Assessing the Costs to Homeowners Aiming For

Monetary Net Gains from Photovoltaic Systems

Daniel Pate

Environmental Economics: ECON 525

May 4, 2016

ii

Table of Contents

Acknowledgements Executive Summary Introduction Literature Review Data Methodology Results Discussion/Conclusion References Tables Figures Appendices

iii

Acknowledgements

I would like to thank the U.S. Energy Information Administration (EIA) for data that

allowed me to determine energy figures used in this study. Additionally, appreciation is extended

to Dr. Chris Dumas for his guidance on this project and lectures that applied economic principles

to environmental scenarios.

iv

Executive Summary

With PV systems rapidly emerging in the residential sector today, this study will compare

the upfront costs that are required of a solar user as well as of a utility-based electricity user and

then determine the amount of time required for the solar homeowner to acquire net monetary

savings compared to the electricity homeowner, if any are received at all. The case for net

savings can be a critical channel that solar and other renewable energy companies can tap to

attract new customers, so I will evaluate where technology stands at this point in being able to

save money through providing solar power for a home. It should be noted that a variety of factors

could cause major swings in the results; however, this study leaves out many of these factors in

an attempt to serve as a reliable base scenario for future studies.

1

Introduction

With renewable energy technologies continuing to evolve at a rapid rate and governments

calling for more sustainable energy practices, the market for solar energy has hardly seemed

more auspicious. Further rationale for this technology is a moral imperative, mostly for

developed countries, to curb fossil fuel emissions as evidence for human-induced climate change

continues to mount and vulnerable countries bear the brunt of consequences from precipitous

carbon monoxide levels in the atmosphere. Additionally, energy suppliers are needed more than

ever as the International Energy Agency (IEA) predicts that the global demand of energy will

grow at a rate of 1.5 percent per year from 2010 to 2030 (Mitscher & Rüther, 2012)

Countries all across the globe have realized the significance of increasing focus on

cleaner fuels, as evident by the ambitious renewable energy targets set by European Union

members as well as such world collaborative efforts as the recent Paris Agreement. One possible

strategy for reaching emissions goals in the United States is approaching the residential market,

responsible for 20 percent of the nation’s greenhouse gasses from fossil fuels (Timmons,

Konstantinidis, Shapiro & Wilson, 2016). Homeowners can assist with emissions goals through

the adoption of photovoltaic (PV) systems that allows them to collect solar energy for residential

use and acquire independence from the utility grid.

Motives for implementing solar installation vary from monetary savings through avoiding

electricity rates to moral reasons such as reducing one’s carbon footprint. Energy savings from

adopting solar has often been used as a selling point for solar developers despite the potential

expensive upfront cost, much of which can be mitigated by government-offered incentives.

Additionally, many solar companies have offered financial assistance to cover most or all

2

installation costs of solar panels while allowing customers to simply pay for the amount of

electricity that they generate during a long-term contract (Sweet, 2013).

Despite a recent trend of increasing solar adoption in the residential, business and

industrial sectors, only 0.5 percent of global electricity demand is currently met by solar energy

(Nelson, Gambhir & Ekins-Daukes, 2014). Even in the United States, solar is responsible for

only 0.4 percent of total electricity, with 67 percent coming from fossil fuels, including coal,

natural gas and petroleum. (“Frequently Asked Questions”, 2016). Specifically, only 230,000

(Harrington, 2015) out of the total 122,460,000 homes in the U.S. in 2013 used solar energy,

making up a meager 0.002 percent. However, the rate at which solar adoption is growing is quite

impressive, with the number of homes using the renewable source growing over 1,000 percent

between 2006 and 2013 (Wisland, 2014) while the one millionth home is projected to go solar in

2016 (Harrington). As economies of scale continue to decrease technological costs and more

market options become available, this trend will only continue upward.

Although solar has much progress to make before becoming affordable on a wide scale,

many homeowners already view it as more cost-effective than utility-based electricity. This case

is further supported by the growing world population rate that will cause non-renewable natural

resources to become scarcer and thus more expensive as time goes on. If enough evidence is

provided to back up the cost-effectiveness of solar, not only could more households consider PV

adoption but also more small businesses and power plants may realize that adopting renewable

energy sources is a smarter corporate strategy. However, this evidence would have to help

provide an answer to one of the most prevalent questions from homeowners who are deciding on

whether to make the conversion: How long will it take for me to start saving money?

