Sizing Solar System for the home @ 80% ?

[akumar12]

Hello, I am new to the forum, but have been reading and learning on this site.

My average usage over the past 12 months is 635, or annual usage is 7615.
I am located in San Jose, CA and have also looked at the PV Watts Calculator for my area.

I see comments that typically you get the best bang for your buck, if you size the solar system at 80%-90%. Is there some analysis that explains why we should go with 80%-90% vs 100%.
The only additional usage I may have would be a new A/C...

Thanks,

[J.P.M.]

Hello, I am new to the forum, but have been reading and learning on this site.

My average usage over the past 12 months is 635, or annual usage is 7615.
I am located in San Jose, CA and have also looked at the PV Watts Calculator for my area.

I see comments that typically you get the best bang for your buck, if you size the solar system at 80%-90%. Is there some analysis that explains why we should go with 80%-90% vs 100%.
The only additional usage I may have would be a new A/C...

Thanks,

That's a ballpark #, and may be more or less depending on what a life cycle cost type of analysis might yield.

The idea that less than a 100 % offset may be more cost effective in the long run has something to do with the idea that, in the past and to a pretty good extent for the near future, because of tiered rates, the last electricity you offset with PV is often or usually the least expensive power that you buy. So, using the most expensive way to offset the cheapest electricity you buy may not be the most economical use of financial resources.

T.O.U pricing and the idea that PV costs are coming down will probably change that some day, maybe sooner than later. In the meantime, folks may do well to understand that any attempt to predict the future is folly so, the best one can hope for is to see reality for what it is and take your best shot using knowledge gained about solar energy and the financial analysis tools available for a bit of learning time.

[DanKegel]

I see comments that typically you get the best bang for your buck, if you size the solar system at 80%-90%. Is there some analysis that explains why we should go with 80%-90% vs 100%.

To add to what JPM said - and to recap many past discussions -

People who pay a much lower rate for the first 10 or so kWh/day (the 'baseline' or 'tier 1') might benefit more from a solar system that produces just enough power to keep usage below that threshold. But if even baseline power is expensive where you live, offsetting 100% might make sense.

And if you have a minimum charge, aiming for a solar system that gets usage down just barely enough so you're paying the minimum charge might be the sweet spot.

It all depends on your utility's rate structure, and which plan you're on. And it depends on how rates change in the future, which makes this all a lot harder to predict. (I don't know where things landed, but see http://www.dra.ca.gov/general.aspx?id=2444 )

If you're in PGE land, http://www.pge.com/en/myhome/saveene...ers/index.page talks about current tiers a bit. Check out alternate rates (e.g. SmartRate) to see if they'd save you money.

It's all about payback time. What's your monthly bill now, what would it be with solar, and how many years would it take for the savings to pay for a solar system that just gets you down into Tier 1 (if you're on a tiered plan) vs. one that covers 100% of your use? Those are the kind of questions you need to look at.

(That, and reducing your energy use in the first place by e.g. replacing inefficient lights and appliances with efficient ones... sometimes that's cheaper than adding more solar.)

[akumar12]

Thanks JPM and DanKegel. Doing this analysis is quite complex due to all the changes going on in the tiered and TOU plans.

I have PGE over here in San Jose, CA. They had a 4 tiered plan in 2015, going to 3 tiers in 2016, and finally collapsing to just 2 tiers+high use surcharge in 2017.
In 2019, all residential customers will move to TOU plans.

3 tier plan rates currently are 18.2c, 25.4c, and 37.4.
TOU plans are quite complex but 1 plan appears to start at 15c (E6 plan closing shortly), while other TOU plans start at > 21c in summer (E-TOU A and B).

My average price from PGE currently is 21c on the tiered plan. And TOU plans will only offer minimal annual savings (< $100/year according to PGE, although not sure how accurate that analysis is).

My monthly average usage is 635 kWH currently, and annual usage is 7615 kWH.

PV watts says a 4.6 kW system will generate 7720 kWh per year (with 8% loss, 1.1 DC to AC, standard panels, and 96% inverter efficiency). This is a 100% coverage system, however the cost of electricity with this system over 20 years is less than 11c over 20 years i.e. if I purchase a system around $3.53 / kWH or ~$16K, then cost over 20 years is 16K / (7720*20) = 11c. This is before the the 30% tax credit but excluding the time value of money in the analysis.

