Last week I wrote about what I consider the main goal of green electricity efforts, namely to stop burning coal. You can do that, to some extent, by removing demand from the grid in places where the grid is coal-heavy. Even in other places, removing demand from the grid will be fairly effective at reducing the production of greenhouse gases.
Update: Since this article a flood of cheap solar panels from China has been changing some of the economics discussed here. I have not altered the article but some of its conclusions deserve adjustment.
No matter what you do — conserve, or put up solar or wind — your goal is to take power off the grid. Many people however, consciously or unconsciously take a different goal — they want to feel that they are doing the green thing. They want their electricity to be clean. This is actually a dangerous idea, I believe. Electrons are electrons. In terms of reducing emissions, you get the exact same result if you put a solar panel on your house than if you put it on your neighbour’s house. You even get a better result if you put it on a house that’s powered by a coal plant, so long as you also reap the benefit (in dollars) of the electricity it makes.
People don’t like to accept this, but it’s much better to put a wind turbine somewhere windy than on your own house. Much better to put a solar panel somewhere sunny than on your own house. And much better in all cases if the power you offset is generated by more by coal than at your house.
However, the real consequences are much deeper. The following numbers reveal it is generally a bad idea to put up solar panels at all, at least right now. That’s because, as you will see below, solar panels are a terrible way to spend money and time to make greener electricity. Absolutely dreadful. Their only attribute is making you feel good because they are on your roof. But you should not feel good, because you could (in theory, and I believe with not much work in practice) have made the planet much greener by using the money you spent on the panels in other ways.
The true goal is to find the method that provides the most bang per buck in removing load from the dirty grid.
Keep reading to see the math and a spreadsheet with some very surprising numbers about what techniques do that the best.
Get your cost per year
To understand this, you want to work out your cost for removing a megawatt-hour (MWH) of demand from the power grid. Today, the average U.S. power company sells a MWH for about $100 (~10 cents/kwh.) This varies a lot, though. In California, a tiered system results in high users paying as much as $310/MWH for incremental power.
You can remove a MWH from the grid in two ways. You can generate it, with solar, wind or even a generator. And you can do genuine conservation, where you take a power demand that was clearly going to continue on, but due to your efforts and money, it is reduced, ideally with minimal sacrifice. The minimal sacrifice is important, because if people don’t feel happy about conservation they have done, they will feel it has an additional cost, and be ready to not do it without much provocation.
Whichever you do, it’s going to involve spending time and money. I will focus on money here, but all the projects involve time as well. (If you want to put solar panels on your roof, you will certainly spend a lot of personal time on the project. And staring at the meter going backwards.)
You must calculate the cost of the project, and how many years it will last. If it’s more than a couple of years, it is vital you now consider the time value of money. Money in the future is worth a great deal less than money today. Energy delivered in the future is different, too.
You should also not include any rebates, tax credits or other subsidies on your project. There are various rebates for solar and other clean energy generation methods, but we want to know the real cost to get a MHW off the grid, not a subsidized one. That’s because once we learn what methods are the most cost effective, we should then hope that these are the ones that are subsidized. It’s the most bang for the subsidy buck. It would be a mistake to create a world where people put in solar because it is subsidized and don’t put in wind because it isn’t, if it turns out the wind is more cost effective.
Just like a home mortgage, you will need to consider an interest rate. Today rates are low, perhaps 6 to 7%. Even if you are going to do the project with cash, you must consider the cost of instead using the money to pay down your mortgage (in effect earning your mortgage’s interest rate) or putting it into investments. While today in 2009 the stock market is poor, historically putting money into good long term investments has returned even better than 7%.
Figure out how many MWH generated/saved per year
Once you have a cost per year, you must work out how many KWH or MWH it will generate or save. From there you can calculate the base cost of taking a MWH off the grid. At today’s prices in sunny California, that’s about $300 for solar (PV) panel systems.
However, one important factor is left out, and requires a second number. You, or whoever is involved will not have to pay the power company for this saved MWH. So that cost, at your local grid rate, should be subtracted to produce the net cost/MWH. With the best systems, this net cost is negative — you actually save money with the technique.
Now everybody should need little incentive to do the methods that save money. However, it turns out they often need a push for a variety of reasons. One is that getting the money for a capital intensive project like PV solar or even a new fridge can be difficult. People are notoriously bad at figuring out they should spend $800 on a new fridge that saves them $80 per year in electricity. The payback is there, but too slow for them. Another is simply a question of time. It takes time and will to make these things happen.
However, some of the methods you can use are so good that one of the most effective things you might do with your own money and time is convince others to do them, even if you don’t reap any of the savings.
As I noted above, solar panels can take a MWH off the grid for about $300. At a typical grid price, that MWH cost $100 so the cost to you of doing it is $200, plus your time.
