THE COST OF GOING THE COST OF GOING SOLAR SOLAR

FINANCING SOLAR PANELS AND SOLAR THERMAL

TECHNOLOGIES By Kelsey Zeitzer

What’s Solar EnergyWhat’s Solar Energy

• Solar energy creates useable power form sunshine

• Photovoltaic or PV uses sunlight to generate electricity

• Thermal solar uses sunlight to heat water

- Sunlight absorbed & energy generated -PV cell: convert solar energy into electrical power- Takes energy - convert PV

● (DC) into energy that can be used at home (AC)

- less efficient●sunlight to electricity conversion rate at 12%

-Require a lot of space & collectors

-5Xs + costly than thermal

-Usable year round

-heating water & storing it-number of different solar thermal designs

-More efficient●use up to 70% of the suns energy

- requires less space & fewer collectors

-difficult to add passive solar collectors to existing buildings

●you will have to use an active system which means larger storage tank

- 5Xs cheaper than PV

-Wont work all year round

Solar Cells Solar Cells OrOr Photovoltaic Photovoltaic (PV)(PV)

Solar Thermal Solar Thermal EnergyEnergy

Who Solar Energy benefitsWho Solar Energy benefits

The Environment!- Solar energy reduces amount of fossil fuel being burned-reducing the pollutants & CO2 polluting the atmosphere

You!- Reduces your energy bill

-Federal, State & utility financial incentives-Adds value to property

-Gain energy independence -Good investment in a sustainable future for yourself & your loved ones

The Community!-safer: improves national security-Protects future generations-Helps the economy!

Solar PV installation costs Solar PV installation costs

• Commercial based solar electric systems – Typically cost: $25,000 to $350,000 installed– Multiple variables influence the cost of these

systems:• Amount of utility grid power to be offset• Selected type of system• Mounting options

– Third party financing available

Solar thermal installation Solar thermal installation costs costs

• Commercial water heating systems – Typically cost: $15,000 to $250,000 installed – Multiple variables influence cost of these

systems: • Amount of water to be heated• Desired water temperature• Selected system collectors• Desired function(s) of the system

– Typical payback period for solar hot water heating systems is 6-8 years

– Third party financing is available

Federal Tax Credit:Federal Tax Credit:Business Energy Investment Tax Business Energy Investment Tax

Credit (ITC)Credit (ITC)• Corporate tax credit • 2005: Energy Policy Act

– S.48: Energy Business Energy Tax Credit• Oct. 3, 2008: Economic Stabilization Act of 2008

– 179D: Energy Efficient Commercial Buildings Tax deduction

• Allow AMT (alternative minimum tax) filers to take credit • 30% tax credit of expenditures • Extended for 8 yrs --> until Dec. 31 2016• NO maximum credit • Eligibility:

– Technologies: Solar water heat, photovolatics ect.– Equipment used to:Generate electricity,heat/cool

structures,provide solar process heat

LA Credit:Business Energy LA Credit:Business Energy Investment Tax Credit (ITC) Investment Tax Credit (ITC)

• Corporate tax credit • Allow AMT alternative minimum tax filers to

take credit• 30% of tax credit of expenditures • Max: fuel cells $1,500 per .05kW • Eligibility:

– Technologies: solar water heat, photovolatics etc. – Equipment used to: generate electricity, heat/cool

structures, provide process heat

Energy Efficient Commercial Energy Efficient Commercial Buildings Tax DeductionBuildings Tax Deduction

• Corporate deduction• Commercial, construction, state gov, fed gov • Energy Policy Act 2005

– Tax deduction for energy efficient commercial buildings

• Extended through 2013• Eligibility

– Technologies: water heaters, lighting, lighting controls / sensors, chillers, furnaces, boilers, heat pumps, air conditioners, etc.

• Ranging from $0.30-$1.80 pr sq-ft depending on technology & amount of energy reduction

MACRS + Bonus DepreciationMACRS + Bonus Depreciation• Corporate deduction • Modified Accelerated Cost Recovery System (MACRS)

– Business recover investments in certain property via depreciation deductions

– Property includes: • Solar electric & solar thermal technologies etc.