3

This study will attempt to generate an answer for that question by using electricity and

solar installation prices to perform a cost-analysis and determining a figure that represents the

amount of time a solar user is required to wait before making net monetary savings on his

investment compared to using electricity. What makes this scenario difficult to assess is its

dependence on a myriad of factors, which are not limited to: irradiance of the area, rooftop

dimensions, electricity rates, weather conditions, market options, the energy habits of residents

and battery storage technology. However, implementing a study that attempts to hold many of

these factors constant and that uses average figures of energy-related costs could produce a

reliable base scenario that can assist with future studies.

Additionally, incentives will not be taken into account since many of them vary

throughout the country. The federal Solar Investment Tax Credit provides a 30 percent credit to

homes and businesses that install solar systems; however, excluding this incentive allows for the

application of this study to any homeowner who might face exemption to this credit and to

homes in the future even if this incentive is no longer available. It should also be noted that

renting PV systems is another cost-flexible strategy of adopting solar as this option continues to

become more popular among U.S. homeowners in states where sale of electricity by third-party

companies is allowed.

Given that no financial assistance is provided to a solar adopter, I think it is reasonable to

predict that a homeowner who installs enough solar capacity to meet all of his energy needs will

have to wait 10 years before reaping savings compared to his electricity-using counterpart. This

figure is selected because I feel that it is a feasible goal considering today’s technology and a

solid threshold that if surpassed would likely dissuade many potential customers from adopting

4

PV for their home. Additionally, this figure becomes even more appealing when you consider the

lifespan of a PV system, which is substantially longer than the average HVAC system.

Literature Review

Given solar energy’s recent emergence and incorporation into many current policies, it

has been a topic popularly covered by the mass media and scholarly studies alike. Many articles

focus on strategies that would better integrate the technology with society on a business and

residential level, including ones focused on cost-effectiveness, emissions reductions, net

metering and renewable energy planning on a mass scale. While many of these topics are not

included on this particular study, many of them could be incorporated in a future study to better

determine the long-term value of residential PV system.

One factor that would greatly facilitate a homeowner’s ability to meet residential energy

needs with solar is PV battery storage technology. Agnew and Dargusch (2015) note that while

current battery prices make it inconvenient for many homeowners to invest in this technology,

the electricity industry should prepare itself for “one of the most disruptive influences to impact

the electricity sector in decades” as projections show that prices could drastically decline in the

next ten years and allow an escalating number of people to become independent from the grid.

While such a transformation would promote emissions reductions and help reduce demand from

the grid, it could also result in laborious regulation processes focused on solving very complex

scenarios while also increasing the prices on those who rely solely on the grid as the network

would have to be financed through smaller provisions of electricity.

However, it is clear at this point that the market cost of the technology will have to decline

before it becomes more widely used. Some European countries have already started offering

5

generous incentives for PV battery adoption while in the U.S., investment banks such as Morgan

Stanley and Barclays are already predicting widespread disruption that the technology could

have on the industry. The authors note that the popularity of the technology and its reception by

PV owners ultimately depends on governmental agencies’ desired outcomes and whether

markets embrace the financial opportunities that the technology potentially offers.

With solar battery storage still in a developing state, net metering might be able to bolster the

industry by allowing homeowners monetary gains for contributing any electricity that they don’t

use to the grid. However, Hirth (2013) points out the complexities involved when comparing the

cost of solar energy to the retail price of electricity. He said that it is not correct to assume that

the cost of producing solar energy with a PV system is what the homeowner should be paid to

contribute to the grid because of the negative externalities that can occur to other economic

actors. This includes “having to pay more for electricity networks, levies and taxes,” which can

make up a substantial amount of retail price that utilities have to pay. Additionally, determining

the market value of electricity in general is complex because of the ebb and flow of supply and

demand along with the inchoate storage development, and all this has become even more

complicated by the influx of individual solar energy providers.

Hirth also gives an interesting analysis on the effects that fossil fuel prices have on solar

market value. Using the European Electricity Market Model, he determines that solar value

would increase with the rise of coal prices since they are substitute goods and decrease with the

increase of natural gas prices because of a complementary goods scenario, given that natural gas

is usually utilized when solar generation is low. This could allow homeowners to use net

metering to their personal gain as they decide when to contribute energy to the grid based on

what the current market prices are of each energy resource. This is one reason that net metering

6

could play a critical role in the decision-making process of homeowners and business owners to

purchase PV systems.

Peng, Huang, Liu and Huang (2015) performed an energy case study by assessing the

performance of a net-zero-emissions home equipped with such features as PV systems, a hot

water system, dynamic windows, a “dual-channel air-layer structural wall” and an energy-

efficient HVAC system. The authors used local weather data and energy generator simulations to

determine that the home would not only provide all the electricity needed but also contribute 25

percent more while the features also helped contribute to higher air quality thanks to installed

ventilating systems. Assessing the home for a week during an energy-efficient home

competition, the authors determined that the building needed only 64.84 square meters of

photovoltaic systems to produce what would be equal to 14,167 kilowatt hours (kWh) a year for

a home that required only 11,335 kWh.

