ECONOMICS OF RESIDENTIAL ROOFTOP SOLAR IN NEW ENGLAND

Proponents, including installers of solar systems, present many numbers, usually in not too clear a format, to show how profitable it is to have solar on your roof.

 

This article presents a spreadsheet analysis of two plans:

 

- Plan A, the Standard Plan, which is to invest in a rooftop solar system.

- Plan B, the Warren Buffett Plan, which is to invest in shares of AT&T that pay a dividend.

 

Comparison of Plan A and Plan B

 

With Plan A, in year 25, homeowner would have had a gain of $10,520, but would have a 25-y old system that, to repeat the cycle, would need to be replaced within about 5 years.

 

With Plan B, in year 25, homeowner would have an asset of $52,078 that is increasing in value, plus a dividend income of $2,497 that is increasing each year.

 

Plan A is a loser for homeowners. It would be much better for homeowners not to get caught up in a smoke and mirrors CO2-reduction charade. For homeowners, Plan B is far superior.

 

Plan A is a loser for society regarding the minuscule, 27-y CO2 emissions reduction of 49.77 metric ton at a very high cost of $637/metric ton.

 

Unlike Plan A, Plan B requires no federal and state subsidies, no feed in tariffs, and no unfair cost shifting to other ratepayers and taxpayers.

 

PLAN A, The Standard Plan

 

A 25-y spreadsheet analysis is presented for a 5 kW residential, rooftop, net-metered, solar system. The analysis, including the generous 30% federal investment tax credit, ITC, and generous 18 c/kWh net-metering tariff, shows:

 

- The amortizing of the $17,500 system cost, at 5%/y for 25y, totals $31,714 (unsubsidized)

- The amortizing of the $12,250 loan, at 5%/y for 25y, totals $22,195 (subsidized)

- The gain from avoided electricity purchases totals $17,527

- The gain from electricity sold to utility totals $15,188

- The net gain totals $1001 (unsubsidized), $10,520 (subsidized). See tables 1, 1A, 2, and 3

 

Table 1 shows the unsubsidized and subsidized 25-y values

 

Table 1	Unsubsidized	Subsidized
Avoided electricity purchases	17527	17527
Gain from electricity sold to utility	15188	15188
Total benefit	32715	32715
Amortized cost	31714	22195
25-y gain	1001	10520

NOTE: The federal tax credit is due to decrease from 30%, to 26, 22, and 0 percent in 2020, 2012, and 2022, respectively, and the net-metering feed-in tariffs are due to be decreased in the near future, as they are overly generous, and have become a too big cost item for utilities, which have complained, the net-metering program is their most expensive energy source. For example, GMP’s cost of net-metered electricity is 21.813 c/kWh. NE midday solar wholesale prices are about 6 c/kWh. See URLs.

 

https://www.novoco.com/sites/default/files/atoms/files/path_act_sum...

http://www.windtaskforce.org/profiles/blogs/green-mountain-power-co...

 

NOTE: The Vermont net-metering scheme reduces the taxes, fees and surcharges on the monthly bills of the solar system owners. This burden is unfairly shifted to other ratepayers and taxpayers. That is not the case in Germany where owners have two meters; one records production, all of which is sold to the utility at 12 eurocent/kWh (2018 tariff for residential rooftop), and the other meter records consumption, which is charged at the regular rate of about 30 eurocent/kWh, including all taxes, fees and surcharges. There is no unfair burden shifting to other ratepayers and taxpayers.

NOTE: Vermont customers transferring RECs to the utility will receive an additional monthly bill credit for 10 years equal to $0.02/kWh multiplied by all kWh produced by the system during the billing period. Beginning July 1, 2018, this rate will decrease to $0.01/kWh. Customers electing to retain REC ownership will be charged each month in perpetuity $0.03/kWh multiplied by all kWh produced during the billing period. In my rooftop solar spreadsheets the REC credit was not included.

