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Investing in a PV system
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Why should you buy a PV system?
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People decide to buy PV systems for a variety of reasons. Some people want to help preserve the Earth's finite fossil-fuel resources and reduce air pollution. Others want to invest in an energy-producing improvement to their property. Some people like the security of reducing the amount of electricity they buy from their utility because it makes them less vulnerable to future price increases. And some people just appreciate the independence that a PV system provides.
If you plan to build a home away from an established utility service, inquire about the cost of installing a utility line. Often, the cost of extending conventional power to your residence is higher than the cost of a solar option.
Whatever your reason, solar energy is widely thought to be the energy source of choice for the future, and you may be able to take advantage of a state-sponsored program to help make it your energy choice for today and tomorrow.
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Is your home or business a good place for a PV system?
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Can you locate your system so it works well?
A well-designed PV system needs clear and unobstructed access to the sun's rays for most or all of the day, throughout the year. You can make an initial assessment yourself. If the location looks promising, your PV provider can determine whether your home or business can effectively use a PV system.
The orientation of your PV system (the compass direction that your system faces) affects its performance. In the United States, the sun is always in the southern half of the sky but is higher in the summer and lower in the winter. Usually, the best location for a PV system is a south-facing roof, but roofs that face east or west may also be acceptable. Flat roofs also work well for solar electric systems, because PV modules can be mounted flat on the roof facing the sky or bolted on frames tilted toward the south at an optimal angle. They can also be attached directly to the roof as “PV shingles.”
If a rooftop can't be used, your solar modules can also be placed on the ground, either on a fixed mount or a “tracking” mount that follows the sun to orient the PV modules. Other options (often used in multifamily or commercial applications) include mounting structures that create covered parking, or that provide shade as window awnings.
Is your site free from shading by trees, nearby buildings, or other obstructions?
To make the best use of your PV system, the PV modules must have a clear “view” of the sun for most or all of the day—unobstructed by trees, roof gables, chimneys, buildings, and other features of your home and the surrounding landscape. Some potential sites for your PV system may be bright and sunny during certain times of the day, but shaded during other times. Such shading may substantially reduce the amount of electricity that your system will produce. To be eligible for some rebates, your system must be un-shaded between certain hours during certain times of the year. Some states have laws that establish your right to protect your solar access through the creation of a “solar easement.” Your PV provider can help you determine whether your site is suitable for a solar electric system.
Does your roof or property contain a large enough area for the PV system?
The amount of space that a PV system needs depends on the size of the system you purchase. Some residential systems require as little as 50 square feet (for a small “starter” system), but others could need as much as 1,000 square feet. Commercial systems are typically even larger. If your location limits the size of your system, you may want to install one that uses more efficient PV modules. Greater efficiency means that the module needs less surface area to convert sunlight into a given amount of electric power. PV modules are available in a range of types, and some offer more efficiency per square foot than others do (see table on the next page). Although the efficiency (percent of sunlight converted to electricity) varies with the different types of PV modules available today, higher efficiency modules typically cost more. System sizing, discussed later in this booklet, should also be discussed with your PV provider.
What kind of roof do you have, and what is its condition?
Some types of roofs are simpler and cheaper to work with, but a PV system can be installed on any type. Typically, roofs with composition shingles are the easiest to work with, and those with slate are the most difficult. In any case, an experienced solar installer will know how to work on all types and can use roofing techniques that eliminate any possibility of leaks. Ask your PV provider how the PV system affects your roof warranty.
If your roof is older and needs to be replaced in the near future, you may want to replace it at the time the PV system is installed to avoid the cost of removing and reinstalling your PV system. PV panels often can be integrated into the roof itself, and some modules are actually designed as three-tab shingles or raised-seam metal roof sections. One benefit of these systems is their ability to offset the cost of roof materials.
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How big should your PV system be, and what features should it have?
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To begin, consider what portion of your current electricity needs you would like your PV system to meet. For example, suppose that you would like to meet 50% of your electricity needs with your PV system. You could work with your PV provider to examine past electric bills and determine the size of the PV system needed to achieve that goal.
You can contact your utility and request the total electricity usage, measured in kilowatt-hours, for your household or business over the past 12 months (or consult your electric bills if you save them). Ask your PV provider how much your new PV system will produce per year (also measured in kilowatt-hours) and compare that number to your annual electricity usage (called demand) to get an idea of how much you will save. In the next section, we'll provide more information on estimating how much you will save.
Some solar rebate programs are capped at a certain dollar amount. Therefore, a solar electric system that matches this cap maximizes the benefit of the solar rebate.
To qualify for net metering in some service territories, your PV system must have a peak generating capacity that is typically not more 10 kilowatts (10,000 watts), although this peak may differ from state to state. Also, utilities have different provisions for buying excess electricity produced by your system on an annual basis (see the section on net metering). Finally, customers eligible for net metering vary from utility to utility; for example, net metering could be allowed for residential customers only, commercial customers only, or both.
One optional feature to consider is a battery system to provide energy storage (for stand-alone systems) or backup power in case of a utility power outage (for grid-connected systems). Batteries add value to your system, but at an increased price.
