Going Green

Math getting better? -- CitizenRe

(Note: I have posted a followup article on CitizenRe as a result of this thread. Also a solar economics spreadsheet.)

I’ve been writing about the economics of green energy and solar PV, and have been pointed to a very interesting company named CitizenRe. Their offering suggests a major cost reduction to make solar workable.

They’re selling PV solar in a new way. Once they go into operation, they install and own the PV panels on your roof, and you commit to buy their output at a rate below your current utility rate. Few apparent catches, though there are some risks if you need to move (though they try to make that easy and will move the system once for those who do a long term contract.) You are also responsible for damage, so you either take the risk of panel damage or insure against it. Typically they provide an underpowered system and insist you live where you can sell back excess to the utility, which makes sense.

But my main question is, how can they afford to do it? They claim to be making their own panels and electrical equipment. Perhaps they can do this at such a better price they can make this affordable. Of course they take the rebates and tax credits which makes a big difference. Even so, they seem to offer panels even in lower-insolation places like New England, and to beat the prices of cheaper utilities which only charge around 8 cents/kwh.

My math suggests that with typical numbers of 2 khw/peak watt/year, to deliver 8 cents/kwh for 25 years requires an installed cost of under $2/peak watt — even less in the less sunny places. Nobody is even remotely close to this in cost, so this must require considerable reduction from rebates and tax credits.

A few other gotchas — if you need to re-roof, you must pay about $500 to temporarily remove up to 5kw of panels. And there is the risk that energy will get cheaper, leaving you locked in at a higher rate since you commit to buy all the power from the panels. While many people fear the reverse — grid power going up in price, where this is a win — in fact I think that energy getting cheaper is actually a significant risk as more and more money goes into cleantech and innovation in solar and other forms of generation.

It’s interesting that they are offering a price to compete with your own local utility. That makes sense in a “charge what the market will bear” style, but it would make more sense to market only to customers buying expensive grid power in states with high insolation (ie. the southwest.)

Even with the risks this seems like a deal with real potential — if it’s real — and I’ll be giving it more thought. Of course, for many, the big deal is that not only do they pay a competitive price, they are much greener, and even provide back-up power during the daytime. I would be interested if any readers know more about this company and their economics.

Update: There is a really detailed comment thread on this post. However, I must warn CitizenRe affiliates that while they must disclose their financial connection, they must also not provide affiliate URLs. Posts with affiliate URLs will be deleted. Some salient details: There is internal dissent. I and many others wonder why an offer this good sounding would want to stain itself by being an MLM-pyramid. Much stuff still undisclosed, some doubt on when installs will take place.

Another war tragedy -- the solar opportunity in Iraq

While I’ve written before about the trouble in making solar competitive with grid power, this is not true when the grid is being blown up by geurilla fighters on a regular basis. Over the past couple of years, Bechtel has been paid over 2 billion dollars, mostly to try to rebuild the Iraq electrical infrastructure. Perhaps it’s not their fault that power is only on in Bagdadh for 2 hours a day after these billions have been spent — but their might have been a better way.

Imagine if that billion had been directed at building a solar power system, with a lower-power grid for night power. A billion would have provided major stimulus to the solar industry, of course, and helped the companies that are working at making PV cost-effective. But it also would have generated a power infrastructure that was much harder to destroy in a civil war. Yes, they might take down sections of the grid, but these would only have been there for night and brownout power. Without them, people would still have had more power. And not just during the day. Mini “neighbourhood grid” systems could allow small areas to have backup diesel generators. Not quite as efficient as the big generators but much more difficult to take down. The “value” targets would still see their local panels and generators under attack, but that’s the way of it.

It seems odd to think of this in a country with so much oil. But doing this would have also had a major effect on greenhouse gas emissions. Putting solar into Iraq would have made the US responsible for major emission cuts. Cutting emissions there so we don’t have to cut them here.

Something to think about next time your country goes and destroys a foreign country’s power grid and then works to rebuild it. (Of course, ideally that’s never.)

Is Google really saving money with PV installation?

Just on the heels of my prior post on the bad math often found around alternative energy, I see a Google Blog post on Google’s solar installation. It claims Google with save money with their 1.6 megawatt solar installation.

I would be very interested to see Google’s numbers — what are they paying for this PV system, and what do they pay the power company for their grid power? Did they get rebates on the PV install? Rebates can help a single customer save money but they do it at taxpayer expense which makes it a wash, other than as a means to try to increase the market for solar and bring down the price.

Now, I’m not in any way saying that it’s bad for Google to go solar. Large grid-tie solar arrays are quite green, with minimal emissions (only those from their manufacture, shipping and install) and so it’s good to have them, even if they are more expensive than non-green grid energy.

But I want to know, is my math bad, or is Google’s? If companies can really save money with a PV array they should be springing up like weeds.

Today I also read announcements of companies hoping to bring to market new solar panel technologies with thin films that are vastly cheaper than existing tech. When that happens, the panels really should sprout everwhere, and to very positive effect.