Look at the alternatives, like CFL for others
Instead consider efficient lighting, such as CFL (Compact fluorescent) bulbs. A 23w CFL can be had for about $3, and should last about 8 years. Replacing a 100w tungsten bulb it saves a lot of electricity, just like it says on the package. If put in place of a regularly used light bulb, it takes just $6 to remove a MWH from the grid when you don’t count the savings. If you do count them (ie. it’s in your own house) it means a “cost” (really a benefit) of -$100 per MWH.
Look at those numbers again. The solar panel costs you $200 for each MWH you remove, and the CFL saves (not cost) $100 for each MWH.
If you’re the sort of person who would put up a solar system, you probably already switched to CFL or other efficient lighting. Good. But you could do more. If you took a few hours of your time, and just fourty of your dollars, you could walk down the street in some town giving out CFL bulbs to people who would let you take out their old bulb and install the new one, making sure the bulb will really be effective. If you manage to get just 13 bulbs replaced that are used for just 3 hours per night, you’ve taken as much power off the grid as a $7,800 1000 watt PV panel. All for $40 and an hour or two of your time.
Or if you prefer, you might hire somebody else to run around and give out and install bulbs. It might cost a bit more, but it will still be nowhere near the cost of that panel.
Here is a spreadsheet that works out the raw cost per MWH and the net cost, factoring in power savings. There is a row where you can plug in information you have on other forms of conservation and clean generation.
In this embedded spreadsheet you can “Click to Edit” to plug in your own numbers, or you can save it out as a file to use on your own machine.
Fridges and dryers
The bulbs stick out, but there are other things you can do. A new fridge, as noted, will save a lot of power. It’s surprising how bad fridges from the 80s and 90s are compared to those of 2009. Buying one for yourself actually saves you money, but you could even go out and buy new fridges for any neighbours who have models that are 15 to 20 years old, and it would still be better than putting that solar panel on your roof.
You could also buy people new gas dryers. Because gas has gone up they don’t save as much money as they used to, and they need a gas plumber to install, but they still beat the panels. Not buying one for yourself. I mean simply going to your neighbour and saying, “would you like a brand new gas dryer and the free services of a plumber at my expense to hook it up and toss out your electric one?” It’s a real win if you single out people with large families and lots of laundry. You could do even better if you convinced them to use a clothesline more, but that’s a harder sell. A new dryer is much easier.
So easy, in fact, that you can probably get them to give you back some of their savings. You don’t have to just give it away. That could reduce your $100/MWH cost in giving away fridges quite a bit. In fact, they might be quite happy just to get a microloan, that they will pay back to you because they are getting a nicer fridge out of the deal.
The loan concept has other implications. Today, credit is hard to get. This is stopping people from putting in new wind farms and other forms of renewable energy, such as solar-thermal and geothermal.
Wind is much more efficient if you make a big turbine and farm. If green-minded people got together, they could simply donate money to put up a giant (50 megawatt) wind farm. If numbers from the wind industry are to be accepted, this would let you offset dirty grid power for about $40/MWH. Giving the power away! Of course the wind farm would sell it. If the wind farm breaks even after paying your interest, your cost to do this is net-zero. You’re just tying up your money, but you get it all back, with interest. (You are also risking it, of course, but again, this is still cheaper than all he other methods except the light bulbs even if you lose all your money.) People looking to be green and ready to spend $30,000 on solar panels could instead band together and be much greener by offering financing to larger green projects that can’t get it because they are not yet profitable or credit is too tight.
I hear you screaming, “Ah, but….” so let me cover some of the common questions.
- Yes, grid power may go up in price, making the solar panels more attractive. The point is, all the grid-reducing methods here get equally more attractive, per MWH, as grid power goes up in price.
- Yes, California Tier III grid power is so expensive that solar can beat it. But the other methods beat it even more.
- Yes, CFLs have mercury vapour in them. If they break, that’s bad. But burning coal to power incandescent lights releases far more mercury into the air than is in a CFL. Whether the light breaks or not.
- No, CFLs don’t use more energy than they save being shipped overseas. Overseas shipping is much more efficient than you think. It takes about 30 minutes for them to save the energy needed to ship them from Asia.
- Yes, solar-thermal is much more cost-effective than PV panels. This is mostly about PV panels, which are one of the most popular choices for misguided money trying to make the world greener.
- Yes, the PV panels can raise the price of your home (as can new appliances) but that is cancelled out when you sell because you stop getting the energy from them. Leaving them behind makes your buyer greener — but there are, I hope you have learned, much more effective ways to do that.
- Yes, I know solar generates power during the “peak demand” period. That’s great for power companies who want to even their loads, which is why they do time-of-use metering and why PV owners love that, but it does not much effect the amount of fossil fuel burned until we get really good at this.
One area I don’t explore because it’s hard to cost out is solar lighting. One of the craziest things we sometimes see is a business putting up solar panels on its roof and using them to power lights — even efficient fluorescent lights — inside the building during the day. That’s 3% efficient at best. Companies should work at ways to bring the natural light directly into the buildings, with appropriate redirection for the heat. This can be done with skylights and light tubes, among other things.