Cost of Electricity

 

The 25-y production totals 146,875 kWh

The 25-y average cost of producing the electricity would be 22195/146875 = 15.1 c/kWh (subsidized); would be 31714/146875 = 21.6 c/kWh (unsubsidized). See table 1.

 

Not included are the costs of:

- Inverter replacement in about year 10 and 20; about $1000 for a good quality inverter each time. The inverter converts the DC output of the panels to AC.

- Any O&M costs, replacement parts and service contract during the 25 years.

 

CO2 Emissions Reduction

 

The closing of Vermont Yankee increased NE grid CO2 emissions from 28 million ton in 2014 to 30.2 million ton in 2015. See URL. The NE System CO2 intensity was 730, 726, and 747 lb/MWh in 2013, 2014 and 2015, respectively, based on primary energy, about 8% higher, based on source energy. See table 1.1 in URL.

 

https://www.iso-ne.com/static-assets/documents/2017/01/2015_emissio...

http://www.iso-ne.com/static-assets/documents/2016/01/2014_emission...

 

The 25-y CO2 emissions reduction would be 146875/1000 x 747/2204.62 = 49.77 metric ton, if the grid CO2 intensity remains unchanged. It likely will become less as more wind and solar added.

The cost to reduce CO2 emissions would be 31714/49.77 = $637/metric ton (unsubsidized)

This is off the charts expensive and unsustainable. The net-metering program should be immediately ended.

 

PLAN B, The Warren Buffett Plan

 

- Homeowner uses the same annual amounts, but invests in shares of AT&T ($33/share, dividend $2.00/share).

- In year 1, $888 would buy 26.909 shares, and would earn dividends of $53.82 + $3.26, reinvested dividends. 

- In year 2, dividends would be $107.64 + $6.46, reinvested dividends, etc.

- Accumulated income at end of year 25 would be $15,924  

- The shares bought with investments would be 482.629

- The shares bought with reinvested dividends would be 293.700

- Total shares would be 776.329, each worth $67, a total asset of $52,078

- Total dividend income in year 25 would be 776.329 x 3.22 = $2497. See table 4.

Detailed Spreadsheet Calculations

PLAN A, The Standard Plan

Below are some spreadsheet calculations for a 5 kW residential, rooftop, net-metered, solar system. The parameters are shown in table 1A.

 

Not shown is the inverter replacement in about year 10. The inverter converts the DC output of the panels to AC.

Also not shown are any O&M costs and service contract costs.

Solar systems are exempt from sales and property taxes in Vermont.

The loan period and the warranty period were assumed at 25 years.

The system continues to degrade beyond year 25.

 

- If the federal tax credit were ended, the borrowed amount would be greater and for about the first 6 years the net benefit would be negligible

- The avoided electricity payments increase as rates increase.

- Selling surplus to the utility becomes less lucrative as production decreases and the net metering rate is kept constant.

- The net benefit for the first year is - 888, loan payment + 450, avoided electricity cost + 675, net-metered = $237

 

Table 1A/Solar system	kW	5
Cost	$/kW	3500
Turnkey Cost	$	17500
Federal tax credit	0.30	5250
Net Turnkey Cost	$	12250
Degradation	%/y	0.5
Production, new	kWh/y	6250
Self-use	kWh	2500
Net-metered	c/kWh	18
Loan	$	12250
Interest	%/y	5
Term	y	25

The loan payoff schedule, system degradation at 0.5%/y, annual production, assumed annual self-use and electric rate escalating at 3.5%/y are shown in table 2

 

