Is Solar Right for Your City?
A TCAP White Paper
These offers can sound too good to be true and—based on claims we’ve seen and heard—they sometimes are. The bottom line is that solar is not a slam dunk for everyone. While some customers may benefit, others may not see a significant change in what they’re paying once the costs of installing and operating the project are factored in. Some customers could even end up paying more.
There are customers that don’t seem as concerned over cost because they simply want solar. They “like the idea” of renewable energy—in whole or in part. Yet, even if cost is not a consideration, there’s still a lot to know and understand about taking on a solar project. The remainder of this paper is intended to lay out some important considerations. The following are some typical claims made about solar power and a short discussion of the complexities involved with each of them.
1. I will get free power from my solar installation.
Since solar panels represent an up-front investment as opposed to the pay-as-you-go use basis of most utility bills, the lost opportunity cost of those committed funds should be considered. And, not just the cost of the panels and installation, but the expense associated with the tie-in to your existing electrical infrastructure.
These costs can be amortized over the life of the solar panels (often 20 years) but still need to be factored against the availability of output—typically between 30% and 50%. Those percentages reflect the fact that your solar panels will not generate power at night, and that they will output less electricity during morning and evening hours as well as on cloudy days. Therefore, these realities need to be included in your overall calculus.
To arrive at a $/kWh cost/benefit estimate, you’ll need to know a realistic, total projected output of the solar installation you are considering, factored over its useful life.
2. I can make my electricity bill disappear with solar power.
3. All of my energy will come from solar panels.
4. Solar Power will save me lots of money because it produces the most power when energy costs are also the highest.
Be aware, though, that these energy plans are less popular with customers because they are subject to higher price volatility and cost. Finally, if you are a frugal user of electricity, your electric bill may not be large enough to make any potential cost savings to justify the investment in a solar project installation.
5. I can make lots of money selling my excess power to others.
At other times—during your periods of high overall use—you will end up paying them because your solar installation won’t be capable of meeting your demand.
So, it’s likely to end up being a wash. Keep in mind, too, that they’re not likely to pay more than the current market price for the excess power you sell back to them. Moreover, if yours is a typical installation, you won’t have any excess power to sell during the highest price, peak usage periods.
6. I can claim to use renewable power for all of the power that comes from my solar installation.
RECs are the currency of the renewable energy market—one REC is issued per megawatt-hour of energy produced by renewables. You can get RECs, too, based on the power you generate with your own solar or wind power installation. Just remember that, if you are buying power under a contract, you’ll have to be sure to get the RECs associated with your usage in order to validate your renewable power claim. Alternately, you can purchase RECs on the secondary markets to meet your renewable goals.
Regardless, the number of RECs you have must match the usage you wish to claim as renewable, and it will add expenses to your total energy costs.
7. All solar projects are just about the same.
Generally speaking, though, it’s more advantageous to both own the installation and the power it generates. Projects that are on your property, but owned by others, can be fraught with complexities and problems. It is wise to seek out some market expertise to assist you in deciding which approach works best for you. Keep in mind that market dynamics and governing rules do change and that the criteria for determining the best approach change over time, too.
Solar power is gaining in popularity and can provide real savings to customers. But, the key is getting it all right: the right project scope, the right site, and the right contract terms.
TCAP can assist its members with making the most of their future solar initiatives.