These authors showcase how energy efficiency can play a vital role in efforts to ensure a

renewable source meets all the energy needs of a home. If a homeowner has an emissions-

reduction objective to adopting solar, his purpose could be defeated by inefficiencies causing the

home to unnecessarily consume all of the energy generated from the renewable source,

increasing chances of accessing the grid for fossil fuels-based electricity. Residential energy

efficiency encompasses many topics, including home improvement retrofit actions, home

appliance market choices and perhaps most importantly, behavioral science related to

conservation habits. While an aggressive approach to this industry may come off as an intrusion

on the lives of Americans, it may be a critical market to helping with emissions reduction targets.

One possibility of reaching out to this market could involve an education-based approach, such

as organizing community-based workshops, incorporating energy efficiency into K-12

7

curriculums and even providing government-subsidized retrofits that allow homeowners to

shadow contractors performing the home improvements.

In a comparison of various renewable energy sources to determine the cost-effectiveness

of reducing a home’s carbon footprint, Timmons, Konstantinidis, Shapiro and Wilson (2016) use

marginal cost analysis to corroborate the case that PV systems are the most elastic. This is

because of its easy accessibility due to mass production of systems, comparable installation costs

and amount of sunlight available to most areas, assuming that political or regulatory boundaries

aren’t involved. In addition to the renewable source providing predictable upfront costs, the

authors note its near-zero operating costs, net metering ability and long lifespan. While it is

relatively easy to project the low operating costs of PV systems, upfront costs are much more

difficult to assess due to the various degrees of solar capacities available along with other factors

such as state or federal incentives and financial assistance from solar developers. The authors

note in the conclusion that regulation would likely be the impetus necessary to decarbonize

American homes, which could be in the form of a carbon tax, carbon emission standard or

subsidies.

One factor about the industry that is evident at this given time is that political and

regulatory boundaries can play a role in a homeowner’s decision to adopt solar. In North

Carolina, for example, recent legislative decisions have promoted an environment less conducive

to residential solar financial assistance than other states. This trend is epitomized by the sunset of

the Personal Renewable Energy Tax Credit at the end of 2015, an incentive that allowed

homeowners and businesses to claim a 35 percent credit for investments in renewable energy

(Barnett, 2015). Additionally, North Carolina policy disallows third-party companies from

selling solar energy directly to a homeowner, preventing the option of renting PV systems

8

(“Solar FAQ”, 2016). However, these policies vary greatly by state, a reason I decided not to

include incentives and regulations in this study.

Shifting focus to a state that allows solar panel rentals, Liu, O’Rear, Tyner and Pekny

(2014) compared the financial differences between purchasing and leasing PV systems in

California. They concluded that it was more economically feasible to lease PV systems through a

licensed distributor primarily due to the difficulty of depreciating the capital that purchasers face

and thus the homeowner would not be able to take advantage of tax breaks. Additional benefits

of leasing solar equipment included minimal upfront costs, maintenance duties being referred to

the lessor and contract flexibility that could lead to eventual purchase of the systems at a reduced

rate if desired. Liu et al. also said that leasing makes sense “as long as the combination of

monthly leasing fees and the costs of grid electricity consumption are lower than the costs if all

electricity demands were being completely met by the grid.”

These studies of focus make it clear how various factors can determine the costs of

renewable energy technologies. Promoting a future that embraces renewable energy will require

a combination of continued technological improvements along with policy objectives that have

the interests of this industry in mind. Since state policies vary greatly, it might be more realistic

to think that federal action will stand the best chance of encouraging use of renewable sources, as

evident by the recent five-year extension of the Solar Investment Tax Credit for homeowners and

businesses that was passed in a bipartisan effort in December 2015 (Martin, 2015). However,

recent events have also involved backlash to proposed federal regulations requiring emissions

reductions, such as the lawsuits filed by 24 states after President Obama formally announced the

Clean Power Plan meant to limit carbon pollution at power plants nationwide (Mellino, 2015).

9

Clearly, it will require an embrace from political parties as much as from the renewable market

in order for solar projects to proliferate on a business and residential level.

