Price paid per watt

[sms]

With this post, I think you and I are stating to find some common ground in the analysis. From what I've read, the AB327 reform is not a cash grab by the utilities, but is likely to result in a net revenue increase that is consistent with long term national trends in electricity costs.

The extension of the argument I think we are both making is that as each panel is installed, its relative cost-effectiveness can be determined by looking at the cost of the electricity it is replacing. Spending $4.70 / W to offset electricity that costs $<0.20 / kWh is not a decision I would make, but do not object to others who consciously make that decision. Yes, the increasing rate of base tier electricity increases the relative benefit of replacing base tier consumption with panels, but that does not mean that it is a good investment yet. It has a lot to do with the price being paid. For my system, I calculated that paying $3.30 / W to replace base tier electricity (in SDG&E, similar to PG&E) would break even in about 9 years, which was barely acceptable. Paying $4.70 / W would not have been.

Edit: Just so it is clear, the calculations I used on my own system were not as simplistic as the example I presented above, but was done using annual rate modeling using the recent testimony heard by the CPUC. You can see more details in my thread here.

Actually the PG&E tier 1 rate is now 16.2¢ and the tier 2 rate is now 18.5¢.

I suspect that solar systems in parts of the country with much lower rates are lower in cost or no one would ever install one. The lowest PG&E rate tier is much higher than the highest tier in other areas. When someone insists that it's not worth offsetting the lower tiers I wonder what they think that the KWH price of the lowest tier is.

Maybe the question to ask is this: "what should the ratio of net price per watt (after all tax credits, rebates, etc.) be, to KWH rate, to make it worthwhile to offset that usage. You would not offset 10¢/KWH with a 400¢/watt system (40:1). Would you offset 16¢/KWH with 320¢/watt solar (20:1)?

[sensij]

Maybe the question to ask is this: "what should the ratio of net price per watt (after all tax credits, rebates, etc.) be, to KWH rate, to make it worthwhile to offset that usage. You would not offset 10¢/KWH with a 400¢/watt system (40:1). Would you offset 16¢/KWH with 320¢/watt solar (20:1)?

This is a fair question, and the answer to it depends heavily on the period of time over which you would plan for the benefits to accrue. If I knew for sure I'd live in my house for 30 years, I would probably be willing to pay >$4.00 /W pre-tax incentive for a PV system. Since I don't know that, I require a faster return on the investment. I can't do much to control Poco electricity prices, and if we lock down electricity consumption as constant, the only knob left to turn is to reduce the upfront expense.

What time period have you been using in your analysis? I used 8 years for mine, but extended it to 10 when the realities of system pricing became clearer to me.

[sms]

This is a fair question, and the answer to it depends heavily on the period of time over which you would plan for the benefits to accrue. If I knew for sure I'd live in my house for 30 years, I would probably be willing to pay >$4.00 /W pre-tax incentive for a PV system. Since I don't know that, I require a faster return on the investment. I can't do much to control Poco electricity prices, and if we lock down electricity consumption as constant, the only knob left to turn is to reduce the upfront expense.

What time period have you been using in your analysis? I used 8 years for mine, but extended it to 10 when the realities of system pricing became clearer to me.

At close to 100% offset my break-even point is about 7 years, assuming an average increase in rates of 2% per year. If the average price per KWH stays the same then it's 8 years. If it goes down then it's longer.

Doing a spreadsheet with tiers is difficult because the tier pricing keeps changing, not only the price per KWH but the number of KWH in each tier. My gut feeling is that with the two lower tiers going up in price every year, due to recent legislation, that it would be a mistake to reduce the system cost by a few thousand dollars to only offset the higher tiers. The break-even might go down to five years but after that it'd get worse every year. If we sold the house hopefully there'd be at least a slight increase in value due to zero electric bill, but it would likely be lost in the noise in the insanity of Bay Area housing prices.

If the lowest tiers were 10-12¢ it would be different. 12¢ versus 16¢ might not sound like a lot in absolute terms but 16¢ is 33% higher than 12¢.

[sensij]

At close to 100% offset my break-even point is about 7 years, assuming an average increase in rates of 2% per year. If the average price per KWH stays the same then it's 8 years. If it goes down then it's longer.

From this, I am guessing you are talking about total system break even, not the marginal breakeven of the panels offsetting low tier rates. It *is* more complicated to analyze the payback for each tier separately, but that is when the real trade-offs of paying for more efficient panels (in the case of limited space) or going with a higher % offset (if space isn't an issue) becomes clear.

[foo1bar]

Exactly. I think I will gain a slight advantage with declaring the rebate as income rather than having it deducted off the price and not getting the 30% tax credit, but only because we have a lot of deductions that bring down our taxable income.

I believe it will be taxed at 30% - same as the tax credit rate.
I don't think the IRS will consider the rebate as actual income.

