Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

Solar Panel Project
Myself ^ | 7-15-12 | Unbubba

Posted on 07/15/2012 12:29:05 AM PDT by UnBubba

My company is contemplating the installation of a 1.2 MW solar photovoltaic (PV) generation solar panel project on the roof of our facility. We are located on Long Island and are powered by LIPA.

LIPA has a new green initiative program called CLEAN. LIPA's CLEAN Solar Initiative will pay customers $0.22/kWh for PV plants between 50 kW and 20 MW under 20-year contracts. LIPA will begin accepting applications under the program on July 16th, 2012.

The United States experiments with feed-in tariffs at the local level. A number of U.S utilities, municipalities and states have approved feed-in tariffs, however such policies typically deviate from the European model in one or more aspects, and few have led to rapid growth in PV markets.

Question. Do you think this is a good project for my company? The $0.22/kWh fee sounds great (we currently pay about $0.16/kWh on average over the course of one year), but it's fixed over 20 years.

Thus, there is no protection for dollar inflation and the potential rising cost of electric. Who knows, in five years $0.22 might be worth only $0.15 (or less).

I would appreciate your comments on this issue. There are other tax benefits for doing this project (i.e., 30% ITC and bonus depreciation) but I would like to exclude these from this analysis because they were available in prior years and have been evaluated.

Thank you.


TOPICS: Business/Economy; Outdoors; Science; Society
KEYWORDS: electric; lipa; solar; value
I evaluated a solar panel project for my company last year (prior to this new program) and calculated a "buy-back period" for this investment to take 9 years. This new program will reduce this period of time significantly.
1 posted on 07/15/2012 12:29:16 AM PDT by UnBubba
[ Post Reply | Private Reply | View Replies]

To: UnBubba

I would expect inflation to run about 4% per year (Historical average).

Consistant with this, see the excerpt from the LIPA report below. Over a 5 year period, electric prices rose 4.2%/year.

From the LIPA Report 12 12 05

LIPA’s Yearly Average Price Increases
Year
Average Price
Increase
1999 to 2000 0.7%
2000 to 2001 2.3%
2001 to 2002 1.8%
2002 to 2003 5.9%
2003 to 2004 10.3%

Source: U.S. Department of Energy,
Energy Information Administration


2 posted on 07/15/2012 12:46:31 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Pikachu_Dad
Thank you for your reply.

Your data is somewhat dated. I worry about the oncoming inflation. Due to the current economics of our society (and world, for that matter), many experts are predicting double digit inflation beginning as early as 2014. Needless to say, that concerns me.

3 posted on 07/15/2012 12:51:08 AM PDT by UnBubba
[ Post Reply | Private Reply | To 2 | View Replies]

To: UnBubba

So, assuming a uniform 4% increase in price/year...

By the end of the contract, you will be selling your electricity for $0.22 and having to buy electricity for $0.34 - a deficit of $0.12.

So while today’s price difference looks great, the chances of it being swiftly erased are very good.

You should work to get an escalation clause put into the contract for rise in prices. Otherwise you will be stuck in a very sour deal in about ten years.

Year Sell Buy Difference
1 $0.22 $0.16 $0.06
2 $0.22 $0.17 $0.05
3 $0.22 $0.17 $0.05
4 $0.22 $0.18 $0.04
5 $0.22 $0.19 $0.03
6 $0.22 $0.19 $0.03
7 $0.22 $0.20 $0.02
8 $0.22 $0.21 $0.01
9 $0.22 $0.22 $0.00
10 $0.22 $0.23 -$0.01
11 $0.22 $0.24 -$0.02
12 $0.22 $0.25 -$0.03
13 $0.22 $0.26 -$0.04
14 $0.22 $0.27 -$0.05
15 $0.22 $0.28 -$0.06
16 $0.22 $0.29 -$0.07
17 $0.22 $0.30 -$0.08
18 $0.22 $0.31 -$0.09
19 $0.22 $0.32 -$0.10
20 $0.22 $0.34 -$0.12


4 posted on 07/15/2012 12:52:45 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
[ Post Reply | Private Reply | To 1 | View Replies]

To: UnBubba

I think solar power is a good investment, under two conditions:

a. you are in an area with lots of sun. The more sunshine, the more power is produced.

b. You can use the power as it is produced. If you cannot use it all, the unused power is essentially wasted as we are not at a point with very good storage technology yet.