Data

The primary source for the data used in this study was the U.S. Energy Information

Administration (EIA), which helped with providing such critical information as national

electricity usage and prices. This information is easily accessible at the agency’s website at

www.eia.org on the “Electricity” section under the “Sources & Uses” tab. On the data tab in this

section can be found figures on consumption, prices, net metering, revenue and demand. This

site is one of the most comprehensive energy data sources available and contains figures on the

entire spectrum of energy sources regarding consumption, production and projections on a

national and international level.

My data collection process involved examining monthly PDF reports that contained

tables conveying average electricity usage while I also looked up charts that contained electricity

price by state. Tables contained the average usage by month in kilowatt hours as I determined the

mean using all 12 months to produce a reliable yearly average. A similar strategy was applied to

determining average rates as I collected the dollar amount from each state and determined the

mean in order to produce a reliable average price. I decided to go with electricity rates and usage

figures from 2015 since these numbers would likely most resemble future years assuming that

inflation and other factors continue to slowly increase prices. Providing average rates would

allow the case study to be more applicable to homes throughout the United States although it

should be noted that there are states with rates that stray far from the average amount.

10

Additionally, online research was performed to obtain reliable averages for both PV and

HVAC system costs. Prices are based on the most recent figures with HVAC costs applying to

the entire system while solar rates were based by watts. This is because solar capacity can vary

by installation, which is convenient for this study since it allows us to assess homeowners who

use various degrees of solar capacity to meet their energy needs. In order to determine total solar

cost, the average electricity usage figure had to be incorporated in order to ensure the capacity

would meet all of the home’s energy needs. The websites that helped provide these system prices

include Service Champions, a California-based heating and air conditioning company, and

Greentech Media, a news outlet that researches global clean energy topics. These sites can be

reached at http://www.servicechampions.net/ and http://www.greentechmedia.com/, respectively.

Variables (all at national level)

Average monthly electricity usage

Average electricity price

Average solar cost (by watt)

Solar capacity needed to meet average electricity usage

11

Methodology

This study will compare three homes to analyze the initial costs of their respected energy

systems and then gauge the duration required before solar users acquire monetary savings

compared to the utility-based electricity user. One home will be using solely electricity, one will

be using solar power generated from a PV system that is able to meet all of the home’s energy

needs and a third home will meet half of its energy needs with electricity and the other half with

solar. It should be noted that the latter of the three scenarios is most representative of Americans

using solar given the current shortcomings of the technology amongst other factors. These

factors include low irradiance in many areas of the country as well as the efficiency rate at which

PV systems generate solar radiation into usable electricity, with the average rate being around 15

percent (Murphy, 2011).

Although only residential PV systems will be considered for a home’s renewable energy

resource, one should keep in mind that other renewable energy options are available for

residential use, including solar water heating, wind and geothermal heat pumps. PV systems will

be used in this study because it is the most popular option among renewable consumers with

around 784,000 homes and small businesses using solar energy, reaching a total U.S. solar

capacity of 22,700 megawatts (MW) (“Solar Industry Data”, 2015). Solar technology will likely

continue to increase in popularity as the technology improves and policies maintain incentive

programs.

As noted earlier, it should be kept in mind that many of the average figures adopted for

this study can in reality vary based on a number of factors. For example, a home’s electricity

price can be easily influenced by such variables as house size and number of residents.

Additionally, electricity prices range all over the country, as evident by the 2014 range that starts

12

at 7.13 cents per kWh in Washington and ends at 33.43 cents per kWh in Hawaii (“State

Electricity Profiles”, 2016). Thirdly, market options for heating, ventilation and air conditioning

(HVAC) system vary greatly based on such factors as home size, the infrastructure in place and

availability of a system to an area.

This difficulty in determining upfront energy costs can also be applied to PV systems. In

addition to the decisions of which system to purchase and how much capacity to install, solar

users can take advantages of financial assistance from solar developers and government

agencies, which can offer tax credits in efforts to help businesses reach emissions reduction

goals. However, for the sake of simplicity, this study will not involve incentives as these can

vary by state and can be easily incorporated into the results for a future study. The solar figures

that are generated for this study have been averaged based on state figures. Upfront costs include

installation along with the price of the system itself while maintenance costs will be held

constant. Additionally, the homeowner using both solar and electricity will be paying half the

solar upfront costs as the other solar homeowner since the former will be meeting only half of his

energy needs with the PV system.