But as I said before - I am not a tax lawyer.

[sms]

On the tax credit issue - sounds like a page out of the leasing slugs playbook.

How do you mean? The companies that lease take the tax credit for themselves and offer a lower upfront price but it's generally a terrible deal. If you can wait a year for the tax credit it's better to buy the system outright. Just as with vehicles, leasing tends to be for those people who are bad at math or that have no money or no credit.

[sms]

From this, I am guessing you are talking about total system break even, not the marginal breakeven of the panels offsetting low tier rates. It *is* more complicated to analyze the payback for each tier separately, but that is when the real trade-offs of paying for more efficient panels (in the case of limited space) or going with a higher % offset (if space isn't an issue) becomes clear.

Okay, I plugged it all into a spreadsheet.

If all my usage was at the current tier 1 price of 16.2¢/KWH it would be about a 10.1 year payback.
If all my usage was at the current tier 2 price of 18.5¢/KWH it would be an 8.5 year payback.

With the expected increase in tier 1 pricing of 2% per year, the payback, if all the usage were at tier 1, would go down to about 9 years.

But of course only part of the usage is at tier 1 or tier 2. At a net cost of 2.84¢/watt, and considering the high costs of tier 1 and tier 2, offsetting most of the use makes sense to me. Shaving $2K off the total cost and not offsetting tier 1 and tier 2 shortens the payback time only a little. Those that insist that it's ridiculous to try to offset the lower tiers probably don't realize just how expensive the lower tiers are in some areas. Some of them are likely paying less for their highest tier than PG&E customers are paying for the lowest tier.

I did not take into account the interest on my net out-of-pocket expense. If we were back in the days of 8-10% CDs then it would be better to just bank the money. The extremely low interest rates on savings make certain expenditures more logical than they would otherwise be.

[J.P.M.]

How do you mean? The companies that lease take the tax credit for themselves and offer a lower upfront price but it's generally a terrible deal. If you can wait a year for the tax credit it's better to buy the system outright. Just as with vehicles, leasing tends to be for those people who are bad at math or that have no money or no credit.

It was meant as a jest - Re: how some leasing companies have their goodies in the ringer for inflating the cost of a leased system to garner a larger investment tax credit and other tax benefits. I've been aware of how solar leasing works for several years now. Thank you for sharing your opinion on the subject.

[sensij]

Okay, I plugged it all into a spreadsheet.

You are using the right words, but still not seeing it. Let's say your panels are in Silicon Valley, south facing, 20 deg tilt.

Let's say you have two choices: 16 * 260 W panels (4160 W total) and 16 * 345 W panels (5520 W total)

Let's say the 260 W panels degrade 3% after the first year, and 0.7% thereafter. The 345 W panels degrade 2% in the first year, and 0.4% thereafter. PVWatts suggests the conversion from W to kWh for this installation is 1.58.

Let's say the baseline allocation is 7 kWh / Day in summer and 8.5 kWh / day in winter. In very broad strokes, that means you get 2829 kWh in tier 1, 849 kWh in tier 2, 1980 kWh in tier 3, and tier 4 after that. Let's also assume your annual usage is something close to what the Sunpower system would produce in year 0, or around 8700 kWh.

Let's guess at electric rates over 10 years using Table 3-4 of the ORA testimony, with 3% increases after 2018. The actual 2015 prices have a higher tier 1, lower tier 2, higher tier 3, but these could be adjusted to fit whatever price model you'd like. (Ignoring minimum bills, flat fees, etc)

Year---Tier 1--Tier 2--Tier 3--Tier 4
2015:--0.158--0.206--0.206--0.335
2016:--0.166--0.222--0.222--0.310
2017:--0.174--0.239--0.239--0.282
2018:--0.183--0.255--0.255--0.255
2019:--0.188--0.260--0.260--0.263
2020:--0.194--0.265--0.265--0.271
2021:--0.200--0.271--0.271--0.279
2022:--0.206--0.276--0.276--0.287
2023:--0.212--0.282--0.282--0.296
2024:--0.219--0.287--0.287--0.304

The resulting cash expenses (PV expense + electric expense) look like this:

2015:--17700---11256
2016:--25-------386
2017:--33-------412
2018:--40-------442
2019:--48-------463
2020:--56-------486
2021:--64-------509
2022:--73-------533
2023:--83-------558
2024:--92-------584

NPV, 0%--18215---15628
NPV, 4%--17413---14251

Regardless of discount rate used, the total expense of electricity plus PV is less if you go with the smaller system. Obviously, your actual monthly usage and generation will not line up with the uniform distribution I've used here, but even accounting for that within this method of analysis, it is very hard to come up with a set of assumptions in which the Sunpower system will cost you less over a 10 year period.