Solar panels optimal life span is about 20 years, with usuable lifespan being upwards of 30-35 years.


5 posted on 07/15/2012 12:54:56 AM PDT by Jonty30 (What Islam and secularism have in common is that they are both death cults.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Pikachu_Dad

That was my thought! I appreciate your comments.


6 posted on 07/15/2012 12:56:02 AM PDT by UnBubba
[ Post Reply | Private Reply | To 4 | View Replies]

To: UnBubba

4% is typical long term HISTORICALLY.

Given the spendthrift ways of our government, a currency collapse with hyper inflation is possible.

However, I am assuming a resumption of fiscally sound government.


7 posted on 07/15/2012 12:56:42 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
[ Post Reply | Private Reply | To 3 | View Replies]

To: Jonty30
We're on Long Island. This area has good and bad years when it comes to sun light, however, the stats are well documented.

We definitely use more power (about 3.2 MW/year) than a solar panel project will generate (about 1.4 MW).

Thank you for your thoughts.

8 posted on 07/15/2012 1:00:08 AM PDT by UnBubba
[ Post Reply | Private Reply | To 5 | View Replies]

To: Jonty30

He is in LONG ISLAND. That is NOT a place with a lot of sun.

The Mohave desert - 7.7 kWh/m2/day.
Montpelier, Vermont - 3.43 kWh/m2/day.

Long Island should be in the 3.4 kWh/m2/day range. Perhaps less due to being on the coast.

Assuming 15% efficiency of the cells, then the harvest is about 0.5 kWh/m2/day.


9 posted on 07/15/2012 1:04:32 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
[ Post Reply | Private Reply | To 5 | View Replies]

To: Pikachu_Dad
As stated previously, another concern of mine is the future cost of electricity. My scientific mind tells me that technology will lead to cheaper energy costs, but my business mind tells me that for profit enterprises will always look for ways to increase ARPU (average revenue per user).

Hence, my concerns.

10 posted on 07/15/2012 1:06:58 AM PDT by UnBubba
[ Post Reply | Private Reply | To 4 | View Replies]

To: UnBubba

A life of 20 years is probably about right - but verify based on the technology you intend to use.

You should include the cost of disposing of the cells when their useful life has expired.

On the other hand, all of the Solar bankruptcies may make obtaining solar panels at a steep discount possible. So you may be able to snag a lot of capacity for a song.


11 posted on 07/15/2012 1:08:22 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
[ Post Reply | Private Reply | To 8 | View Replies]

To: Pikachu_Dad
"He is in LONG ISLAND. That is NOT a place with a lot of sun."

I wish you could tell my sunburn that! :(

12 posted on 07/15/2012 1:08:36 AM PDT by UnBubba
[ Post Reply | Private Reply | To 9 | View Replies]

To: Pikachu_Dad

It definitely would not pay for itself in any reasonable length of time.

Have you thought of installing a wind turbine near New York’s city hall?

You should be able to generate enough power to pay for it.


13 posted on 07/15/2012 1:08:55 AM PDT by Jonty30 (What Islam and secularism have in common is that they are both death cults.)
[ Post Reply | Private Reply | To 9 | View Replies]

To: UnBubba

But you are basically buying your own power. If you are consuming 1/2 of what you will make you will have not export.

So if you do the contract right, you will have a fixed electric price for 1/2 of your needs for the next twenty years.