For consistency, this study will refer to the following labels when mentioning each

homeowner:

S

A homeowner with a PV system that meets all of the

home’s energy needs

E

A homeowner with a heating, ventilation and

air conditioning (HVAC) unit that meets all of the home’s energy needs

13

S/E

A homeowner with a PV system and an HVAC unit that each meet half of the home’s energy needs

In addition to solar and HVAC system costs, electricity rates will help determine the

length of time required for solar uses to acquire a net gain. The study requires that all three

parties make an upfront investment in order to purchase their respected energy systems. It is

evident looking at these figures that making an investment in solar will be rather steep, with S

having to pay nearly 2.8 times the amount paid by E. Costs are considerably high for S/E as well

since he paid for half of the solar capacity and then had to make the full investment for the

HVAC system. E will likely pay the least given that HVAC systems are considerably cheaper

than PV systems, although full electricity rates are to follow.

Munsell (2015) says that a solar purchaser can expect to pay $3.48 per watt for small-

scale solar capacity, which will be the figure used for this study. Given that a residential PV

system needs to have a capacity of 8 kilowatts (kW) to meet the average yearly electricity usage,

the total upfront investment for a solar user to meet all of his energy needs will be about $27,840.

The calculation performed to produce this figure is displayed below:

Average U.S. yearly electricity usage: 10,932 kWh

PV capacity to meet this amount: 8 kW

Average cost of solar capacity: $3.48/w

14

8 (PV capacity) X 1,000 (watt conversion) X $3.48 (average solar cost)

= $27,840 (w/o incentives or financial assistance)

Investing this amount will complete the installation of the system and it can be argued that this

figure will be the lifetime price of the system if we keep maintenance costs constant.

Additionally, we take half of S’s costs and combine it with all of E’s to determine the upfront

costs of S/E.

The total upfront investment amounts for each homeowner are shown below:

Homeowners Investment (in dollars) Equipment Purchased

S

27,840

Full solar capacity

E

10,000

HVAC unit

S/E

23,920

Half solar capacity

and HVAC unit

The study sets the average cost of an HVAC system to be $10,000, although this can vary with

the size of the house among other factors (“How Much Does an HVAC System Cost?”, 2015).

This scenario will also involve no maintenance costs; however, E will start paying monthly rates

for the electricity he uses. This variable is significant because the price of electricity determines

how much time is required for S and S/E to start making savings as continue to use rate-free

power. We incorporate the costs of electricity in the United States based on the 2014 average of

15

12.67 cents per kWh for a yearly electricity cost of $1,385. This was acquired by averaging out

the monthly U.S. electricity costs provided by the U.S. EIA (2016).

While it is quite certain that S will be able to acquire substantial savings during the

lifespan of a PV system, it will be more interesting to see if the same can be said about S/E since

he had to purchase both systems and has to make up for a higher upfront investment. This study

will apply the same electricity rates to S/E as E but for only half the energy usage as the PV

system will provide the other half. As mentioned earlier, this scenario is likely more

representative of U.S. homes with solar given the current limitations of the technology. From

another realistic standpoint, S/E is an advantageous scenario because the HVAC system can

serve as a “security net” and kick in when the PV system either isn’t able to provide the required

amount of power or malfunctions. This is especially important if the home doesn’t have battery

storage, meaning solar energy will be used immediately upon generation by the PV system.

The graph below portrays the total financial costs of each of the three homeowners in the

first five years after purchasing their respected energy systems.

16

It is obvious that costs peak at the beginning when upfront investments are made, but

costs continue only for electricity users. The drastic decline in the costs for S conveys that he is

essentially finished with his investment after the PV system installation. The costs of S/E also

decline drastically, but not as much as S since the former has to continue paying electricity rates,

but at only half the rate of E. This will likely result in a longer wait period to acquire savings

than will be required for S.

Now I will generate calculations that will determine exactly how long it will take each

solar homeowner to acquire a net savings on their investment, if one is received at all. A

different equation is required for each solar homeowner since different types of upfront

investments were made. The following can be used to determine the number of years required for

S and S/E to begin monetary savings:

Amount of time in years for S to acquire net savings:

(PV Installation Costs - Cost of HVAC System)

________________________________________________

(Yearly Electricity Costs)

Amount of time in years for S/E to acquire net savings:

0.5(PV Installation Costs)

________________________________________________

0.5(Yearly Electricity Costs)

17

The multiplication by 0.5 is incorporated into the top half of the second equation for S/E because

he uses only half-capacity PV system and then the HVAC unit system isn’t included since it was

part of his upfront investment. Additionally, the 0.5 is incorporated into the bottom half of the

equation because this homeowner pays for half of the power usage through electricity while the

other half is being generated rate-free from the solar panels.

Results

Filling in the appropriate variables and making the calculations will provide the number of years

for S and S/E before a monetary net savings is acquired. For S, the output is 12.88 years and for

S/E, the output is 20.1 year, as illustrated in the table below.