• Federal Economic Stimulus Act 2008– 50% bonus depreciation provisions for renewable energy

systems • American Recovery & Reinvestment Act 2009

– Provision from 2008 extended to 2009– Requirements:

• Recovery of 20 years (or less) under normal fed. Tax depreciation rules

• Taxpayer must claim deduction• Solar technologies acquired 2008 or 2009• Solar technologies working by 2010

Property TaxProperty Tax

• Solar Systems are an asset that add value to your property

• The value of solar energy systems are not subject to property tax in Louisiana

Calculating the payback timeCalculating the payback time

• Years to Breakevennet cost - property value increases

“pre-tax” average annual utility savings= years to break even

• Break Even point:– Costs / expenses = revenue – NET = ZERO (no net loss or gain)– EX) you spend $40 you make $40

Years to Break EvenYears to Break Even

– EX) Solar Panels• Entergy bill: 1,000 a month• Solar Panels cost: 10,000 • Save money over time • So the years to break even is how many years it would

take to get a net zero (recoup costs)

– Hybrid Cars • Cost extra but your not paying as much for gas• So if gas is cheep than the years break even will be

longer but if gas is expensive then the years to break even will be short

Years to Break Even (cont)

“pre-tax” average annual utility savings: how much your not spending on Entergy

Net cost - Property value increases

Saving $2

$10 - $5 = 5

Property value increases by $5

Property value increases: property value increases with solar panels

Net cost: what its worth to put on solar panels

= Years to break even(Net cost - property value increases)

(“Pre-tax” average annual utility savings)

What it means

(Net cost - property value increases)(“Pre-tax” average annual utility savings)

$10 - $5$2

= Years to break even = 2.5 years

Example

$10 for solar panels

McGehee Energy Costs McGehee Energy Costs

Date Building Account # KW pr Month Price

8/18/08 2343 Prytania 1286158 66600 $7,817.41

9/11/08 2343 Prytania 1286158 49800 $7,119.57

10/16/08 2343 Prytania 1286158 80000 $11,693.63

11/11/08 2343 Prytania 1286158 60000 $7,690.39

12/11/08 2343 Prytania 1286158 49000 $7,547.29

1/12/09 2342 Prytania 1286158 73600 $8,686.29

2/13/09 2343 Prytania 1286158 62800 $7,501.12

Average Monthly Bill CostAverage Monthly Bill Cost$8293.67

Average Kilowatts per monthAverage Kilowatts per month63,114.29kW/Month

Electric RateElectric Rate$.1314kWh

AssumptionsAssumptions

Solar Electric Numbers Solar Electric Numbers

What to examine What to examine

• Estimated system sizeEstimated system size• Estimated system costEstimated system cost• Financial incentivesFinancial incentives• Savings and benefits Savings and benefits

Estimated System Size Estimated System Size % energy

Solar system capacity required (DC watts)

Roof Area needed (sq-ft)

10 62kW 6,245

20 125kW 12,490

30 187kW 18,735

40 250kW 24,980

50 312kW 31,225

60 375kW 37,470

70 437kW 43,715

80 500kW 49,960

90 562kW 56,205

100 625kW 62,450

Estimated System Cost Estimated System Cost % of energy Assumed installation gross cost

10 $562,050 20 $1,124,100 30 $1686150 40 $2,248,200 50 $2,810,250 60 $3,372,300 70 $3,934,350 80 $4,496,400 90 $5,058,450 100 $5,620,500

Financial Incentives Financial Incentives % of energy

LA state tax credit

Federal Tax Credit

Estimated net cost

Loan monthly payment

10 $12,500 $164,865 $384,685 $2,431 20 $12,500 $333,480 $778,120 $4,918 30 $12,500 $502,095 $1,171,555 $7,405 40 $12,500 $670,710 $1,564,990 $9,892 50 $12,500 $839,325 $1,958,425 $12,379 60 $12,500 $1,007,940 $2,351,860 $14,865 70 $12,500 $1,176,555 $2,745,295 $17,352 80 $12,500 $1,345,170 $3,138,730 $19,839 90 $12,500 $1,513,785 $3,532,165 $22,226 100 $12,500 $1,682,400 $3,925,600 $24,812

Savings and Benefits Savings and Benefits % of energy

Property value increase

1st year utility savings

average annual utility savings

25 yr utility savings

ROI (solar system average cost as asset value)