[SoCalsolar]

I probably agree with sensij however

I probably agree with sensij and the analysis is way beyond what most would attempt for themselves and especially for a stranger. There look to be some assumptions and information that may not be quite accurate. In the same ORA document referenced in your post on page 3-8 it references what the ORA predicts the rates will be by summer of 2015 and they are quite different then what you have in your chart which seems to fluctuate by reasons that can only be explained by the craziness that is the CPUC. It seems that in the interest of consistency, the starting point should line up with the increase. The baseline for region X which seems like it ought to cover "Silicon Valley" is

Baseline Territory X
Electric - Code B
Basic Quantities Summer: 10.1 Winter: 10.9
Electric - Code H
All-Electric Quantities Summer: 9.3 Winter: 16.7

All this does is lessen the impact of the higher cost tiers on the estimated payback and strengthen the argument that a lower cost panel will save you more money over time. sms it seems as though you may have gotten sold but there are other factors to consider current usage, future usage, that could impact your decision and the numbers. All this analysis fails to tale into account some sort of catastrophic failure of non-SunPower panels which SunPower likes to insinuate is a real possibility. If you want SunPower get SunPower but in your case it looks really difficult to justify the cost if savings is your ultimate goal. If you want SunPower then to improve your payback you could go with the 327w panel you ought to be able to find those for around the $4 mark as SP has been offering these to it's dealers at a very good price if they buy a truckload.

A few posts back sms mentioned the difference in rates between the IOU in his area PG&E and a municipal utility. The difference is stark and consistent that the IOU's are about 40-50% more expensive than the government run utilities. One of the rare industries where the government run business is more efficient than the private sector run businesses. The rate game is stacked against the consumer. The state has no interest in low rates as they collect taxes on the electricity sold/used the IOU's have little to no interest in conservation or low rates, and the CPUC is by appointment from the Governor who has no interest in lower the money the state collects. It a case of not wanting to kill the golden goose but no real interest in (except by appearance) reducing usage or lowering or controlling rates.

[foo1bar]

The difference is stark and consistent that the IOU's are about 40-50% more expensive than the government run utilities

Actually 200% more expensive around here.
SVP (the municipal POCO) is ~$.11/kwh
PG&E is ~$.33/kwh

That's top tier for both - bottom tier it's $.09787 vs $.1617

http://siliconvalleypower.com/Modules/ShowDocument.aspx?documentid=6246

http://www.pge.com/tariffs/tm2/pdf/ELEC_SCHEDS_E-1.pdf

[sms]

Actually 200% more expensive around here.
SVP (the municipal POCO) is ~$.11/kwh
PG&E is ~$.33/kwh

That's top tier for both - bottom tier it's $.09787 vs $.1617

http://siliconvalleypower.com/Modules/ShowDocument.aspx?documentid=6246

http://www.pge.com/tariffs/tm2/pdf/ELEC_SCHEDS_E-1.pdf

Yeah, don't get me started about that.

I was telling my wife to stop plugging in her plug-in hybrid because the electricity is costing about 2x as much as gasoline on a per mile basis. I mentioned that to someone that lives in Santa Clara and they advised me to move. The value of the plug-in hybrid is solely for carpool lane access. If it hadn't been less than the non-plug-in version (due to the tax credit and a huge rebate from Toyota) we would not have bought it.

[sms]

You are using the right words, but still not seeing it. Let's say your panels are in Silicon Valley, south facing, 20 deg tilt.

Let's say you have two choices: 16 * 260 W panels (4160 W total) and 16 * 345 W panels (5520 W total)

Let's say the 260 W panels degrade 3% after the first year, and 0.7% thereafter. The 345 W panels degrade 2% in the first year, and 0.4% thereafter. PVWatts suggests the conversion from W to kWh for this installation is 1.58.

Let's say the baseline allocation is 7 kWh / Day in summer and 8.5 kWh / day in winter. In very broad strokes, that means you get 2829 kWh in tier 1, 849 kWh in tier 2, 1980 kWh in tier 3, and tier 4 after that. Let's also assume your annual usage is something close to what the Sunpower system would produce in year 0, or around 8700 kWh.

Let's guess at electric rates over 10 years using Table 3-4 of the ORA testimony, with 3% increases after 2018. The actual 2015 prices have a higher tier 1, lower tier 2, higher tier 3, but these could be adjusted to fit whatever price model you'd like. (Ignoring minimum bills, flat fees, etc)

Year---Tier 1--Tier 2--Tier 3--Tier 4
2015:--0.158--0.206--0.206--0.335
2016:--0.166--0.222--0.222--0.310
2017:--0.174--0.239--0.239--0.282
2018:--0.183--0.255--0.255--0.255
2019:--0.188--0.260--0.260--0.263
2020:--0.194--0.265--0.265--0.271
2021:--0.200--0.271--0.271--0.279
2022:--0.206--0.276--0.276--0.287
2023:--0.212--0.282--0.282--0.296
2024:--0.219--0.287--0.287--0.304