Time Before Net Savings (Years)

S

12.88

S/E

20.1

After each amount of time is when these homeowners should start saving money compared to E.

At first glance, these numbers appear reasonably accurate and follow the projections made earlier

in the study. A critical factor in determining further significance of these numbers is looking at

the lifespan of the energy systems.

18

Although the market will have products that vary in quality and lifespans, the average

lifespan of solar panels can be expected to be at least 25 years (Liu, et al., 2014) with the

degradation rate after this amount of time being 0.4 percent per year, (Lombardo, 2014). Given

this information, it turns out to be a very good deal for homeowners if they are able to put forth

the upfront investment and meet all of their home energy needs with solar. This means that after

25 years, assuming electricity rates and system maintenance costs stay constant, the solar

homeowner would acquire savings of $16,788.14 compared to the electricity user and after 30

years the homeowner would acquire a total savings of $23,713.94, if the system is still able to

meet all of the energy needs during that time. Even if the PV system degrades substantially after

only 20 years, these savings convey that it would still be cost-efficient to purchase an entire new

PV system in order to continue avoiding conventional electricity costs. It should also be noted

that the average lifespan of an HVAC system is 15 to 20 years, which builds an even higher case

for solar. (“Central Air Conditioning”, 2015).

The lifespan of PV systems even makes it cost-effective to invest in half-capacity solar as

well, although this would not reach the savings number of S. For the 25-year span keeping the

same constants, S/E would acquire savings of $3,393.64 and a savings of $6,856.54 over 30

years. An additional note is that it is relatively easy to add solar capacity assuming that the

inverter and other infrastructure can withstand the increase in energy generation and that there is

adequate roof space. Also, solar users can acquire even more savings through net metering,

allowing homeowners to contribute solar energy that they don’t use back to the grid for what is

usually the price of conventional electricity. However, policies regarding this practice vary

throughout the country as its implementation continues to be a topic of debate amongst state

government entities, utilities, business owners and homeowners.

19

Discussion/Conclusions

While a selection of variables can be incorporated for further analysis in determining the

savings or other benefits of installing residential PV systems, this study attempts to serve as a

reliable base scenario. This study doesn’t involve financial assistance of any kind, a rare

occurrence since such options are readily available in the form of either government incentives

or flexible purchase plans offered by solar developers. Even if a state provides no incentives for

adopting solar resources, the aforementioned federal Solar Investment Tax Credit can be

considered. Additionally, homeowners can rent PV systems from a company and pay for the

energy they produce if the state allows third-party electricity sales.

Other factors that can be incorporated into this study include net metering, irradiance,

electricity prices by state, cost comparisons to other renewable energy sources, emissions

reduction, solar market options, weather conditions, PV system degradation rates and home

inefficiencies. Given these factors, the realistic side of solar energy is that it is relatively difficult

for a home to meet all of its energy needs with PV systems. Many homeowners are able to

achieve various levels of independence from the grid thanks to solar, but various technology

shortcomings require them to access it on a regular basis, especially during the night when no

solar radiation is available. A common strategy adopted by homeowners is to use solar energy

during the peak electricity demand hours, which closely coincides with peak sunlight hours, in

order to avoid paying the highest rates.

Homeowners should also receive education or consultation on residential solar to ensure

they pick the plan that works best for their home. Roof dimensions could make it difficult for a

PV system to optimally collect solar radiation or the location of the home might not be in an area

conducive to solar irradiance, causing investment in residential solar to be an unsound decision.

20

Irradiance is a way to measure how much of the sun’s light energy reaches the surface of the

Earth (“Solar Irradiance”, 2008) and ranges greatly throughout the U.S. from 1,500 watt-hours

per square inch (Whr/sq) in the Northeast to around 7,500 Whr/sq in areas of California

(“National Solar Radiation Data Base”).

Given these caveats, I believe that the monetary savings presented make a good case for

the investment in solar if the homeowner is willing to contribute the upfront costs. Solar users

also won’t be subjected to volatile electricity prices or wide scale power outages since they will

be independent from the grid. Additionally, while monetary savings are an important part of

leading a quality lifestyle, I would like to think that there would be a bit of moral motivation

involved with investing in renewables since this strategy can help reduce one’s carbon footprint.

While this may be a primary reason for some homeowners who purchase PV systems, this

standpoint would likely be hard-pressed to make impressions in the energy market. However, as

the moral imperative to “go green” increases, perhaps this is a marketing strategy that solar

developers should either start or continue to pursue.