Table 2	Principal	Principal	Interest	Total	Degradation	Production	Self-use	Electric rate
Year	$	$/y	$/y	$/y		kWh/y	kWh/y	c/kWh
1	12250	275	613	888	1.000	6250	2500	18.0
2	11975	289	599	888	0.995	6219	2500	18.6
3	11686	304	584	888	0.990	6188	2500	19.3
4	11382	319	569	888	0.985	6156	2500	20.0
5	11063	335	553	888	0.980	6125	2500	20.7
6	10729	351	536	888	0.975	6094	2500	21.4
7	10378	369	519	888	0.970	6063	2500	22.1
8	10009	387	500	888	0.965	6031	2500	22.9
9	9621	407	481	888	0.960	6000	2500	23.7
10	9214	427	461	888	0.955	5969	2500	24.5
11	8787	448	439	888	0.950	5938	2500	25.4
12	8339	471	417	888	0.945	5906	2500	26.3
13	7868	494	393	888	0.940	5875	2500	27.2
14	7374	519	369	888	0.935	5844	2500	28.2
15	6855	545	343	888	0.930	5813	2500	29.1
16	6310	572	315	888	0.925	5781	2500	30.2
17	5737	601	287	888	0.920	5750	2500	31.2
18	5136	631	257	888	0.915	5719	2500	32.3
19	4505	663	225	888	0.910	5688	2500	33.4
20	3843	696	192	888	0.905	5656	2500	34.6
21	3147	730	157	888	0.900	5625	2500	35.8
22	2417	767	121	888	0.895	5594	2500	37.1
23	1650	805	82	888	0.890	5563	2500	38.4
24	845	846	42	888	0.885	5531	2500	39.7
25	-1	888	0	888	0.880	5500	2500	41.1

The avoided electricity payments, the revenue from net metering, and the net benefit are shown in table 3.

 

Avoided	Sold to utility	Revenue	Net Benefit
Table 3
$/y	kWh/y	$/y	$/y
450	3750	675	237
466	3719	669	247
482	3688	664	258
499	3656	658	269
516	3625	653	281
534	3594	647	294
553	3563	641	307
573	3531	636	320
593	3500	630	335
613	3469	624	350
635	3438	619	366
657	3406	613	382
680	3375	608	400
704	3344	602	418
728	3313	596	437
754	3281	591	457
780	3250	585	478
808	3219	579	499
836	3188	574	522
865	3156	568	545
895	3125	563	570
927	3094	557	596
959	3063	551	623
993	3031	546	651
1027	3000	540	680

PLAN B, The Warren Buffett Plan

Below is the table of Plan B, The Warren Buffett Plan. The last two columns are shares bought with reinvested dividends and income from those shares.

 

									Reinvest Dividends
Year	Invest	Share Incr	AT&T price	Shares	Div Incr	Dividend	Div Inc	Div Inc	Shares	Div Inc
		%/y	$/share		%/y	$/share	$/y	$/y
1	888		33.00	26.909		2.00	53.82	53.82	1.631	3.26
2	888	3	33.99	26.125	2	2.04	53.30	107.64	3.167	6.46
3	888	3	35.01	25.364	2	2.08	52.78	159.89	4.567	9.50
4	888	3	36.06	24.626	2	2.12	52.27	211.11	5.854	12.43
5	888	3	37.14	23.908	2	2.16	51.76	261.33	7.036	15.23
6	888	3	38.26	23.212	2	2.21	51.26	310.55	8.118	17.93
7	888	3	39.40	22.536	2	2.25	50.76	358.79	9.106	20.51
8	888	3	40.59	21.880	2	2.30	50.27	406.07	10.005	22.99
9	888	3	41.80	21.242	2	2.34	49.78	452.39	10.822	25.36
10	888	3	43.06	20.624	2	2.39	49.29	497.77	11.561	27.63
11	888	3	44.35	20.023	2	2.44	48.82	542.24	12.226	29.81
12	888	3	45.68	19.440	2	2.49	48.34	585.79	12.824	31.89
13	888	3	47.05	18.873	2	2.54	47.87	628.44	13.357	33.88
14	888	3	48.46	18.324	2	2.59	47.41	670.21	13.830	35.78
15	888	3	49.92	17.790	2	2.64	46.95	711.11	14.246	37.60
16	888	3	51.41	17.272	2	2.69	46.49	751.16	14.610	39.33
17	888	3	52.96	16.769	2	2.75	46.04	790.35	14.925	40.98
18	888	3	54.54	16.280	2	2.80	45.59	828.72	15.194	42.55
19	888	3	56.18	15.806	2	2.86	45.15	866.27	15.419	44.05
20	888	3	57.87	15.346	2	2.91	44.71	903.01	15.605	45.47
21	888	3	59.60	14.899	2	2.97	44.28	938.95	15.754	46.82
22	888	3	61.39	14.465	2	3.03	43.85	974.12	15.868	48.10
23	888	3	63.23	14.044	2	3.09	43.42	1008.51	15.949	49.32
24	888	3	65.13	13.635	2	3.15	43.00	1042.14	16.001	50.46
25	888	3	67.08	13.237	2	3.22	42.58	1075.02	16.025	51.55
Totals	22195			482.629				15135.39	293.700	788.86
									Div total	15924.25
									Shares total	776.329
									Income y-25	2497
									Asset y-25	52078