ROI (system cost less property appreciation as asset value)

Internal rate of return

Greenhouse gas saved

10 199,036 9,952 16,704 417, 593 296% 613% 2% 1553 tons

20 398,072 19,904 33,407 835,187 293% 599% 2% 3,105 tons

30 597,108 29,855 50,111 1,252,780 292% 595% 2% 4,658 tons

40 796,144 39,807 66,815 1,670,374 291% 593% 2% 6,210 tons

50 995,180 49,759 83,519 2,087,967 291% 591% 2% 7,763 tons

60 1,194,216 59,711 100,222 2,505,561 291% 590% 2% 9,316 tons

70 1,393,252 69,663 116,926 2,923,154 290% 590% 2% 10,868 tons

80 1,592,288 79,614 133,630 3,340,748 290% 589% 2% 12,421 tons

90 1,791,324 89,566 150,334 3,758,341 290% 589% 2% 13,973 tons

100 1,989,360 99,468 166,953 4,173,837 290% 588% 2% 15,526 tons

Summary Summary

• Renewable Technologies in the future – Help the economy

• More domestic jobs that cannot be outsourced• Less money spent on foreign oil and natural gas

– Help the planet • Our planet needs responsible inhabitants

• Energy costs are going to keep going up• Energy self sufficiency is key for financial

freedom • Investing in solar technologies will help

you gain financial freedom

Works CitedWorks Cited

• “Business Energy Investment Tax Credit (ITC).” DSIRE: LA Federal Incentives for Renewables and Efficiency. February 18 2009. April 23 2009. <http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=US02F&State=federal&currentpageid=1&ee=1&re=1>.

• “Commercial Solar Electric Power (PV)." APS: Alternative Power Solutions. 2008. April 26 2009. <http://www.apowersolutions.com/index.php?p=1_5_Solar-Electric-Power-PV->.

• “Commercial Solar Water Heating.” APS: Alternative Power Solutions. 2008. April 26 2009. < http://www.apowersolutions.com/index.php?p=1_6_Solar-Water-Heating>.

• Dan. “Solar Thermal vs. Solar PV.” CalFinder: residential Solar Power Contractors. July 30 2008. April 26 2009. <http://solar.calfinder.com/blog/going/solar-thermal-vs-solar-pv/>.

•Dan. “The Lowdown on Solar Thermal Savings.” CalFinder: residential Solar Power Contractors. May 28 2008. April 26 2009. <http://solar.calfinder.com/blog/solar-information/the-lowdown-on-solar-thermal-savings/>.

•“Energy Efficient Commercial Buildings Tax Deduction.” DSIRE: LA Federal Incentives for Renewables and Efficiency. October 7 2008. April 23 2009. < http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=US40F&State=federal&currentpageid=1&ee=1&re=1>.

•“Financing Solar & Energy Efficiency Projects.” Solar Estimate: Local Solar Pros to Help You put Solar Energy to Work. 2000-2009. April 23 2009. <http://www.solar-estimate.org/index.php?page=rightforme&subpage=finance>.

•“How do you calculate the payback time?” Solar Estimate: Local Solar Pros to Help You put Solar Energy to Work. 2000-2009. April 23 2009. <http://www.solar-estimate.org/showfaq.php?id=9&fromsearch=1>.

•Modified Accelerated Cost-Recovery System (MACRS) + Bonus Depreciation (2008-2009).” DSIRE: LA Federal Incentives for Renewables and Efficiency. February 19 2009. April 23 2009. <http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=US06F&State=federal&currentpageid=1&ee=1&re=1>.

•23 2009. < http://www.conergy.us/desktopdefault.aspx/tabid-2343/>.

•“My Solar Estimator.” Solar Estimate: Local Solar Pros to Help You put Solar Energy to Work. 2000-2009. April 23 2009. < http://www.solar-estimate.org/index.php?verifycookie=1&page=solar-calculator>.

•“The American Recovery and Reinvestment Act of 2009 (Recovery Act).” U.S. Department of the Treasury: American Recovery and Reinvestment Act. May 5 2009. April 23 2009. < http://www.treas.gov/recovery/>.

•“Thy Solar?” Conergy USA: Renewable Energy. 2008. April