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financing
Financing
Solar energy, in comparison to other renewable and non-renewable energy sources, continues to be a relatively expensive way to generate electricity. Note that the economics of solar thermal technologies for space and water heating are discussed separately. Despite high costs per kilowatt hour generated, the use of photovoltaics is growing exponentially, and coupled with technological advances, this growth is driving costs down over the long term. According to the Solar Energy Industries Association, Global PV market growth has averaged a stunning 25%+ annually over the last 10 years, with worldwide growth rates for the last 5 years well over 35%. According to the National Renewable Energy Laboratory, the price of photovoltaic energy plummeted from $15 per kilowatt-hour in 1975 to about $.22 in 1997.
Understanding Costs and Incentives
A general rule of thumb is that fully installed PV systems cost in a range of $8- $12 per Watt. Larger systems and/or those that benefit from bulk pricing may fall to the lower end of this range, while smaller systems in areas with high labor costs, or with extra features such as data monitoring displays may fall into (or exceed) the upper end of this range.
Rough percentages of cost breakdown:
- PV Modules: 40%-60%
- Inverters: 10%-15%
- Balance of System: 15% (BOS includes mounting equipment, wires, switches, and all other parts not broken out)
- Design and Installation: 15%
- Operations and maintenance (O&M) costs for PV systems are proportionately insignificant at less than $.01 per kilowatt-hour. Fuel costs are of course zero, and scheduled maintenance consists mostly of washing the modules to remove dirt and dust. Technical failures of the modules themselves are very rare. Inverters have historically been problematic, but are showing improved reliability.
Solar thermal technologies for hot water and space heating are more difficult to generalize (system configuration tends to vary more greatly than with PV), but generally have much lower costs per energy offset (even if fewer financial incentives are available).
For all types of solar installations, community projects should be able to leverage some economies of scale. Even if the community project consists of many small-scale systems, a centrally-organized program can mean bulk pricing on equipment as well as design costs. A community that issues one Request for Proposals (RFP) for multiple projects can often get lower cost bids than dealers can offer to individuals. However, be aware that the transaction costs of dealing with multiple small installations can still be relatively high. If communities can find ways to share the benefits of fewer, larger solar arrays the costs associated with site preparation, placing orders on equipment, travel, and paperwork are often significantly lowered.
Incentives
For an overview of incentives available for renewable energy projects, including solar projects, please follow the links below:
- Federal Incentives: Production tax credit, Renewable Energy Production Incentive, Accelerated Depreciation, Clean Renewable Energy Bonds, USDA grant & loan programs
Note that solar energy systems placed on line after December 31, 2005, are NOT eligible for the Renewable Electricity Production Tax Credit (PTC)!
- Oregon Incentives: Energy Trust of Oregon Solar Electric Buy-Down & Solar Hot Water Buy-Down Program, Business and Residential Energy Tax Credit, Small Scale Energy Loan Program, Renewable Energy Systems Tax Exemption, OECDD Renewable Energy Feasibility Fund
- Washington Incentives: Renewable Energy Production Incentive, Sales and Use Tax Exemption
- Environmental Attributes/Green Tags
- Utility Rebates & Programs
Recognizing different forms of value
While the value of incentives may help determine the best structure for a community solar project, the project itself may also be selected on less tangible values to the community. For example, money may go the furthest for a commercial entity with a large solar array, with the ability to take advantage of grants and tax incentives, as well as selling green tags to the local utility. When reinvesting income from green power programs, that same utility may opt to serve the community in an assortment of ways. The first might be to support a large amount of renewable energy on their grid, with purchases from wind or other large scale projects. In addition, the utility may want to invest in what could be referred to as “visible renewable energy.” These projects, generally small in scale, add renewable energy to our communities with the greatest impact to education and awareness. These projects are often solar, placed on schools, libraries, and community service buildings, with extra features like data monitoring equipment and displays.