So, getting a system with 100% coverage seems fine, given that the base cost of PGE plans is higher than 15c, and likely to rise much more over the next few years. I am sure there will likely be some other costs to me as well, over the next 20 years for maintenance, etc but it does not seem like a bad idea to buy a 100% coverage system??

Thanks for any input.

[sensij]

Using 20 years as the basis for the calculation is one way in which PV systems can look more cost-effective than they actually turn out to be. Does 20 years really reflect the amount of time you expect to be in the same house?

[akumar12]

I guess that is a long time and plans can change unexpectedly...but I could use 10 years, and then need to come up with the residual value of the system, when/if I sell my home...which is a guestimate again.

Also the post credit price would be 30% cheaper (7.5c vs 11c), but I guess we still have the time value of money to add to the analysis...

Using 20 years as the basis for the calculation is one way in which PV systems can look more cost-effective than they actually turn out to be. Does 20 years really reflect the amount of time you expect to be in the same house?

[J.P.M.]

Using 20 years as the basis for the calculation is one way in which PV systems can look more cost-effective than they actually turn out to be. Does 20 years really reflect the amount of time you expect to be in the same house?

Agreed. Simply because a PV system will last 20 or 25 years or so does not make that a valid number to use in a cost analysis. As you note, the longer the time frame, the more cost effective the PV system will look so peddlers use 20 or more years. FWIW, I used 12 yrs. for my analysis. I seem to remember seeing that the average time in a home in the U.S. is about 7 years, but that data is probably old and I'm sure there are lots of folks who move sooner or stay longer. Point is, trust no one. Do your own research.

As for residual or salvage value, I'd suggest that an existing PV system on a house has a resale value or adds a premium to the selling price that is not unlike the trade in value of a car in terms of a % or original price recouped. I have no hard basis for writing that, but, and in spite of what other academic, or what may be biased sources may say or puke out, I haven't seen anything that I think is trustworthy enough to change my opinion at this time. Somewhat coincidentally, I had an interesting conversation with a neighbor just yesterday. He claims to have been a residential real estate appraiser for 25 yrs. or so and said that the appraisers he knows are mostly in the dark about the value of PV systems, and that guidance on the issue is mostly non existent, fragmentary and generally unreliable. He adds $5K to the appraisal if a home has a PV system. That's it. All anecdotal, but perhaps telling.

[akumar12]

Agreed. Simply because a PV system will last 20 or 25 years or so does not make that a valid number to use in a cost analysis. As you note, the longer the time frame, the more cost effective the PV system will look so peddlers use 20 or more years. FWIW, I used 12 yrs. for my analysis. I seem to remember seeing that the average time in a home in the U.S. is about 7 years, but that data is probably old and I'm sure there are lots of folks who move sooner or stay longer. Point is, trust no one. Do your own research.

As for residual or salvage value, I'd suggest that an existing PV system on a house has a resale value or adds a premium to the selling price that is not unlike the trade in value of a car in terms of a % or original price recouped. I have no hard basis for writing that, but, and in spite of what other academic, or what may be biased sources may say or puke out, I haven't seen anything that I think is trustworthy enough to change my opinion at this time. Somewhat coincidentally, I had an interesting conversation with a neighbor just yesterday. He claims to have been a residential real estate appraiser for 25 yrs. or so and said that the appraisers he knows are mostly in the dark about the value of PV systems, and that guidance on the issue is mostly non existent, fragmentary and generally unreliable. He adds $5K to the appraisal if a home has a PV system. That's it. All anecdotal, but perhaps telling.

Thanks JPM. Redoing the analysis with $5K residual value, 12 years time frame, and $16K initial system cost, the cost becomes slightly higher.

Note: $5K residual value 12 years in the future, discounted back to today @ 5% annual rate = 2784 (= 5 / 1.05^12)

($16000-$2784) / (7720*12) = 13.3c (before the 30% tax credit). So this is still cheaper than the base/starting PGE rate.

[J.P.M.]

