11 ms·

I always find it a bit dishonest sounding when these things are referred to as producing a "savings". Solar on a residential rooftop is not financially sustaina

I always find it a bit dishonest sounding when these things are referred to as producing a "savings". Solar on a residential rooftop is not financially sustainable when you consider the cost of capital and require a market ROI. So I assume that lessors in this case are receiving a non-trivial government subsidy. Which means, in the end, that whatever the lessee is "saving" and then some is being paid in additional taxes that wouldn't be there if there were no subsidy. All of which is fine for those that want to pay more for energy that is cleaner. But people should not be given the impression that they're paying less. If they really were we'd all have solar rooftops over night.

kuschku 11y ago
Well, look at the subsidies for the existing energy companies. Nuclear companies get the waste handling for free, if they break regulations, often the government pays the bill... Coal companies never pay for the damages to the environment their huge quarries do... Subsidies for solar are just one part of it. If you take these subsidies that you give the energy companies, and add them as tax to the electricity price, you end up with electricity costs like in Germany – 0.40$ per kWh
- mbostleman 11y ago
  If what you're saying is correct, if subsidies were removed across the board taxes would go down, energy costs would go up and solar would take off and replace coal because it would be the (real) best deal.
  - kuschku 11y ago
    What do you think why German electricity companies are trying to sell their gas and coal business and focus on renewables as much as possible? In Germany, the effect is even stronger: As we are taxed per kWh, the electricity is quite expensive. On the other hand, this money is then spent on subsidies for solar and wind. Overall making solar and wind so extremely cost effective that anything else becomes stupid. And, at the same time, it leads to people saving really a lot of energy. A family of 4 using 3000kWh per year or less is common.
  - aidenn0 11y ago
    Even fairly conservative estimates of the negative externalities of coal do in fact indicate this for daytime loads.
tstactplsignore 11y ago
This is an argument detached from two realities: (1) that fossil fuels receive enormous subsidies in the US and worldwide, and (2) that there is an enormous impact of CO2 on global climate, health, and ecosystems (not to mention the local environmental and health impacts of coal mining and fracking). When accounting for these costs, it becomes increasingly dishonest to claim that fossil fuels are cheaper than renewables.
- mbostleman 11y ago
  That may or may not be the case, but the claims that these systems are "cheaper" prey on economic ignorance.
  - dafrankenstein2 11y ago
    Mind your comment and wait and see what will happen after 20 years
    - freehunter 11y ago
      20 years doesn't change their price today.
      - coldtea 11y ago
        No, only make the world better for our kids, with a small premium to pay today instead of loaning from the future...
        freehunter 11y ago
        Oh so now we're talking about morals. I thought just a minute ago we were talking about dollars.
        coldtea 11y ago
        I wasn't. This was my first comment. And for me morals trump over dollars everytime. Not to mention that huge ecological damage also has cost someone will have to pay eventually. So as long as you still believe in your country (which will pay its toll) or your children (which will pay their toll) from that, there's a hidden cost there too.
URSpider94 11y ago
The common definition of "savings" is a reduction of cash outlay for the purchaser. The fact that there are government subsidies (or surcharges) involved is not relevant for that calculation. The Google site is extremely thorough -- for the case where the consumer is buying the panels, they calculate the time to break even, but also a net present value given a 4% cost of capital. Same thing for the lease cases -- for an example I ran, the lease would cost $96 per month (fixed for the 20-year life of the lease), and offset $115 of a monthly $120 electrical bill at today's rates. So, it would generate cash savings for me from day one. Most solar leases in fact GUARANTEE that you will pay less for electricity after the install. So, "savings" should not be in quotes, it's a real savings for the lessee. As for your argument that we might all be better off if we didn't have to pay higher taxes for the subsidy -- maybe, but my decision to install solar or not is going to have a negligible impact on my personal tax rate, so I should value any savings against a fixed tax rate that doesn't change as a function of my decision.