One factor that is clear is that solar and other renewable technologies are at a stage of

evolution where they are more affordable and practical for homeowners. To add to the appeal of

the declining costs and increasing efficiency rates of PV systems, many federal and state

government agencies continue to consider policies that make it even more attractive for power

plants, businesses and homeowners to adopt solar as the pressure rises for society to take a more

combative stance against human-induced climate change. The residential sector has large

potential for assisting with emissions reduction numbers given the sizeable market and

improving technology, and meeting these factors with policies that facilitate renewable source

ownership could generate more momentum in the industry than ever before. Implementing this

21

exact same study even just a couple of years in the future could produce drastically different

results depending on how well our nation embraces a drastically changing energy landscape.

22

References

Agnew, S., & Dargusch, P. (2015). “Effect of Residential Solar and Storage on Centralized Electricity Supply”. Nature Climate Change. Volume 5. Pages 315-318. Retrieved from http://www.nature.com/nclimate/journal/v5/n4/full/nclimate2523.html?WT.feed_name=subjects_carbon-and-energy. Barnett, N. (2015, October 10). “N.C. Lets Sun Set on Solar Tax Credit”. The News & Observer. Retrieved from http://www.newsobserver.com/opinion/opn-columns-blogs/ned-barnett/article38700429.html. “Central Air Conditioning”. (2015). Website, U.S. Department of Energy. Retrieved from http://energy.gov/energysaver/central-air-conditioning. “Frequently Asked Questions”. (2016). U.S. Energy Information Administration. Retrieved from https://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3. Harrington, R. (2015, October 13). “The U.S. is About to Hit a Big Solar Energy Milestone.” Tech Insider. Retrieved from http://www.techinsider.io/solar-panels-one-million-houses-2015-10. “How Much Does an HVAC System Cost?” (2015, October 5). Website, Service Champions Heating & Air Conditioning. Retrieved from http://www.servicechampions.net/blog/how-much-does-a-hvac-system-cost/. Lombardo, T. (2014, April 20). “What is the Lifespan of a Solar Panel?” Website, Engineering.com. Retrieved from http://www.engineering.com/ElectronicsDesign/Electronics DesignArticles/ArticleID/7475/What-Is-the-Lifespan-of-a-Solar-Panel.aspx. Liu, X., O’Rear, E., Tyner, W., & Pekny, J. (2014). “Purchasing vs. Leasing: A Benefit-Cost Analysis of Residential Solar PV Panel Use in California”. Renewable Energy. Volume 66. Pages 770-774. Retrieved from http://www.sciencedirect.com.prox.lib.ncsu.edu/ science/article/pii/S096014811400055X. Martin, R. (2015, December 28). “Tax Credit Extension Gives Solar Industry a New Boom”. MIT Technology Review. Retrieved from https://www.technologyreview.com/s/544981/tax-credit-extension-gives-solar-industry-a-new-boom/.

23

Mitscher, M., Rüther, Ricardo. (2012). “Economic Performance and Policies for Grid-Connected Residential Solar Photovoltaic Systems in Brazil.” Energy Policy. Volume 49. Pages 688-694. Retrieved from http://www.sciencedirect.com.prox.lib.ncsu.edu/science/article/pii /S0301421512005903. Munsell, M. (2015, March 13). “Solar PV Pricing Continues to Fall During a Record-Breaking 2014”. Greentech Media. Retrieved from http://www.greentechmedia.com/articles/read/solar-pv-system-prices-continue-to-fall-during-a-record-breaking-2014. Murphy, T. (2011, September 21). “Do the Math”. Blog, The University of California, San Diego Department of Physics. Retrieved from http://physics.ucsd.edu/do-the-math/2011/09/dont-be-a-pv-efficiency-snob/. “National Solar Radiation Data Base.” Data set, National Renewable Energy Laboratory. Retrieved from http://rredc.nrel.gov/solar/old_data/nsrdb/. Nelson, J., Gambhir, A., & Ekins-Daukes, N. (2014). “Solar Power for CO2 Mitigation”. Graham Institute for Climate Change, Imperial College London. Retrieved from https://www.imperial.ac.uk/media/imperial-college/grantham-institute/public/publications/briefing-papers/Solar-power-for-CO2-mitigation---Grantham-BP-11.pdf. Peng, C., Huang, L., Liu, J. & Huang, Y. (2015) “Energy Performance Evaluation of a Marketable Net-Zero-Energy House: Solark I at Solar Decathlon China 2013”. Renewable Energy. Volume 81. Pages 136-149. Retrieved from http://www.sciencedirect.com.prox.lib.ncsu.edu/science/article/pii/S0960148115002116. “Solar FAQ”. (2016). Carolina Solar Energy. Retrieved from http://carolinasolarenergy.com/solar-faq/. “Solar Industry Data”. (2015). Website, Solar Energy Industries Association. Retrieved from http://www.seia.org/research-resources/solar-industry-data. “Solar Irradiance”. (2008, January 1). Website, The National Aeronautics and Space Administration. Retrieved from http://www.nasa.gov/mission_pages/sdo/science/solar-irradiance.html. “State Electricity Profiles”. (2016). Website, U.S. Energy Information Administration. Retrieved from http://www.eia.gov/electricity/state/.

