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Economics of

Photovoltaic Systems

Original Presentation by J. M. Pearce, 2006


Updated in 2010 by J.M. Pearce and M. Pathak
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
PV Economics Terms
• kW = kilowatt = 1 000 Watts
• MW = Megawatt = 1 000 000 Watts
• kW-h/kW/ *
– * year or month or day
– Amount of power predicted to be produced
from a 1 kW solar panel in the desired
location
• Payback = minimum time it takes to
recover investment costs.
Economics of a Solar
Electric Home

• A typical American uses ~11,000 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 2010 is
between $5/Wp to $10/Wp
• For a 4kW system:
– 4000Wp x $5/Wp = $20,000
– 4000Wp x $10/Wp = $40,000
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
Feed-In Tariff
• Solar FIT rates for Ontario:
• Rooftop
– Less than 10 kW - 80.2 ¢/kWh
– 10 - 100 kW - 71.2 ¢/kWh
– 100-500 kW - 63.5 ¢/kWh
– Greater than 500 kW - 53.9 ¢/kWh
• Ground Systems
– Less than 10 MW - 44.2 ¢/kWh
• You are guaranteed these rates for
20 years.
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 Work
In 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 Stations
and 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?
$3.12/Wp to $3.56/Wp
Economy of Scale

0 subsidies
Grid-tied
Market
Module Costs
Component Costs
Industry-Developed PV Roadmap
World PV Module Production (MW) Increases

World PV installations in 2004 rose to 930MW -- 512.2


500
growth of 62 % Consolidated world production of
PV now 1.15 GW+ 390.5
400

U.S. Japan Europe Rest of world


300 287.7

201.3
200
154.9
125.8
100
60.1 69.4 77.6 88.6
40.246.5 55.4 57.9
33.6
0
198819891990199119921993199419951996199719981999200020012002
Source: PV News, March 2003
World PV Module Production (MW) Increases
World PV Module Installation (MW)
Increases
So Why Can’t We Do It?
PV System vs. Electricity Costs
44

40
Capacity Factor = 0.2
36
Cost of Generated Electricity (cents/kWh)

(U.S. Average)
32

28
Japanese Retail Rate
24
German Retail Rate
Capactiy Factor = 0.25
20 (South West U.S)
16
Pennsylvania Retail Rate
12
Additional Assumptions:
8
System Lifetime = 20 years
Real Interest Rate = 6% California Retail Rate
4
O&M = 0.1 cent per kWh
0
$9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00
Installed PV System Cost ($/Wp)
New Technology
Could Play a Role
• Heterojunction with
Intrinsic Thin-layer
• Sanyo
• 18.5%
SANYO, plans to continue
to grow its unique solar
business, aiming to
reach a production scale
of approximately 2GW
for HIT solar cells by
2020.
New Technology
Could Play a Role
Built-in Incentives
Building Material Replacement Value
Material Material avoided $/W Value
Credit by BIPV Installation
$1/sq-ft Asphalt Shingle roof, $0.10/W
monolithic glazing
$5/sq-ft Laminated glass $0.50/W
w/coatings
$10/sq-ft metal roofing/cladding $1/W
Roofing slates, clay tile,
$20/sq-ft high performance coatings $2/W
Stainless steel,
photochromic glass
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?
• It is estimated that solar on average
creates 26 total jobs per MW in the US
– Coal only produces 8.7 total jobs per MW
in the US.

• Ontario predicts 31.6 jobs/MW for solar


PV
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
– As of 2009 there are
46,000 jobs. From 2009
to 2010, approximately
17, 000 new jobs were
created as a result of
the increased demand
through the installation
of solar systems.
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
and Michael Pathak.