- mbostleman 11y ago
  You are correct - the impact on your personal tax is negligible. Solar accounts for something well under 2% of total energy generation and residential rooftop far less. So almost all of your subsidy is paid by others. That doesn't make the over all analysis any more sound. What if we all had solar on our rooftop? Energy would cost more. The savings would be negative.
  - URSpider94 11y ago
    I don't accept your conclusion. If we all had solar on our roofs, there are many possible factors that could reduce power rates (including tax burden, by your definition): -- fossil fuel prices would drop, since demand would fall -- we would spend less tax money on grants and subsidies for oil and gas marine terminals -- fewer emergency responses, disaster clean ups, etc. for fuel transportation mishaps -- maybe we could avoid or sit out the next land war in the Middle East ... Additionally, even without a tax subsidy, installing solar on my roof in CA would generate a positive NPV over 20 years. Here in CA, it's just plain cheaper than the utilities, even without the (nice to have) tax subsidies.
drited 11y ago
Actually by the standards of rates of change in the energy industry, we are going to all have solar panels powering our homes 'overnight' (see the rapid growth of solar forecast in slide 33 of the doc linked below). In many areas, due to rapid price declines and relatively low prevailing interest rates, solar is cost competitive without subsidy now so the ROI is real. As cumulative solar installations continue to grow, we will continue down the cost curve shown on slide 13 and that will be true for more and more people. Which means that subsidies today can actually lead to long term lower energy costs as prices continue to drop. On that topic, we should all be thanking Germany for being farsighted enough to invest in subsidies to keep the industry going for long enough to get us down to where we are on the cost curve today. Bloomberg new energy finance talk slide deck: http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_2014-04-08-ML-Summit-Keynote_Final.pdf http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_2...
cheald 11y ago
This was true several years ago, but the cost of solar has come down substantially even without considering tax subsidies, and is continuing to decrease at a healthy rate. For example, Sunroof estimates that a 5.75kWh system would cost $21,500 before subsidies (about $15k after, but we're ignoring that), and that it will save you (gross) $60,000 over 20 years in utility bill costs. You can either: a) Invest that capital. At a stable 7%, after 20 years, your balance would be about $86.8k. b) Purchase a solar system for that $21.5k, and invest the difference on your power bill each month. Assuming a base power bill of $200, and the 2.2% annual rate increase that Sunroof uses, you would invest $2400 the first year, $2452.80 the second year, etc. At the same 7% return, then in 20 years your investment balance would be $122.8k, and your power bills would continue to be $0. Remember, these numbers assume an unsubsidized system. The gain comes from the fact that after the break-even point (at year 12), you are continuing to invest your power bill equivalent, rather than paying it to the power company, whereas in the non-solar case, the increased power bill will never earn you a return. The downside is that it (with those numbers) takes 12 years for you to come out ahead, and solar tech is moving so fast that the opportunity cost of committing capital to solar today rather than investing it and then liquidating that investment tomorrow to pay for a cheaper and more efficient system may be substantial, but is arguably specifically unknowable. If you don't offset your full cost, the numbers change a bit, as well (but you can certainly compute what happens at a 50% offset for a smaller upfront capital investment easily enough, as well). There are certainly scenarios in which solar is viable unsubsidized today, though. Feel free to check my math and assumptions: https://docs.google.com/spreadsheets/d/1JoJxX5t7VmRhV1LDI1UFZ1-f_5yrX62ypS9Bi6AwfBs/edit?usp=sharing https://docs.google.com/spreadsheets/d/1JoJxX5t7VmRhV1LDI1UF...
- kartickvad 11y ago