24

Sweet, C. (2013, February 14). “How Homeowners Are Getting Solar Panels Without a Lot of Cash Upfront”. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB10001424127887324432004578302521934005936. Timmons, D., Konstantinidis, C., Shapiro, A. & Wilson, A. (2016). “Decarbonizing Residential Building Energy: A Cost-Effective Approach.” Energy Policy. Volume 92. Pages 382-392. http://www.sciencedirect.com.prox.lib.ncsu.edu/science/article/pii/S0301421516300702

Wisland, L. (2014) “How Many Homes Have Rooftop Solar? The Number is Growing…”. Union of Concerned Scientists. Retrieved from http://blog.ucsusa.org/laura-wisland/how-many-homes-have-rooftop-solar-644.

25

Tables Table 1

Variables (all at national level)

Average monthly electricity usage

Average electricity price

Average solar cost (by watt)

Solar capacity needed to meet average electricity usage

Table 2

S

A homeowner with a PV system that meets all of the

home’s energy needs

E

A homeowner with a heating, ventilation and air

conditioning (HVAC) unit that meets all of the home’s

energy needs

S/E

A homeowner with a PV system and an HVAC unit

that each meet half of the home’s energy needs

26

Table 3

Table 4

Homeowners Investment (in dollars) Equipment Purchased

S

27,840

Full solar capacity

E

10,000

HVAC unit

S/E

23,920

Half solar capacity

and HVAC unit

Average U.S. yearly electricity usage: 10,932 kWh

PV capacity to meet this amount: 8 kW

Average cost of solar capacity: $3.48/w

8 (PV capacity) X 1,000 (watt conversion) X $3.48 (average solar

cost)

= $27,840 (w/o incentives or financial assistance)

27

Table 5

Table 6

Time Before Net Savings (Years)

S

12.88

S/E

20.1

Amount of time in years for S to acquire net savings:

(PV Installation Costs - Cost of HVAC System) ________________________________________________

(Yearly Electricity Costs)

Amount of time in years for S/E to acquire net savings:

0.5(PV Installation Costs) ________________________________________________

0.5(Yearly Electricity Costs)

28

Figures Figure 1

Figure 2 25-YearEnergyCostsforHomeowners Year S S/E E

1 $42,000.00 $31,692.59 $11,385.162 $0.00 $692.58 $1,385.163 $0.00 $692.58 $1,385.164 $0.00 $692.58 $1,385.165 $0.00 $692.58 $1,385.166 $0.00 $692.58 $1,385.167 $0.00 $692.58 $1,385.168 $0.00 $692.58 $1,385.169 $0.00 $692.58 $1,385.16

29

10 $0.00 $692.58 $1,385.1611 $0.00 $692.58 $1,385.1612 $0.00 $692.58 $1,385.1613 $0.00 $692.58 $1,385.1614 $0.00 $692.58 $1,385.1615 $0.00 $692.58 $1,385.1616 $0.00 $692.58 $1,385.1617 $0.00 $692.58 $1,385.1618 $0.00 $692.58 $1,385.1619 $0.00 $692.58 $1,385.1620 $0.00 $692.58 $1,385.1621 $0.00 $692.58 $1,385.1622 $0.00 $692.58 $1,385.1623 $0.00 $692.58 $1,385.1624 $0.00 $692.58 $1,385.1625 $0.00 $692.58 $1,385.16

Figure 3

SavingsByYear(cumulative)Year S S/E1though12 $0.00 $0.00

13 $166.22 $0.0014 $1,551.38 $0.0015 $2,936.54 $0.0016 $4,321.70 $0.0017 $5,706.86 $0.0018 $7,092.02 $0.0019 $8,477.18 $0.0020 $9,862.34 $0.0021 $11,247.50 $623.3222 $12,632.66 $1,315.9023 $14,017.82 $2,008.4824 $15,402.98 $2,701.0625 $16,788.14 $3,393.64

30

Appendices Poster presented at 2016 N.C. State Energy Conference, April 20, 2016, Raleigh, N.C.