Economics of Photovoltaic Systems

Original Presentation by J. M. Pearce, 2006 Email: profpearce@gmail.com

PV Economics Basics

• Solar Photovoltaic Cells convert sunlight directly into electricity

• They are sold on a $/Wp basis or $/power• Wp is the power in Watts for Peak sun hours

-- the equivalent number of hours per day, with solar irradiance equaling 1,000 W/m2, that gives the same energy received from sunrise to sundown.

• To convert power to energy simply multiply by the amount of time that the cell is illuminated – W * hr = 1 W-hr

• Electricity (energy) is normally billed $/kW-hr

Economics of a Solar Electric Home

• A typical American uses ~ 9,000 kW-hrs/year

• A well-designed U.S. home needs 4kW-5kW of PV to provide for its energy needs averaged throughout the year– Depends on location (solar flux)– Energy use of home– Because calculating on /Wp basis you do

not need to worry about efficiency

How much for a Solar Electric House?

• The 2nd presentation discussed the components of a grid-tied solar home system

• The price tag for the complete installed system including all labor as of 2006 is between $5/Wp to $10/Wp

• For a 4kW system: – 4000Wp x $5/Wp = $20,000 – 4000Wp x $10/Wp = $40,000

Cost of Energy Production

Photovoltaic cells: $0.20-0.40 per kW-hr

Wind turbines: $0.04-0.05 per kW-hr

Gas: $0.02-$0.03 per kW-hr

Coal: < $0.03 per kW-hr

Financing PV

• For new homes a PV system can be folded into the mortgage – long term low interest loan

• For retrofits of existing homes PV can be economic with:– Financial assistance through grants,

subsidies, or other incentives– High costs of electricity in your area– Green power purchase agreements– Off-grid Applications

PV Incentives• One stop shop for financial incentives is

www.dsireusa.org/• The Database of State Incentives for Renewable

Energy (DSIRE) is a comprehensive source of information on state, local, utility, and federal incentives that promote renewable energy.

• Lists includes:– Corporate Tax Incentives – Direct Equipment Sales – Grant Programs – Leasing/Lease Purchase Programs – Loan Programs – Personal Income Tax Incentives – Production Incentives – Property Tax Incentives – Rebate Programs – Sales Tax Incentives

Where PV makes Economic Sense Now

• Remote sites that are too far from power• Or where the power is too unreliable for

a given application (e.g. internet server) – Costs for power lines range from $8000 to

$75,000 per mile. – As a general rule, if you are more than ½

mile from a line, solar is probably the best alternative.

PV : Cheap Electricity

for Road WorkIn areas that have grid power, where the cost of tearing up the streets and/or other construction are expensive.

                           

Portable Radio Station

The Developing

World

Stand Alone Systems

Coast Guard Stationsand Aircraft

Bus Stops and Emergency Phones

Solar in Space

Parking Lights

Running Trails and Lighthouses

Solar powered monaste

ries!

When will PV make economic sense for me?

Economy of Scale

0 subsidiesGrid-tied Market

$3.12/Wp to $3.56/Wp

Industry-Developed PV Roadmap

World PV Module Production (MW) Increases

1988 19891990 19911992 1993 19941995 1996 19971998 1999 2000 20010

100

200

300

400

Rest of worldEuropeJapanU.S.

33.6 40.2 46.5 55.4 57.9 60.1 69.4 77.6 88.6125.8

154.9

201.3

287.7

390.5

2002

512.2500

Source: PV News, March 2003

World PV installations in 2004 rose to 930MW -- growth of 62 % Consolidated world production of PV now 1.15 GW+

PV System vs. Electricity Costs

0

4

8

12

16

20

24

28

32

36

40

44

$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

Installed PV System Cost ($/Wp)

Cos

t of

Gen

erat

ed E

lect

rici

ty (

cen

ts/k

Wh

)

Pennsylvania Retail Rate

Japanese Retail Rate

German Retail Rate

Additional Assumptions:System Lifetime = 20 yearsReal Interest Rate = 6%O&M = 0.1 cent per kWh

Capactiy Factor = 0.25(South West U.S)

Capacity Factor = 0.2(U.S. Average)

California Retail Rate

What you can do• Energy consumers would sign up on

www.iwillifyouwill.org• Give names, addresses, phone numbers, e–mail

addresses, and "pledge levels." • Your pledge level would indicate how many peak

Watts of solar panels you would be willing to purchase based on the price of an installed system.

• Your identifying information would be kept confidential; however, your participation level would be posted on a publicly accessible Web site.

• In this way consumers become "subcontractors" to the major solar cell manufacturers providing needed market data

New Technology Could Play a Role

• Heterojunction with Intrinsic Thin-layer

• Sanyo • 18.5%• 30MW (by the end of FY

2003: coupled with current production boost total output to 60MW)

• Annual production is increased to 120 MW in 2005.

Built-in Incentives

$/W ValueMaterial avoidedby BIPV Installation

Material Credit

$1/sq-ft

$5/sq-ft

$10/sq-ft

$20/sq-ft

Asphalt Shingle roof, monolithic glazingLaminated glass w/coatingsmetal roofing/claddingRoofing slates, clay tile,high performance coatingsStainless steel,photochromic glass

$0.10/W

$0.50/W

$1/W

$2/W

Building Material Replacement Value

Utilizing Financial Incentives

Subsidies for Fossil Fuel

• Fossil fuels and nuclear energy receive 90% of the government money, (with PV receiving <3%).

• Hidden costs that we all subsidize for the energy industry which include: – Air pollution leads to the death of

120,000 Americans every year and costs $40 billion in health care annually. /

– Hidden Subsidies – pollution, global climate change, war• Military (U.S. military spends billions/yr just

defending the oil supplies in the Persian Gulf).

The Question of Energy Unemployment

• If we switch to solar what about all the fossil fuel jobs?

• A 1997 Pembina Institute report found that for every million dollars invested:– 36.3 jobs are created in the energy

efficiency sector– 12.2 in the renewable energy sector – conventional energy only 7.3 jobs are

created.

PV: Net Job Producer!

Jobs created with every million dollars spent on:– oil and gas

exploration: 1.5 – on coal mining:

4.4 – on producing

solar water heaters: 14

– on photovoltaic panels: 17

Jobs Coal vs. Solar

– Coal only employs 80,000

– By 2010, approximately 70,000 new jobs could be created as a result of the increased demand through the installation of only one million solar energy systems (3%).

People Want Solar

• The Program on International Policy Attitudes found that the American public wants the federal budget for renewable energy research like solar PV to increase by 1090 %.

Solar Photovoltaics is the Future

Acknowledgements

• This is the fourth in a series of presentations created for the solar energy community to assist in the dissemination of information about solar photovoltaic cells.

• This work was supported from a grant from the Pennsylvania State System of Higher Education.

• The author would like to acknowledge assistance in collecting information for this presentation from Heather Zielonka.