Is Google really saving money with PV installation?

Submitted by brad on Tue, 2006-10-17 01:09
Topic: 
Going Green

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?

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Comments

Anonymous

Sun, 2006-10-22 02:29

Even by showing people your rough math, you are effectively saying to people and business, "Don't use solar power yet, cause it's not really financially viable."

You're not knocking google for going solar
You're knocking the idea of going solar

brad

Mon, 2006-10-23 13:56

And other forms of clean and renewable energy. It's fine to say, "Solar currently costs more than grid power in $/kwh, but we're using it anyway to be cleaner." That's a good message. Saying that solar for more than $3.50/watt "pays for itself" in some number of years compared to grid power is, to the best of our knowledge today, a lie.

Doing solar to be cleaner, and promote demand so that the total cost falls to compete with the grid -- these are good things. Pretending it's what it's not is bad.

Now, I can see arguments to bump the number. For example, the "total cost to society" of grid power is higher than its market cost, because of how it competes. It's hard to decide an exact number for the total cost of grid power -- there will always be debate. Solar itself also has extra costs, since manufacturing it takes grid power and creates pollution as well, though these are comparatively low.

But none of the "pays for itself in N years" statements are using this sort of analysis. They're mostly using bad math.

Another issue for debate is the rebates. Typical solar today can be put in for about $8/watt, and the cost can get near the $3.50 price with rebates and tax breaks. However, this is not solar being cost-effective, this is taxpayer money doing the work. Which may be a wise decision, but again we should be clear about what it is, and ask if this is the best way to use taxpayer money and government power to create greener energy. It may be, but we don't discuss it in those terms.

Bruce Colley

Mon, 2006-11-13 15:47

If PV installations using tax rebates are such a good idea, then everyone should do it. If everyone did it, then we are simply paying taxes out of one of our collective pockets, funneling the money through a government bureaucracy, with the attendant costs, and then putting the remaining money back into another one of our collective pockets. So the "ideal" outcome of tax subsidized PV - 100% saturation - actually results in an increase in their cost to society as a whole, not a decrease. The same holds true of utility subsidies and other similar misguided schemes. PV holds great promise, but there are better ways to do it than through these end user subsidies.

Tom

Fri, 2010-05-07 13:03

Solar panels have just reached the point micro chips did in the late 90s, and as the prices fall and efficiencies increase we will need installers pre trained in solar installations. The subsidies are not necessarily just helping the residents and businesses that install solar power, they are helping the construction industry train individuals in a skill set that we will need people trained in within the next 15 years... Look at the subsidies as a form of college tuition our country must pay so that we don't have chinese immigrants doing it all for us. Many high tech jobs are being imported from outside of our country and that money flees the sinking ship with the dumb people, and guess who the dumb people will be 15 years down the road if we don't incentivize our solar industry to maintain its course.

brad

Sat, 2010-05-08 02:37

And indeed things have changed.

-hh

Mon, 2006-11-06 05:20

I looked at a 6KW home system around 15 months ago. The short/simple answer is that the direct costs of such a system was not cheap - it was somewhere around $40K before the local (State - NJ) rebate of roughly 50%.

When you then take that capital outlay and divide by the monthly savings in electricity, it works out to around a 20 year time-until-payback in KISS form. Obviously unacceptable ROI, but more curiously, way, way off from what the claims were.

What I found was that (at least locally), the owner of the PV system has the ability to register at a State website for their power generation and effectively what happens is that as they generate power, the PV owner sells off their "Green" (Renewable Energy) energy credits, and it is this revenue that dramatically changes the ROI numbers.

These 'Green' sales are being sold to the local Utility company who is required by regulation to have some small percentage of their total power generation be from renewable resources. That's not necessarily a good or bad thing - the main thing is to know where the money's coming from and the general makeup of the market in order to assess your longer term prospects of that marketplace remaining effectively the same over 2, 5, 7, 10 years ... ie, until you at least hit your ROI.

However, this sale is done as an auction, so very simplistically, with more people installing PV, the supply's going to increase, and since the demand is artificial, it seems to me to be unlikely that the claimed ROI's are going to hold up in reality over the needed longer term.

-hh

brad

Mon, 2006-11-06 22:19

Carbon credits for example, even at the euro price of $11/tonne, still can't do much to offset the cost of PV.

Clearly with enough rebates and credits, PV (and anything else) can be made cost effective for the consumer, if not society. Not that it is necessarily bad to throw some tax money at reducing pollution, but we should be clear that that's what it is.

Barry Hooper

Fri, 2008-09-19 10:24

One item missing from your financial estimation is escalation of electricity costs. California rates have increased by 5% to 7% nominally (depending on what period you choose to average) for years, while the cost per kWh from PV is largely fixed at installation. (Maintenance isn't zero, but the fuel is free of course.)

Under any reasonable assumptions about inflation, the escalation of electricity costs would be sufficient to offset inflation, plus a portion of interest, so the net effective interest rate on the project could be on the order of 1.5%, all-in. If inflation in the next few years is higher than would have been reasonable to anticipate in 2006, prepaid electricity with fixed financing costs will look brilliant in retrospect.

Tom

Fri, 2010-05-07 12:55

I don't see him trying to figure the costs of oil into the price at the pump (the cost benefit analysis of oil shows that it is a dead end with only one solution, tons of profit for a very few people) this same guy would argue we make more nukes, another form of diminishing resource with the same outcome. SOLAR IS CHEAPER, than any other form of fuel, its the costs we have not measured and do not measure that matter. Right now there are giga tons of methane hydrates just waiting to come out of the ocean, and poised to kill all life if the ocean temperatures rise just a smiggin. 30 years of oil left according to EXXON. 300 years of coal if we don't end up using it to make gasified coal oil after the 30 years are up. Global terrorism grows stronger with every trip to the mini mart.... And you would dare say solar costs too much... Measure your costs, weigh them out, and you will open your eyes to just how cheap solar is...

In case of point if you add up all the costs of nuclear the price end up being near to $5500 a kWh of capacity and Solar CSP is much less $4900... So whats the problem, lets add CSP to all the coal power plants, then we can call them true clean coal, or atleast hybrid coal power plants.

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