APPENDIX 1

Residential Rooftop Solar in Vermont: The Vermont load is about 6000 GWh/y, or 6 billion kWh/y.

About 300 million kWh/y/(8766 h/y x 0.14) = 244,450 kW of panels would be needed for 5% of the Vermont load.

The rooftop systems would cost 244,450 kW x $3500/kW =  $0.86 billion 

About 244,450/5 = 48,890 rooftop systems would be needed, if each house had 5 kW of panels.

 

Remember, only the south facing roofs are useful for solar. 

About 30% of all roofs are south facing, and not all of them qualify, as they may be too small, shaded by trees, etc.

Eliminating unsuitable roofs, at most 10% of ALL roofs can be used.

Vermont’s freestanding houses would not have enough residential roof space for 5% of the Vermont load.

Thus, large-scale, field-mounted solar systems, up to 5000 kW, have to be used.

APPENDIX 2

Exploiting Fear of Climate Change Benefits Multi-Millionaire Owners: The wind turbine power plant is owned by Deepwater Wind LLC, a part of the D. E. Shaw Group, a global investment and technology firm with $38 billion of invested capital as of July 1, 2016. Multi-millionaires, with lucrative, risk-free, tax shelters, put up the capital and expect high, mostly tax-free returns.

 

Wall Street financial services providers saw a huge opportunity for tax shelter business. So they told Congress exactly what laws to pass to make happen wind and solar, etc.. The US public was subjected to a media blitz the world was burning up and coming to an end.

 

The US Congress, under pressure of Wall Street, passed tax laws favorable to wind and solar, etc., to enable tax-free returns possible. 

 

Various government agencies performed “studies” with dire climate change predictions, and/or gave grants to “independent” entities to make studies with similar predictions, to convince the public the end of the world would be near, unless…. 

 

Publications, such as the business- friendly New York Times and Wall Street Journal, published mostly favorable articles about wind and solar. The public was told all was done to save the world. 

 

NOTE: Warren Buffett, considered one of the outstanding investors of all-time, has stated: “On wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit”. Buffett has investments in multiple wind sites, as do many other multi-billion dollar entities. Buffett and his cohorts hire tax accountants/lawyers to refine the subsidy-milking art form, as well as PR pros and RE lobbyists to continually increase the milking, via higher RPS targets and renewed subsidy periods.

APPENDIX 3

Vermont has an anemic, near-zero, real-growth economy, which does not produce enough tax revenues year after year, partially due to the huge RE giveaways, such as: 

 

1. Federal and state ITCs; upfront giveaways to offset any taxes. 
2. Federal and state taxes not paid due to rapid depreciation write-offs during the first 6 years 
3. Federal and state taxes not paid due to loan interest deducted from taxable profits.
4. School portion of property taxes not paid; households have to pay more.
5. State sales taxes not paid on some solar system components.
6. ALL electricity sold to utilities at 13 - 14.5 c/kWh (large-scale, field-mounted solar, mostly owned by multi-millionaires); NE midday wholesale prices are about 6 c/kWh.
7. Excess electricity sold to utilities at about 19 c/kWh (residential, roof-mounted, mostly owned by rate payers); NE household rates are about 19 c/kWh.

