Solar Analysis Report

Amal Kabalan
MDCSystems®
Consulting Engineer

Today there is a lot of dialogue about ‘being green’, ‘energy efficiency’, and ‘carbon footprints’. One of the main promises of campaigning politicians is investing in renewable energy technology. Every other commercial on TV or in a magazine speaks about green energy. Solar power is a major component of the renewable energy mix. By now, most people know that solar energy is a pollution free technology; it has the potential to reduce your carbon footprint and provide clean energy for future generations. In 2010 state imposed rate caps on electricity are set to expire, and utilities are positioning themselves for massive rate increases in Pennsylvania. Before deregulation, Pennsylvanians paid 15 percent more for their electricity than the national average. With current caps those customers are paying 2 percent less than the average. Amid all these promises and buzz one would think that it is time to invest in solar energy. A closer analysis is needed to figure out if such an investment is sound and profitable. A solar system has a lot of advantages; however, its profit depends on many different factors such as location, tax, rebate incentives, and the size of the system. Thus, a generalization cannot be made for such systems a case by case study is needed to conclude if this system is a cost-effective investment.

Let’s assume that you want to install a 3KW solar system on your house. This system will deliver 6000 KWh/ yr. The system will cost you around $23, 000. To pay for this cost you get a 6 %, 30-year loan and you are in the 37 % tax bracket (combined state and federal). Under these conditions, and taking into account that you will get a tax break on the $23,000 loan, the average cost of Solar system will be $0.22/kWh. The utility rates, however, differ from one location to another in one state. Thus, the location of your house will play a major role in determining whether it is viable for you to go solar.

In 2010 Pennsylvania PECO customers in Philadelphia and Delaware County and much of Bucks, Montgomery and Chester counties will experience an increase of 20 percent on the utility rates in January 2011. Customers in Eastern and Central PA, served by PPL Electric Utilities, could see increases of 37 percent according to the PA Consumer Advocate office. Bills for Allegheny power customers in the western part of the state could spike as much as 63 percent. In fact, Bills have already shot up 75 percent for some Pike County Light and Power customers in Northeastern PA where caps expired in 2006. Let’s examine the savings that one might be able to generate if you live in those counties. The following chart shows the projected utility rates in comparison to solar systems, also known as Photovoltaic (PV) systems rates. The main effect of that will be the continuous rise in the market and the addition of certain values that will decrease the idea of a democratic market in the very near future.

However, without any rebate incentives, certain residents of Northeastern Pennsylvania will start generating electricity at a lower rate than the utilities by 2014 by installing the solar system described earlier. Residents of Allegheny will reach this stage by the year 2020. However, Residents of Central Pennsylvania, Philadelphia, and Delaware Counties, will not experience any net savings without some rebate structure rates.

House Bill No.1 in Pennsylvania states that renewable systems are eligible for 15% rebates of the initial system cost, which makes solar systems a sound option to a lot of residents. This is illustrated in figure 2. Residents of Northeastern PA will be able to generate power that is cheaper than the current utility rates. Residents of Allegheny and Central Pennsylvania will be able to do the same by the year 2011 and 2016 respectively. Higher rebate rates are required so that residents of Philadelphia and Delaware Counties can profit from the use of solar systems. Figure 3 shows the savings that residents of Northeastern PA, Allegheny, and Central Pennsylvania can realize.

Given the anticipated rise in electric utility rates and the probability for ever escalating fossil fuel costs, locally generated electricity from PV solar is becoming a viable alternative. This is especially true when tax credits and rebates are available. When selecting a PV system configuration the user’s operating profile is key.