The surge in fracking giving plentiful and cheap natural gas may cut the cost of electricity. But your business mind should expect a typical inflation rate of 4% per annum based on history (mainly due to currency devaluations).


14 posted on 07/15/2012 1:11:54 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
[ Post Reply | Private Reply | To 10 | View Replies]

To: Pikachu_Dad
Believe it or not, an entire solar panel project's cost (soup to nuts, including planning, install, permits, service, etc...) has declined significantly over the past couple of years (from about $4.00/kWh to $2.80/kWH).

One of my big concerns is the general contractor's (GC) financial condition. I have seen many fly-by-night solar company's come and go over the past few years. Most of them have been in business for 5 years or less and have grown too quickly and have become over-leveraged.

15 posted on 07/15/2012 1:14:57 AM PDT by UnBubba
[ Post Reply | Private Reply | To 11 | View Replies]

To: Jonty30

Good one, Jonty.


16 posted on 07/15/2012 1:18:25 AM PDT by UnBubba
[ Post Reply | Private Reply | To 13 | View Replies]

To: UnBubba

So the delta between .16 and .22 (even in the short term) is being paid for by whom? The rest of the rate payers I would guess. The entire solar power/green energy deal is a scam.


17 posted on 07/15/2012 4:48:50 AM PDT by WHBates
[ Post Reply | Private Reply | To 1 | View Replies]

To: UnBubba

“(from about $4.00/kWh to $2.80/kWH).”

...that’s per Wh, not kWh. But yea, the price has come down greatly.

You should try to lobby for the same 22 cents per kWh, but with production being in the California desert (as mentioned by others). You’d still be SAVING THE WORLD, which is the reason for this in the first place, plus you’d be doing it twice as fast. The idea being that you’d buy the power from one of the big plants out there for maybe 15 cents, and then get paid 22 cents. It actually makes more sense for everyone involved...but will never be allowed to happen.


18 posted on 07/15/2012 5:28:49 AM PDT by BobL
[ Post Reply | Private Reply | To 15 | View Replies]

To: WHBates
Your capacity factor will be in the 10%-15% range, meaning your 1.2 MW (1200 kW) will produce on average about 150 kW (day/night, sunny/cloudy).

1200 kW X 12.5% X 8760 hrs/yr X $0.22/kWh = $290,000 per year.

If that justifies your investment, go for it. (You should be able to get a better estimate for the capacity factor.)

19 posted on 07/15/2012 5:42:22 AM PDT by Engineer1955
[ Post Reply | Private Reply | To 17 | View Replies]

To: UnBubba

I won’t mention the agency by name, but there was a solar panel project [federally funded] here in Texas that was supposed to supply power to several buildings. Yes, we get a LOT of sun here, but the panels were installed flat instead of at an angle facing south. It makes ZERO electricity. Got some nice covered parking garages now.


20 posted on 07/15/2012 5:42:34 AM PDT by Arrowhead1952 (It's time to take out the trash in DC.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Engineer1955

Yeah, there’s 8760 hours in a year.

Some are at night, in case you didn’t notice.


21 posted on 07/15/2012 5:47:15 AM PDT by Tijeras_Slim
[ Post Reply | Private Reply | To 19 | View Replies]

To: UnBubba
My experience from a 3.2 KW grid-tie system on a 2,700 SF home. Intial cost = $25K; FTC -30%; STC -50%; Equipment Depr. -6%. Final cost after credits, approximately $3.5K.

Energy use reduction (aprox.) 33% reduction in purchased energy; 33% reduction due to conservation measures due to heighten awareness of energy wastefulness and some inefficent equipment replacement (there are tax incentives here as well).

Comments: Absolutely no issues with the solar system to-date (plug and forget). Immediately after installation, energy costs in our area jumped 10.2%. While others in my area were jumping up and down mad, I actually never knew about the increased until a neighbor told me.

Of course, this wouldn't make sense without the huge tax incentives and it's likely that there is only so long that broke governments can continue these incentives.