 

The state giving ITC money (extracted from already over-burdened taxpayers) to the tax shelters of multi-millionaires, who own the larger systems, and not collecting taxes due to rapid depreciation write-offs, etc., has resulted in contributing to chronic budget deficits.

 

The state legalizing above subsidies has resulted in higher NE electric rates than they would have been.

 

APPENDIX 4

Money received by investors in the early years, such as upfront federal and state ITCs, is always better than in later years.

The SO projects are structured to provide a risk-free internal rate of return (IRR) of about 9%/y, which is similar to an electrical utility in Vermont, such as GMP. It is quite generous compared to long-term interest rates of 4.5%/y.

During the first 6 years of a solar project, the economic cost is 27.1 c/kWh (using only 3 of the above 6 subsidies to simplify the analysis). Because of rapid solar build-outs, a substantial part of the installed solar capacity is less than 6 years old, and therefore in 27.1 c/kWh mode, in New England. The same is true for wind projects. Wind and solar projects in this mode act as a major drag on economic growth.

 

The above average of 27.1 c/kWh for the first 6 years and average of 13.036 c/kWh for 25 years, are the highly subsidized costs, which excludesthe costs of externalities that are shifted.

 

http://www.theenergycollective.com/energy-innovation-llc/2420282/ra...

http://www.windtaskforce.org/profiles/blogs/subsidized-solar-system...

http://www.windtaskforce.org/profiles/blogs/the-true-cost-of-solar-...

http://www.windtaskforce.org/profiles/blogs/the-true-cost-of-wind-e...

http://www.windtaskforce.org/profiles/blogs/a-very-expensive-offsho...

 

APPENDIX 5

Various Subsidies for Wind and Solar: Because of the various subsidies, taxpayers and rate payers are forced to pay 1) higher monthly electricity bills, 2) higher prices for goods and services, and 2) taxes to finance various subsidies for wind, solar and other RE producers. Here is a partial list:

 

- The federal ITC, 30% of the qualified portion of the turnkey capital cost. The federal ITC is an upfront, tax credit that can be applied against any of owner’s taxes.

- The state ITC, usually a percentage of the federal ITC. The state ITC is an upfront, tax credit that can be applied against any of owner’s taxes.

- The federal production tax credit, PTC, of 2.4 c/kWh for the first 10 years of operation, a subsidy of 2.4/5 = 48% of the US average wholesale price. No wonder owners are crowing about underbidding traditional generating plants. For example, in areas with good winds, low construction costs and low operation and maintenance costs (Texas, Great Plains), if an owner’s cost is 7.3 c/kWh and he deducts 2.4 c/kWh as PTC, then his bid price could be 4.9 c/kWh, which is sufficient to get the contract, in most cases, and “competitive” with traditional plants.

- The federal and state tax savings due to rapid depreciation write-offs in about 5 to 6 years, much more rapid than normal utility equipment write-off schedules of 10 to 20 years. Having tax savings earlier, instead of later, is financially more advantageous.

- The exemption of equipment purchases from the state sales tax and from the education property tax.

- Selling wind electricity at generous feed in tariffs of about 9 - 10 c/kWh in areas with high capital costs and low capacity factors (CFs), such as New England.

- Selling solar electricity at generous feed in tariffs of about 13.5 - 14.5 c/kWh in areas with high capital costs and low capacity factors, such as New England.

- Selling renewable energy credits, RECs, which lower the utility purchased RE energy cost by up to 50%.

- Loan guarantees by the federal and state government, which lower the interest rate of the funds borrowed from private entities, because the federal and state government assume the risk of the loans.

APPENDIX 6

Comparison of Nuclear and Solar Cost/kWh and CO2 Emission Reduction Cost/metric ton: If a 1000 MW nuclear plant, turnkey cost $5000/kW, amortized at 5%/y over 60y, the amortized cost would be $15,893,400,000; the 60-y production would be 473,365,000,000 kWh, at 0.90 capacity factor, or 3.3575 c/kWh; if O&M and fuel would be 3.3575 c/kWh, total cost would be 6.7200 c/kWh.