As a rule, the cost per kilowatt-hour goes down as you increase the size of the system. For example, many inverters are sized for systems up to 5 kilowatts, so even if your PV array is smaller (say, 3 kilowatts), you may have to buy the same size of inverter.
Labor costs for a small system may be nearly as much as those for a large system, so you are likely to get a better price for installing a 2-kilowatt system all at once, rather than installing 1 kilowatt each year for two years.
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How much will you save with your PV system?
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The value of your PV system's electricity depends on how much you pay for electricity now and how much your utility will pay you for any excess power that you generate. If your utility offers net metering (and so pays the full retail price for your excess electricity), you and your Utility will pay the same price for each other's electricity. You can use the calculation box on the next page to roughly estimate how much electricity your PV system will produce and how much that electricity will be worth. Actual energy production from your PV system will vary by up to 20% from these figures, depending on your geographic location, the angle and orientation of your system, the quality of the components, and the quality of the installation.
Also, you may not get full retail value for excess electricity produced by your system on an annual basis, even if your utility does offer net metering. Be sure to discuss these issues with your PV provider. Request a written estimate of the average annual energy production from the PV system. However, even if an estimate is accurate for an average year, actual electricity production will fluctuate from year to year because of natural variations in weather and climate.
If your utility does not offer net metering, you can still use the calculation box to determine the amount of electricity your system will produce. However, this is not as straightforward, because the excess electricity will not be worth as much as the electricity you actually use. You may earn only 2 cents per kilowatt-hour—or less than half the retail rate—for your excess power.
PV systems produce most of their electricity during the middle of the day, when residential electric loads tend to be small. If your utility does not offer net metering, you may want to size your system to avoid generating electricity significantly beyond your actual needs.
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How much does a PV system cost?
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No single answer applies in every case. But a solar rebate and other incentives can always reduce the cost. Your price depends on a number of factors, including whether your home is under construction and whether PV is integrated into the roof or mounted on top of an existing roof. The price also depends on the PV system rating, manufacturer, retailer, and installer.
The size of your system may be the most significant factor in any measurement of costs versus benefits. Small, single-PV-panel systems with built-in inverters that produce about 75 watts may cost around $900 installed, or $12 per watt. These small systems offset only a small fraction of your electricity bill. A 2-kilowatt system that meets nearly all the needs of a very energy efficient home could cost $16,000 to $20,000 installed, or $8 to $10 per watt. At the high end, a 5-kilowatt system that completely meets the energy needs of many conventional homes can cost $30,000 to $40,000 installed, or $6 to $8 per watt. These prices are rough estimates; your costs depend on your system's configuration, your equipment options, and other factors. Your local PV providers can give you more accurate estimates or bids.
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Calculating Electricity Bill Savings for a Net-Metered PV System
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• Determine the system's size in kilowatts (kW). A reasonable range is from 1 to 5 kW. This value is the “kW of PV” input for the equations below.
• Based on your geographic location, select the energy production factor from the map below for the “kWh/kW-year” input for the equations.
Energy from the PV system = (kW of PV)
x (kWh/kW-year) = kWh/year
Divide this number by 12 if you want to determine your monthly energy reduction.
Energy bills savings = (kWh/year)
x (Residential Rate)/100 = $/year saved
(Residential Rate in this above equation should be in dollars per kWh; for example, a rate of 10 cents per kWh is input as $0.10/kWh.)
For example, a 2-kW system in Denver, CO, at a residential energy rate of $0.07/kWh will save about $266 per year: 1,900 kWh/kW-year x $0.07/kWh x 2 kW = $266/year.
 Note: The uncertainty of the contoured values is generally ±10%. In mountainous and other areas of complex terrain, the uncertainty may be higher.
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How can you finance the cost of your PV system?
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When it comes to financing the cost of purchasing and installing your PV system, there are some special programs particular to financing solar and other renewable energy investments. But most of the options will be familiar to you.
The best way to finance PV systems for homes is through a mortgage loan. Mortgage financing options include your primary mortgage; a second mortgage, such as a U.S. Department of Housing and Urban Development (HUD) Title 1 loan; or a home-equity loan that is secured by your property. There are two advantages to mortgage financing.
First, mortgage financing usually provides longer terms and lower interest rates than other loans, such as conventional bank loans. Second, the interest paid on a mortgage loan is generally deductible on your federal taxes (subject to certain conditions).
If you buy the PV system for your home at the same time that you build, buy, or refinance the home, adding the cost of the PV system to your mortgage loan is likely to be relatively simple. It is also one way to avoid additional loan application forms and fees.
If mortgage financing is not available, look for other sources of financing, such as conventional bank loans. Seek the best possible combination of low rate and long term. This allows you to amortize your PV system as inexpensively as possible. Because your PV system is a long term investment, the terms and conditions of your financing are likely to be the most important factor in determining the effective price of your PV-generated power.
PV systems for businesses are probably best financed through a company's existing sources of funds for capital purchases—such as Small Business Administration loans or conventional bank loans.
Source: National Renewable Energy Laboratory " A Consumer's Guide - Get Your Power From The Sun" June 2005
To download the guide in its entirety as a pdf document, please click on the first link above right.
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