Payoff will be in less than five years at current rates. I expect energy costs to increase and I'm planning to add off-grid capability due to concerns of future reliability issues with commercially provided power (i.e. rolling blackouts).

My $25K.

22 posted on 07/15/2012 5:57:12 AM PDT by Errant
[ Post Reply | Private Reply | To 16 | View Replies]

To: Engineer1955

Were you addressing me with this comment? I think not (I didn’t pose the original question), but interesting. What is the installed cost (total investment) for a functional 1200kW Solar system.


23 posted on 07/15/2012 6:25:49 AM PDT by WHBates
[ Post Reply | Private Reply | To 19 | View Replies]

To: Errant

You are in LA, I’m in AR. How do you deal with the dirty panels with water an pollen? I’d guess I’d spend 50 hours a year squeegying them ;)


24 posted on 07/15/2012 6:33:14 AM PDT by DCBryan1 (I'll take over the Mormon over the Moron any day!)
[ Post Reply | Private Reply | To 22 | View Replies]

To: DCBryan1
The roof is very steep, 45 degrees, and I have great water pressure! A few minutes with the garden hose, if the rain doesn't come, removes the pollen in the spring.

I still squeegee the panels once a year, from the ground, using an extend-able pole mounted squeegee. The panels are mounted on the garage and that makes them easy to get at. It only takes about 45 minutes, including set up and putting everything away. The most electricity the 3.2kw unit has produced, is just over 20kw in a day. That's about $2.40 of worth of electricity here, in one day! :) Not a lot, but it all adds up.

25 posted on 07/15/2012 6:57:16 AM PDT by Errant
[ Post Reply | Private Reply | To 24 | View Replies]

To: Engineer1955
Your math is sound. I ball-parked it at $300k/year. FYI, we would continue to pay, the utility every month,as normal, for our 3.2 MW annual usage. We would receive a check from LIPA each month for our $0.22/kWh fee from the 1.4 MW solar energy generation.

The system would cost approximately $3.36 million. We would receive a 30% federal ITC ($1.008 million), approximately 60% bonus depreciation on 85% of the project cost in the first year ($600,000 =$3.36 million * .85 * .60 * .35 (effective tax rate)). Thus, in year 1, our net cost would be about $1.75 million. Once the project is completed we would begin to earn our fees ($300k/year). We would also get the tax benefit of depreciating the remaining 25% of the project cost over time.

Having said all that, the pay back period is still quite long (about 6 years, which includes interest expense on financing the project).

We completed an energy efficient lighting project on our entire facility last year which had a pay back period of about 10 months. That project was a no-brainer. This project, not so much.

26 posted on 07/15/2012 7:08:23 AM PDT by UnBubba
[ Post Reply | Private Reply | To 19 | View Replies]

To: Tijeras_Slim
"Yeah, there’s 8760 hours in a year. Some are at night, in case you didn’t notice."

That has been accounted for in the calculation. The factor takes into account night hours (where no energy is produced, at all). The factor takes into account the physical location (latitude and longitude) of the facility.

27 posted on 07/15/2012 7:14:39 AM PDT by UnBubba
[ Post Reply | Private Reply | To 21 | View Replies]

To: UnBubba
Having said all that, the pay back period is still quite long (about 6 years, which includes interest expense on financing the project).

I don't see how you could go wrong, if your company isn't overextending. Sounds like a very good capital investment plan considering the likely hood of increasing energy costs and the possibility of future power interruptions due to our aging national electric grid. Plus the system stands last at least four times the payoff period.

28 posted on 07/15/2012 7:18:10 AM PDT by Errant
[ Post Reply | Private Reply | To 26 | View Replies]

To: UnBubba

Well, if there’s math involved, I’ve got a 40-40 chance of getting it wrong.