  I wish "who pays for the system" and "where the system is installed" are decoupled, via a market that lets investors finance the system and the installation and own the resulting energy, and house owners or other sites that merely provide a place to install the panels in return for $x worth of free energy every month. If you're a house owner, you'll bid on the X, or different energy companies could make you offers, and you'd pick one that you like. If you're an investor, you'd presumably choose the site that gives you the greatest ROI — the most sunlight, the highest grid prices, and the least rent to be paid to the house owner (x above). This addresses your point about upgrading. You can install the newer system on another roof, without incurring cost of removing the older system, and generate power (and therefore income) from both panels at once. As long as the older system is generating more power than its annual maintenance cost, it doesn't make economic sense to dismantle it. Decoupling also means that if you decide to invest in solar energy, you can have it installed in whichever part of the world (or at least your country) gives the greatest ROI: the most sunlight, and the highest electricity tariffs. Maybe you live in a rented house or an apartment where you can't install solar panels. Giving a higher return will encourage more people to invest in solar. Other advantages of decoupling will be the ability to invest the amount you want, whether $1000 or $100K, rather than the price of one solar system, the ability to make additional investments if you have more money later on, and the ability to liquidate an investment any time you need the money, or in a financial emergency. People will also be able to dip their toes into this market with a small investment, and see how it performs, before making a larger investment.
IkmoIkmo 11y ago
Actually in many places solar is currently cheaper than the utility, without having to be a cheaper generation source. For example a cost of 15c per kwh cost from solar is pretty trivial in many parts of the world nowadays. But here's the thing, for example in the Netherlands, I pay 7c per kwh for electricity, and then about 13c in energy specific tariffs, and then VAT on the whole lot. My final electricity price is about 3x (22c) the cost of the electricity itself. But for every kwh I generate myself and don't buy, I save 22c. In other words, at a hypothetical cost of 15c per kwh, twice as much as electricity from my utility, I save almost half of my bill. That situation differs radically between countries and even states, but again, savings on solar are a very typical story nowadays. I'd say most solar buyers today are saving money. 5-6 years ago that was different, when most people who bought were still buying with a moral position in mind and paid a slight premium. Mostly, I don't think people realise how incredibly subsidised solar is. Per unit of energy generated, direct taxes/subsidies are much, much higher than oil. The other part of that story is that we have path dependency in oil and that the carter doctrine has cost trillions of dollars, and that externalities aren't priced in much for fossil. (e.g. cost of pollution, droughts etc). For example, here's an interesting thought. For every $1m you buy in solar, you get about half a MW in capacity, which generates a little under 1 GWH per year (rounding it up very heavily here but you'll see it's mostly irrelevant). Now here's what that means. First of all, you can get a 30% tax credit, which you can sell. That's $300k recuperated. Then on a portion of the cost, 85% iirc, you can depreciate within 5 years or so. At a tax rate of 35%, that's a total of $300k in tax avoidance due to depreciation. So right off the bat in tax structuring, you've already gotten more than 50% off. Then, your almost 1 GWH per year generates solar credits, which you can sell, too, for about $100k per year. And yes you can presell these for 10 years into the future. And then and only then, after you've paid $1m, received $600k in tax back from the government and sold solar credits for just the first 10 years for $1m (on a system with 20-40 years of lifetime at least), when you already made $600k accounting profit without generating a single electron, then you can start to actually sell the energy to an offtaker (like an Amazon warehouse) for about 10c per kwh, making you a little under $100k a year. So you invest $1m, you get $1m, you get $600k in tax benefits and annual income of a little under $100k. Sounds insane? Well it sort of is. It depends on the state, some states are crap (low cost of electricity, low price of solar credit market, little offtaker demand, few solar resources (sun), difficult regulations etc etc), some are great. And beyond that, solar is simply becoming cheaper really fast. For example, SolarFirst just signed a contract for a 100 MW solar project at a kwh price of 3.8c. Pretty insane. Anyway in short the notion that solar savings are disingenuous is completely false. In fact virtually all of the big solar companies offer leases right now, where you pay nothing upfront, you don't own the panels, but you lease them on your roof and pay an electricity bill that's lower in the vast majority of cases than your utility. That's their main selling point.