Update: The press releases say the system is 1.6MW, and provides 2.6 million khw/year for a saving of $393K per year (about 15 cents/kwh which is about right in California.) The press release also says the system will pay for itself in 7.5 years, which at 7% interest rate means its total cost was $2.2M. (Truth is Google is able to make far better than 7% with its money, I suspect.)

This means an astounding $1.38 per watt for installed solar. I’ve never heard of anything remotely like this. Even with a bad-math 0% interest rate, 7.5 year payoff is $1.84/watt so it’s not just bad math here. Even with the California rebates of $2.60/watt and 30% federal tax credit, it’s still amzingly cheap — and almost all the savings are coming from the taxpayer.

The release also suggests that 393K per year will result in 15 million saved over a 30 year lifespan. I can’t figure the math in this number. The bad-math 30*393 is under 12 million. The real saving over 30 years at 7% interest has a present value of 4.8 million. The future value, in 30 years time, of $393/year is well over 30M at 7%. You need an interest rate of 1.5% to have a FV near $15M. I suspose the risk-free-rate-above-inflation might correspond to this but it’s not typical in expressing these numbers.

So what are the real numbers?

Stop the bad math on alternative energy

I think it’s important that we stop burning petrofuels or indeed any fuels and get energy from better sources.

But there’s a disturbing phenomenon I have seen from people who believe the same thing too much. They want to believe so much, they forget their math. (Or I may be being charitable. Some of them, trying too hard to sell an idea or a product, may be deliberately forgetting their math.)

I see this over and over again in articles about photovoltaic solar, wind and other forms of power. They suggest you could put in a PV panel array for $20,000, have it provide you with $1,000 worth of electicity per year and thus “pay for itself” in 20 years. Again and again I see people take a series of payments that happen over a long time and just divide the total by the monthly or annual amount.  read more »

How Prius drivers are gross polluters and other lessons of carbon credits

I’ve been thinking more about environmental economics since I blogged about retail carbon credits. I was surprised about how cheap (some would say unrealisticly cheap) wholesale credits are — about $2.20 per tonne of CO2. (Update: This price keeps changing. The U.S. price is clearly out of whack down to just 25 cents per tonne in 2009. The European price has declined too, from $20/tonne when I wrote this to $14/tonne in fall 2009.)

Today, many of my friends have bought a car like the Toyota Prius, feeling they are doing their bit to help the environment by burning less gas. The Prius costs around $3,000-$6,000 more than a comparable old-style engine car (in part because high demand keeps the price high), and the savings on gasoline don’t justify it on a financial basis unless you do nothing but drive all day. So the main reason to buy it is to help the environment and to make a statement before your peer group. The Camry Hybrid, which gets 32mpg instead of 23mpg costs about $5,000 more than the regular Camry.)

Problem is, there’s an argument that you’re hurting the environment, counterintuitive as that sounds. And no, it’s not just the unanswered questions about recycling the fancy batteries in the Prius when they fade, where fairly positive results have been returned so far. Read on…  read more »

Retail carbon credits for the car driver

You may have heard of the idea of pollution credit trading. I’ve been pointed to two firms that are selling CO2 credits on the retail level for individuals, to offset the output from driving a car, heating a house etc.

I’ll get into the details on how it works a bit below, but if you have a car like mine that is putting out 5 metric tons of CO2 each year, you can for a low price (about $50, which includes a whopping markup) pay a factory somewhere to cut their own output by 5 tons, meaning that net, you are causing zero emissions. Which means you are reducing total emissions by a lot more than you would by switching to a Prius, and you are doing it at a vastly lower cost. (This doesn’t mean you shouldn’t drive a Prius, it just means this is a lot more effective.)

Normally pollution credits are traded only by the big boys, trading contracts with hundreds or thousands of tonnes of emissions. The retail firms are letting small players get in the game.

This is a fabulous idea, in theory at least, and also a great, if sneaky gift idea. After all, if you buy the gift of not polluting for your loved one all they get is a bumper sticker and a good feeling. At least it’s better than giving to The Human Fund in their name.

Here’s the catch. I went and priced the credits, and while www.certifiedcleancar.com wanted $50 to credit my car, the actual price of credits on the Chicago Climate Exchange is about $2.16 per tonne of CO2, or about $8 for my actual output as they calculated it. One expects some markup, of course, and even some profit for the company selling the retail credits, but this is nuts. I called the other company, Terrapass and got reasonably frank answers. First of all, they claim they invest more in wind power and other truly non-polluting forms of energy more than they just buy carbon credits. Secondly, this is still a small volume thing, and most of the costs are not the credits, but the $20,000 or so to become a member of the exchange, or so I was told. And of course, in small volumes, administrative costs can swamp the real costs.

Another outfit I found is carbonfund.org which is non-profit and cheaper. In some sense since people buy these out of guilt rather than compulsion (they were meant to be forced on polluters to give money to non polluters and make a market) non-profit might make sense, but they are also supposed to be a real market.

Still, if I pay $50, I would love for my $50 to mostly go to reducing pollution, not mostly to administration. Usually when exchanges are expensive there are members who will trade for you at much more modest markups. The folks at Terrapass said they were not yet profitable at the current prices.

And it is such a good idea. Read below for more on pollution credits.  read more »

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