kW solar array would be enough to offset the electrical usage and environmental impact in full of driving a standard electric vehicle.

An average electric vehicle, in this case, a Ford Focus or Nissan Leaf will use around 0.32 kWh per mile or around 11.31 kWh of electricity consumed per day. The average distance traveled in Ohio is 35.4 miles per day according to the Federal Highway Administration's Website. If the average vehicle in the country gets 25.5 mpg, then over the course of a year based on Ohio's average driver mileage of 12,906, electric vehicle drivers will save the cost of filling up at the pump by foregoing 506 gallons of gas. Gas is currently listed at $2.22 a gallon in the state of Ohio. This means that over a full year of going solar and driving electric, you would save over $1,100.