29 posted on 07/15/2012 7:18:50 AM PDT by Tijeras_Slim
[ Post Reply | Private Reply | To 27 | View Replies]

To: UnBubba

One thing to consider though, is what will the maintenance costs will be on a large system. The bugs have pretty much been worked out of the smaller units.


30 posted on 07/15/2012 7:24:20 AM PDT by Errant
[ Post Reply | Private Reply | To 27 | View Replies]

To: UnBubba

You have done the math, how does a 6 year payback compare to other uses for the companies capital budget? you menitioned lighting upgrades, its there other low hanging fruit available? Also, are you selling all the power back or just you excess? When you purchase price of electricity rises above 22c can you simply consume and not sell to the grid?

If you can use the power directly, does the design allow the system to function during a blackout? Sounds silly, but I haven’t scene a residential system that does.

Finaly, have you calculated the increased cost of roof maintenance. how long will the roof under the system last? if you have to reroof every ten years, you will have the added cost of removing and reinstalling the sytem every ten years.


31 posted on 07/15/2012 8:05:42 AM PDT by lack-of-trust
[ Post Reply | Private Reply | To 26 | View Replies]

To: UnBubba

You have done the math, how does a 6 year payback compare to other uses for the companies capital budget? you menitioned lighting upgrades, its there other low hanging fruit available? Also, are you selling all the power back or just you excess? When you purchase price of electricity rises above 22c can you simply consume and not sell to the grid?

If you can use the power directly, does the design allow the system to function during a blackout? Sounds silly, but I haven’t scene a residential system that does.

Finaly, have you calculated the increased cost of roof maintenance. how long will the roof under the system last? if you have to reroof every ten years, you will have the added cost of removing and reinstalling the sytem every ten years.


32 posted on 07/15/2012 8:06:16 AM PDT by lack-of-trust
[ Post Reply | Private Reply | To 26 | View Replies]

To: UnBubba

You have done the math, how does a 6 year payback compare to other uses for the companies capital budget? you menitioned lighting upgrades, its there other low hanging fruit available? Also, are you selling all the power back or just you excess? When you purchase price of electricity rises above 22c can you simply consume and not sell to the grid?

If you can use the power directly, does the design allow the system to function during a blackout? Sounds silly, but I haven’t scene a residential system that does.

Finaly, have you calculated the increased cost of roof maintenance. how long will the roof under the system last? if you have to reroof every ten years, you will have the added cost of removing and reinstalling the sytem every ten years.


33 posted on 07/15/2012 8:06:24 AM PDT by lack-of-trust
[ Post Reply | Private Reply | To 26 | View Replies]

To: UnBubba

You have done the math, how does a 6 year payback compare to other uses for the companies capital budget? you menitioned lighting upgrades, its there other low hanging fruit available? Also, are you selling all the power back or just you excess? When you purchase price of electricity rises above 22c can you simply consume and not sell to the grid?

If you can use the power directly, does the design allow the system to function during a blackout? Sounds silly, but I haven’t scene a residential system that does.

Finaly, have you calculated the increased cost of roof maintenance. how long will the roof under the system last? if you have to reroof every ten years, you will have the added cost of removing and reinstalling the sytem every ten years.


34 posted on 07/15/2012 8:06:59 AM PDT by lack-of-trust
[ Post Reply | Private Reply | To 26 | View Replies]

To: lack-of-trust
You make some very good points. All the power is sold back to LIPA. I will inquire about our ability to use the power during a blackout. I don't think that will work, however, because we utilize more energy than the solar panels will produce. We also have a 1,500 kW backup generator.

I will also inquire about being able to use the solar generated electric if our costs exceed $0.22/kwh.

The solar contractor claims that the free standing (ballast mount) panels will actually extend the life of the roof. Our roof is about 5 years old and is covered under a 20 year warranty.

I have a meeting on Tuesday to pursue this project further.

35 posted on 07/15/2012 4:19:24 PM PDT by UnBubba
[ Post Reply | Private Reply | To 34 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson