Why are turnkey Solar PV systems so ridiculously overpriced?

[dennis]

I had a rather large home system installed 10 years ago when the price was $8/W after rebates and the expected payback was 10-11 years even in high $$/kWh California. Initially the PV array cut our power bills by 60% annually. Then in 2012 I got my Model S and applied for the EV incentive rate from PG&E. Now I am paying 1/20th of my annual electricity cost from 10 years ago including charging the Model S and a Fiat 500e. The system has paid for itself and just sits there generating electricity...

My friends in the Bay Area are now being quoted about $4/kWh installed. To me it is a no-brainer with the virtuous combination of Solar/Net Metering/EV incentive rate/EV charging at night. I realize this may not apply to other states in the US.

My installer was great. The CEO/founder was a EE and one young installer had an ME degree and the other a EE. But there just wasn't enough profit to be made for the capital investment required so the CEO sold out to a larger company and started a consulting engineering company for large solar projects. A shame because they were really good but that was the financial reality of an unleveraged business.

 

[FlasherZ]

Nearly everyone should soon be able to finance solar without having to increase your out of pocket each month. One great installed around me is doing $2.75/W as part of a group install and this market is minutes old. Can't image you'll have a tough time finding a deal before the summer is done.

SolarCity is always an option if one doesn't have the up front cash.

SolarCity doesn't operate here because of the cheap power costs. They can't make a profit in any reasonable time.

 

[dhanson865]

SolarCity doesn't operate here because of the cheap power costs. They can't make a profit in any reasonable time.

aye, 9 cents per kWh here and the payback sucks for PV on my house even though I live in a state with way better solar insolation than the northern states.

 

[SageBrush]

aye, 9 cents per kWh here and the payback sucks for PV on my house even though I live in a state with way better solar insolation than the northern states.

Solar City is in Albuquerque, where a kWh is also ~ 9 cents

 

[FlasherZ]

Solar City is in Albuquerque, where a kWh is also ~ 9 cents

They explained to me that 9 kWh is beneath their threshold for profitability and that's why they don't serve these midwestern states. It could be that it's a combination of cheap power and regulation, who knows - bottom line is that they don't operate here, so you can't take advantage of their amortization/annuity business model.

 

[SageBrush]

It could be that it's a combination of cheap power and regulation,

If by regulation you mean political influence of the entrenched fossil fuel interests and utilities then I agree.

 

[TheTalkingMule]

SolarCity doesn't operate here because of the cheap power costs. They can't make a profit in any reasonable time.

Southeastern PA is just as cheap if not cheaper due to the Marcellus Shale frackers operating with zero extraction tax and SolarCity is active here though likely operating at a loss for now. As costs drift downward, SolarCity will be able to operate profitably nearly everywhere within a year or two.

Either way, you should certainly be able to get $2.85/W from a quality installer in St Louis at some point this summer. Not optimal yet, but definitely financeable to the point where your monthly out-of-pocket doesn't change much if at all. We've passed the major tipping point of cost/profitability, now the installation network needs to get up to scale regionally to make systems affordable to all.

 

[dhanson865]

Solar City is in Albuquerque, where a kWh is also ~ 9 cents

New Mexico had or has rebates or incentives of some sort. Tennessee does not. Tennessee utilities don't do net metering, no time of use rate plans, it's essentially anti PV here.

 

[SageBrush]

New Mexico had or has rebates or incentives of some sort. Tennessee does not. Tennessee utilities don't do net metering, no time of use rate plans, it's essentially anti PV here.

Yep --- Had incentives, yet so far as I know SolarCity is still operating.


Nowadays, I don't consider an area anti-PV unless they add a surcharge just because the homeowner has PV that is part of a grid-tie -- even if no net metering is used.

 

[dhanson865]

Yep --- Had incentives, yet so far as I know SolarCity is still operating.


Nowadays, I don't consider an area anti-PV unless they add a surcharge just because the homeowner has PV that is part of a grid-tie -- even if no net metering is used.

See TVA is killing the solar industry with 3 easy steps | for a good rant on it. AFAIK nothing has changed significantly since that was written.

 

[SageBrush]

Either way, you should certainly be able to get $2.85/W from a quality installer in St Louis at some point this summer. Not optimal yet, but definitely financeable to the point where your monthly out-of-pocket doesn't change much if at all. We've passed the major tipping point of cost/profitability, now the installation network needs to get up to scale regionally to make systems affordable to all.

I've often wondered at people who say that the pay-off for PV has to << 25 years to be worthwhile. It makes me wonder if they understand the calc or the meaning of those terms. Tongue in cheek, but I imagine this conversation:

Seller: 10 cents a kWh. Would you like that energy clean or dirty ?
Buyer: Same price huh ? Well then, obviously dirty!
Seller goes to talk with his manager and then says: OK! 5 cents a kWh for clean energy for 25 yrs
Buyer: Sounds risky. I'll take the dirty stuff at 10 cents a kWh

My fancy financial calculator (FinKit for OS X, shareware) tells me that a $3 a watt installed system is cash flow positive from day one using these assumptions per 1 kW system:
4% apr, 25 year pay-back
30% federal tax credit
1.5 - 1.75 kWh/watt*a production
10 cents a kWh retail cost

Loan: $126 a year
Annual PV savings: $150 - $175

This is true even before considering two facets that push the $ calc further towards PV:
1. Price increase of the utility over time
2. Tax deduction if the PV installation is part of home loan or equity line of credit

 

[SageBrush]

See TVA is killing the solar industry with 3 easy steps | for a good rant on it. AFAIK nothing has changed since that was written.

Absolutely; that was exactly my point. States like TN are politically holding PV back; it is not a money question.

 

[FlasherZ]

Panels arrived this morning... 49 cents per watt... now waiting on the rest of the goodies.

 

[SageBrush]

<<drooling>>

SolarWorld no less. That is awesome! What is the panel efficiency ?

 

[TheTalkingMule]

Panels arrived this morning... 49 cents per watt... now waiting on the rest of the goodies.

That must be so much fun. I'd love to do my own simple install, but my local installer is so great that I just want to give them the business. Good luck!

 

[FlasherZ]

My fancy financial calculator (FinKit for OS X, shareware) tells me that a $3 a watt installed system is cash flow positive from day one using these assumptions per 1 kW system:
4% apr, 25 year pay-back
30% federal tax credit
1.5 - 1.75 kWh/watt*a production
10 cents a kWh retail cost

Loan: $126 a year
Annual PV savings: $150 - $175

Unfortunately, these are very optimistic for the area where I live.

HELOC/HE loan APR rates are running about 5% right now for "good" FICO scores (700ish) @ $30/50k borrowed on 15 year terms. Yes, you can do better if you have 750-800 FICO, but not everyone has that.

Due-south-facing panels on a 6/12-pitch roof are generating about 1.33 kWh/W for 300W panels on my system installed 2 years ago (9 kW system netting right at 12 MWh). Using these Solar World panels, the production will be more like 1.25 kWh/W because of an east-west 1/12 pitch roof. There is going to be some degradation in there too, and don't forget that most system installers tell you to be prepared to do a new inverter in 10-15 years.

Then there's always the opportunity cost.

I look at it this way: you need to figure out a cash payback that fits into loan terms at minimum.

 

[FlasherZ]

Either way, you should certainly be able to get $2.85/W from a quality installer in St Louis at some point this summer. Not optimal yet, but definitely financeable to the point where your monthly out-of-pocket doesn't change much if at all. We've passed the major tipping point of cost/profitability, now the installation network needs to get up to scale regionally to make systems affordable to all.

I hope so, but if indications hold, that won't be the case. The few reputable installers that I'm aware of will quote $4/W and won't budge.

 

[TheTalkingMule]

I hope so, but if indications hold, that won't be the case. The few reputable installers that I'm aware of will quote $4/W and won't budge.

Southeastern PA was exactly the same one year ago, if not worse. We now have a decent governor in place, and while there's pretty much zero chance of state subsidy, there's now much more regulatory certainty. That seems to be the big thing for solar to proliferate now that hardware costs are no longer an issue.

The solar install market needs to be halfway up to scale regionally in order for customers to get the $2.75/W bids we're just now seeing in the Philly suburbs. Until STL installers can be assured of a steady efficient run of installs, they can only offer $4/W at best. Catch-22 of sorts. It'll scale super fast this summer and more next year, there's just too much low hanging fruit in these secondary markets like Philadelphia and St Louis.

States that treat solar customers at least semi-fairly at the state regulatory level will have affordable solar installs. Places like Nevada/Arizona/NM will be held back by too much uncertainty as legacy fossil interests sabotage attempts to scale regionally. Any way you slice it, it's just a matter of time.

You could always organize one of these Solarize group buy projects, or suggest it to a community organization. This group buy project is what dropped the install price standard so low in my area.

 

[SageBrush]

Then there's always the opportunity cost.

That would be business as usual with the utility.

Certainly not "everybody" will find PV a smart money choice, just as not everybody has an option. Some people do not even have sunlight.

This EIA graphic is interesting though: they try to count up the PV installed in the country and the electricity generated

The graphs are not granular but you can eyeball numbers. If I was feeling pessimistic I would say 1.5 kWh/w*a, or optimistically 1.6 kWh/w*a is average. Or perhaps a better guess is about 1.6 kWh/w*a with a SD of about 0.2. I just checked (again!) pvwatts for my home presuming unobstructed sunlight for a pole mount array that lets me change the panel angle a couple times a year and I came up with 1.9 kWh/watt*a (6.62 kWh insolation / day*kW average)

 

[strider]

You may want to wait to hear the results of poking holes in my own roof and my brother's roof first.

This would be my biggest fear. My Dad and I could handle the electrical side no problem. Not having a leaking roof afterwards? Eek.