Thanks JPM. Redoing the analysis with $5K residual value, 12 years time frame, and $16K initial system cost, the cost becomes slightly higher.

Note: $5K residual value 12 years in the future, discounted back to today @ 5% annual rate = 2784 (= 5 / 1.05^12)

($16000-$2784) / (7720*12) = 13.3c (before the 30% tax credit). So this is still cheaper than the base/starting PGE rate.

You're welcome. Note my numbers were for example purposes only. Everyone's situation and #'s will be different as will be their analysis method. I tend to favor LOCE vs. expected NPV of expected cost of POCO power for the solar go/no go decision and then comparison of alternative analysis to guess if there's a better way to allocate the resources than solar. A 5% discount rate might be a bit optimistic for me but I've got no real beef with it.

[Remmy700P]

As for residual or salvage value, I'd suggest that an existing PV system on a house has a resale value or adds a premium to the selling price that is not unlike the trade in value of a car in terms of a % or original price recouped. I have no hard basis for writing that, but, and in spite of what other academic, or what may be biased sources may say or puke out, I haven't seen anything that I think is trustworthy enough to change my opinion at this time. Somewhat coincidentally, I had an interesting conversation with a neighbor just yesterday. He claims to have been a residential real estate appraiser for 25 yrs. or so and said that the appraisers he knows are mostly in the dark about the value of PV systems, and that guidance on the issue is mostly non existent, fragmentary and generally unreliable. He adds $5K to the appraisal if a home has a PV system. That's it. All anecdotal, but perhaps telling.

A couple of things. As a residential appraiser, he probably has zero experience valuing an income-producing asset, such as a solar array. Understandable. Commercial appraisers would have no trouble. However, his simply adding $5K to a home that has a PV system is lazy and is a disservice to his clients. There have been enough real estate transactions with homes with installed PV to conduct proper analysis, and such studies have been done by Berkeley National Labs, Wells Fargo, BofA et al that he should have had no trouble finding "guidance" on valuation methodologies. I attached a few you might want to share with him. Not sure what state you are in, but in CA the pseudo rule of thumb is for every $1 of electrical costs offset by solar equates to a $14-$20 additional premium on the listing price.

[SunEagle]

A couple of things. As a residential appraiser, he probably has zero experience valuing an income-producing asset, such as a solar array. Understandable. Commercial appraisers would have no trouble. However, his simply adding $5K to a home that has a PV system is lazy and is a disservice to his clients. There have been enough real estate transactions with homes with installed PV to conduct proper analysis, and such studies have been done by Berkeley National Labs, Wells Fargo, BofA et al that he should have had no trouble finding "guidance" on valuation methodologies. I attached a few you might want to share with him. Not sure what state you are in, but in CA the pseudo rule of thumb is for every $1 of electrical costs offset by solar equates to a $14-$20 additional premium on the listing price.

Sad to say but based on input from some friends who are Florida Realators, an existing solar pv system will not only not increase the home value but it can scare some people away from purchasing it.

[akumar12]

Sad to say but based on input from some friends who are Florida Realators, an existing solar pv system will not only not increase the home value but it can scare some people away from purchasing it.

That is weird. Why would that be, especially if the system is purchased, vs leased?? The new owners can simply disconnect the solar system from the grid, if they so wish??

[Remmy700P]

Sad to say but based on input from some friends who are Florida Realators, an existing solar pv system will not only not increase the home value but it can scare some people away from purchasing it.

You can't fix stupid.

[ButchDeal]

Sad to say but based on input from some friends who are Florida Realators, an existing solar pv system will not only not increase the home value but it can scare some people away from purchasing it.

Well realtors are the most stuck in their ways and slow to change, so when you consider those facts and that the realtor is usually setting the price and doing the negotiating, what do you expect.

[SunEagle]

Well realtors are the most stuck in their ways and slow to change, so when you consider those facts and that the realtor is usually setting the price and doing the negotiating, what do you expect.

My friend is very familiar with solar technology but indicates that solar is not a big draw. It just comes down to the buyers not comfortable purchasing an existing system.

What is even crazier is that since leasing a pv system is not allowed in Florida the hardware belongs to the home owner so no issue that the new owner has to assume a lease.