 

CO2 emissions reduction would be 60-y production in kWh/1000 x 747 lb/MWh/2204.62 = 160,391,772 metric ton, or $99.1/metric ton, amortizing + $99.1/metric ton, O&M and fuel = $198.2/metric ton. This compares with residential rooftop solar at 21.6 c/kWh and $637/metric ton

NOTE: Remember, nuclear electricity and wind and solar electricity are not comparable. Variable and intermittent wind and solar electricity cannot exist on any electric grid without the traditional, dispatchable, flexible, generators, primarily gas turbine plants, performing the peaking, filling-in and balancing. Also nuclear plants can be designed to be base-loaded (lowest c/kWh), or to vary their outputs to follow the daily demand curve (higher c/kWh), as France has proven for 40 years.

APPENDIX 7

The Tesla Powerwall 2.0, AC version, has a turnkey installed cost of about $8600

Battery operating cost = $8600/37800 kWh = 0.23 c/kWh; neglected costs are amortizing loan interest, and any operating and maintenance charges.

https://www.solarquotes.com.au/blog/powerwall-2-warranty/

 

As the battery ages, its internal resistance, milli-Ohm, will increase (its charge loss of about 0.35 in year 1 will increase to about 0.70 in year 10), and its capacity to store energy, kWh, will decrease (not exceeding 30% by year 10, per Tesla warrantee). Its energy throughput per day is greater in year 1 than in year 10. Such decrease in performance adversely affects the battery system economics. See figure 7 in URL, which shows degradation and resistance increase for only 40000 h, or 4.56 y

https://www.sciencedirect.com/science/article/pii/S030626191731190X

 

When new:

- Its AC to AC efficiency = 0.978, AC to DC x 0.965, charge loss x 0.965, discharge loss x 0.978, DC to AC = 0.89

- Its stored charge is about 13.5/0.7 = 19.28 kWh; not all charge is available for discharge

- It can deliver 13.5 kWh x 0.978, DC to AC conversion = 13.2 kWh as AC

 

At end of year 10:

- It can deliver about 13.5 x 0.7, degradation factor x 0.978, DC to AC = 9.24 kWh as AC, per Tesla warrantee.

- Its efficiency = 0.978, AC to DC x 0.93, charge loss x 0.93, discharge loss x 0.978, DC to AC = 0.83

- Its energy throughput shall be limited 37800 kWh or less, per Tesla warrantee; if greater, warrantee is void.

APPENDIX 8

PV solar owners in the net-metered program receive about 18.9 c/kWh for their surplus electricity, which reduces their charges for electricity and also any taxes, fees and surcharges on monthly electric bills. Almost all net-metered electricity, 71970 MWh in 2016, was PV solar. Total program cost was $15.699 million in 2016.

 

Recently, the PUC reduced the 18.9 by 0.5 cent in 2018 and one cent in 2019 (Category I systems up to 15 kW) to reduce program costs. GMP collected a minimum management fee of about 71970 x 1000 x (21.813, program cost - 18.90, Category I compensation) = $2.096 million in 2016, increasing in future years with the growth of the program. See table and URL.

 

NOTE: The actual 2016 GMP fee is much higher, because Category II, III, IV systems are compensated at much lower rates than Category I. If the weighted average were 16.9 c/kWh, the likely GMP fee would be 71970 x 1000 x (21.813 - 16.900) = $3.535 million in 2016, or 3.535/15.699 x 100 = 22.5% of the total program cost.See URL.

 

http://www.windtaskforce.org/profiles/blogs/green-mountain-power-co...

https://solarindustrymag.com/vermont-puc-makes-changes-to-net-metering

 

PV Solar, Category I	2016	2017	2018	2019
GMP charges	2.913	2.913	2.913	2.913
Feed-in tariff	18.900	18.900	18.400	17.400
Total cost	21.813	21.813	21.313	20.313