The resulting cash expenses (PV expense + electric expense) look like this:

2015:--17700---11256
2016:--25-------386
2017:--33-------412
2018:--40-------442
2019:--48-------463
2020:--56-------486
2021:--64-------509
2022:--73-------533
2023:--83-------558
2024:--92-------584

NPV, 0%--18215---15628
NPV, 4%--17413---14251

Regardless of discount rate used, the total expense of electricity plus PV is less if you go with the smaller system. Obviously, your actual monthly usage and generation will not line up with the uniform distribution I've used here, but even accounting for that within this method of analysis, it is very hard to come up with a set of assumptions in which the Sunpower system will cost you less over a 10 year period.

A lot of errors in that, starting with the wrong cost for tier 1.

Tier 1 is about 316 KWH at 16.2¢/KWH
Tier 2 is about 95 KWH at 18.5¢/KWH
Tier 3 is about 221 KWH at 26.4¢/KWH
Tier 4 is 32.4¢/KWH

You also want to take into account the different degradation rates of the different types of panels as well as the efficiency differences. The difference in degradation rates makes a huge difference when it is compounded over time.

When I use the calculator at http://pvwatts.nrel.gov/ I get generation of 9175KWH per year and an 11¢/KWH equivalent to generate the power. I calculated around 8280 KWH using what I thought were conservative losses. The Sunpower proposal estimated 8473, degrading to 8079 over 20 years.

The bottom line is that while the break-even time is longer when you offset the lower tiers, no matter what the price of the lower tiers, if the lower tiers are high-priced then it makes sense to offset them. The salespeople hawking the poorer efficiency panels will point to a shorter break-even time with a lower capacity system especially when they can't configure a higher capacity system. Don't fall for it.

[sensij]

I wonder how much of the discrepancy has to do with where the power comes from:

SVP, 2013
Renewable: 24.2%
Coal: 8.4%
Hydro: 17.7%
NG: 43.7%
Nuclear: 0%
??: 6%

PG&E, 2013
Renewable: 22%
Coal: not listed
Hydro: 10%
NG: 28%
Nuclear: 22%
??: 18%

[sensij]

A lot of errors in that, starting with the wrong cost for tier 1.

Tier 1 is about 316 KWH at 16.2¢/KWH
Tier 2 is about 95 KWH at 18.5¢/KWH
Tier 3 is about 221 KWH at 26.4¢/KWH
Tier 4 is 32.4¢/KWH

You also want to take into account the different degradation rates of the different types of panels as well as the efficiency differences. The difference in degradation rates makes a huge difference when it is compounded over time.

When I use the calculator at http://pvwatts.nrel.gov/ I get generation of 9175KWH per year and an 11¢/KWH equivalent to generate the power. I calculated around 8280 KWH using what I thought were conservative losses. The Sunpower proposal estimated 8473, degrading to 8079 over 20 years.

The bottom line is that while the break-even time is longer when you offset the lower tiers, no matter what the price of the lower tiers, if the lower tiers are high-priced then it makes sense to offset them. The salespeople hawking the poorer efficiency panels will point to a shorter break-even time with a lower capacity system especially when they can't configure a higher capacity system. Don't fall for it.

Your reading comprehension is clearly lacking. Efficiency and degradation rates were included in the calculation. I am certain that if you perform the analysis with whatever numbers you want to nitpick about, you will find a similar result to what I posted. You may be a lost cause, but perhaps others who stumble onto this thread will think twice about paying for a large or premium system that will cost more over most time periods of interest than a smaller, less expensive system would.

Edit: one more attempt, using numbers that may be more consistent with your personal rate expectations and better baseline allocations for your area.

Year---Tier 1--Tier 2--Tier 3--Tier 4
2015:--0.162--0.185--0.264--0.324
2016:--0.170--0.194--0.246--0.301
2017:--0.179--0.204--0.253--0.310
2018:--0.188--0.214--0.260--0.320
2019:--0.193--0.218--0.266--0.329
2020:--0.199--0.223--0.271--0.339
2021:--0.205--0.227--0.276--0.349
2022:--0.211--0.232--0.282--0.360
2023:--0.217--0.236--0.288--0.371
2024:--0.224--0.241--0.293--0.382

The resulting cash expenses (PV expense + electric expense) look like this:

2015:--17700---11256
2016:--26-------395
2017:--33-------423
2018:--41-------453
2019:--49-------475
2020:--57-------498
2021:--66-------521
2022:--75-------546
2023:--85-------572
2024:--95-------599

NPV, 0%--18228---15746
NPV, 4%--17423---14345

Also, here is the spreadsheet I'm using, if you would like to play with the numbers yourself. Looking at this monthly would be better than looking at it annually, but really, the conclusions don't change substantially.