I predict this will be a way to get a lot of MWH/dollar, especially in business where lights are on during the day.
Cap and Trade
There is a lot of similarity to the logic in this article, and the results of a real working emissions credit trading system. If you have a true working system that rewards real generation and real conservation, the money ends up flowing to the methods that get the best bang for the buck.
The problem of course is enforcement. It’s not cost effective to see if people really use their $3 CFL, and people are notorious at finding loopholes in rules enforcing conservation. Green generation is easier to track.
But if such a system did exist, it would be readily apparent what methods worked best, and people would do them.
Markets for green efforts
It would be nice if companies would spring up that would reliably, and verifiably take money and use it to cause real conservation and green generation. They would pay people to go door to door with free CFLs that they install, and they go round a year later to see if the CFLs have not been swapped back out to measure effectiveness. Companies that will arrange microloans for energy efficient appliances. Companies that will pool money and finance wind and other renewable energy methods.
Even, if you still love PV, companies that will subsidize putting up solar panels on Arizona houses (where they burn a lot of coal and have lots of sun) and give the financier the remaining money to offset their own grid costs in a less sunny place.
It won’t happen because people do seem wedded to that psychological connection. They want to see that meter turn backwards even if it’s a horribly money-inefficient way to make the world greener. There just is no satisfaction in putting a certificate on the wall saying “I made the world 10 times greener with my money and time.” I understand why the right thing isn’t very compelling. I wish we could find a way to make it so.
Other solar benefits
Many people like the fact that solar panel makes them “energy independent.” If the power grid goes out, they are still getting power (at least during the day — a normal grid tie system would have no power off-peak.)
But the reality is, grid power goes off so little that, polluting and noisy as it is, a gas generator would do this job better. In the not to distant future, it is predicted that you will be able to plug your hybrid car into your house to power your house in an outage.
Increasing demand for solar, even when it is such a poor performer, may drive down the price of solar so that it is able to compete. But that’s true of all the other technologies, too.
Right now, there are just too many good opportunities available in conservation and in other alternative energies to put in PV. Down the road, as it gets cheaper, it will make sense, and deserve the money. However, a lot of evidence suggests that solar thermal power (where mirrors generate heat the spins a traditional turbine) is a big winner, in spite of its moving parts.
Solar power is distributed, which means it doesn’t face losses in the power lines. That’s good. But it’s not that good. It, and all the other benefits don’t compensate for the vastly greater cost/MWH saved.
Sadly, the only real benefit is that people feel good about it. They see the panels on the roof every day when they come home. They look at their power tracking system every day. They smile to see the meter run backwards on a sunny afternoon. That’s all very nice, but is it worth hurting the planet to pretend you’re doing the right thing? Harsh, but true.
Still, I don’t want to sneer at the people who covered their houses with PV. Their goals were good. What’s important is that they analyse what they do and look at the real numbers.
Solar can make off-grid sense, in locations where grid power can’t be brought in. But there are other complexities. All off-grid systems must find a way to store excess power from the sunny periods to use when it’s dark or not so sunny. The most common method is batteries. The problem is, batteries should not be kept in deep discharge. So a typical off-grid solar system is designed to get those batteries back up quickly after a night of discharge.
This means, sadly, that for much of the day, often the peak time, the batteries are not heavily discharged and simply can’t accept the excess power. Many off grid systems have the panels spend their time throwing away the power because the batteries are full or nearly so. This makes the energy cost much more than it does in grid-tie.
I have even heard of people who imagine they are green by disconnecting from the grid even though they live in the city. This is terrible. Their solar systems throw away power all day which they could be putting back into the grid, stopping coal from being burned. They’re doing a much worse job at greening the world than they could if they were grid-tied. Grid-tie makes sure every single watt-hour is used to offset load from the fossil fuel heavy grid.
Conservation and improved energy-efficiency are fantastic and we should do all we can. But you can only conserve so much. In the end electrical generation must get cleaner.
In the future, after we’ve conserved everywhere we can readily conserve, and when PV comes down in price, as it will, then PV will be a competitor. In fact, when it is, PV will show up on the grid, as well as on people’s homes. I am eager for that future, but it is not today.
Addendum on the Prius
Check the bottom of the spreadsheet for an example for a Hybrid car, such as a Prius. In this sheet we imagine you pay $3,000 extra to get the more efficient car, which gets 42 real world mpg, compared to 30 real world mpg for the cheaper car. You save 238 gallons of gas every year, at $2/gallon. More controversially, the DoE calculates each KWH of electricity requires about 1/12th gallon of gasoline equivalent at the power plant, so I map the cost per mwh to compare it to electricity.
Further update: I’ve added a line for solar panels where the panels are free but you still have to pay for other costs. Remarkably, they still don’t compete. There’s more on this in an update post about evangelical environmentalism.