kuschku 11y ago

Well, look at the subsidies for the existing energy companies. Nuclear companies get the waste handling for free, if they break regulations, often the government pays the bill... Coal companies never pay for the damages to the environment their huge quarries do... Subsidies for solar are just one part of it. If you take these subsidies that you give the energy companies, and add them as tax to the electricity price, you end up with electricity costs like in Germany – 0.40$ per kWh

mbostleman 11y ago
If what you're saying is correct, if subsidies were removed across the board taxes would go down, energy costs would go up and solar would take off and replace coal because it would be the (real) best deal.
- kuschku 11y ago
  What do you think why German electricity companies are trying to sell their gas and coal business and focus on renewables as much as possible? In Germany, the effect is even stronger: As we are taxed per kWh, the electricity is quite expensive. On the other hand, this money is then spent on subsidies for solar and wind. Overall making solar and wind so extremely cost effective that anything else becomes stupid. And, at the same time, it leads to people saving really a lot of energy. A family of 4 using 3000kWh per year or less is common.
- aidenn0 11y ago
  Even fairly conservative estimates of the negative externalities of coal do in fact indicate this for daytime loads.

tstactplsignore 11y ago

This is an argument detached from two realities: (1) that fossil fuels receive enormous subsidies in the US and worldwide, and (2) that there is an enormous impact of CO2 on global climate, health, and ecosystems (not to mention the local environmental and health impacts of coal mining and fracking). When accounting for these costs, it becomes increasingly dishonest to claim that fossil fuels are cheaper than renewables.

mbostleman 11y ago
That may or may not be the case, but the claims that these systems are "cheaper" prey on economic ignorance.
- dafrankenstein2 11y ago
  Mind your comment and wait and see what will happen after 20 years
  - freehunter 11y ago
    20 years doesn't change their price today.
    - coldtea 11y ago
      No, only make the world better for our kids, with a small premium to pay today instead of loaning from the future...
      - freehunter 11y ago
        Oh so now we're talking about morals. I thought just a minute ago we were talking about dollars.
        coldtea 11y ago
        I wasn't. This was my first comment. And for me morals trump over dollars everytime. Not to mention that huge ecological damage also has cost someone will have to pay eventually. So as long as you still believe in your country (which will pay its toll) or your children (which will pay their toll) from that, there's a hidden cost there too.

URSpider94 11y ago

The common definition of "savings" is a reduction of cash outlay for the purchaser. The fact that there are government subsidies (or surcharges) involved is not relevant for that calculation. The Google site is extremely thorough -- for the case where the consumer is buying the panels, they calculate the time to break even, but also a net present value given a 4% cost of capital. Same thing for the lease cases -- for an example I ran, the lease would cost $96 per month (fixed for the 20-year life of the lease), and offset $115 of a monthly $120 electrical bill at today's rates. So, it would generate cash savings for me from day one. Most solar leases in fact GUARANTEE that you will pay less for electricity after the install. So, "savings" should not be in quotes, it's a real savings for the lessee. As for your argument that we might all be better off if we didn't have to pay higher taxes for the subsidy -- maybe, but my decision to install solar or not is going to have a negligible impact on my personal tax rate, so I should value any savings against a fixed tax rate that doesn't change as a function of my decision.

mbostleman 11y ago
You are correct - the impact on your personal tax is negligible. Solar accounts for something well under 2% of total energy generation and residential rooftop far less. So almost all of your subsidy is paid by others. That doesn't make the over all analysis any more sound. What if we all had solar on our rooftop? Energy would cost more. The savings would be negative.
- URSpider94 11y ago
  I don't accept your conclusion. If we all had solar on our roofs, there are many possible factors that could reduce power rates (including tax burden, by your definition): -- fossil fuel prices would drop, since demand would fall -- we would spend less tax money on grants and subsidies for oil and gas marine terminals -- fewer emergency responses, disaster clean ups, etc. for fuel transportation mishaps -- maybe we could avoid or sit out the next land war in the Middle East ... Additionally, even without a tax subsidy, installing solar on my roof in CA would generate a positive NPV over 20 years. Here in CA, it's just plain cheaper than the utilities, even without the (nice to have) tax subsidies.

drited 11y ago

Actually by the standards of rates of change in the energy industry, we are going to all have solar panels powering our homes 'overnight' (see the rapid growth of solar forecast in slide 33 of the doc linked below). In many areas, due to rapid price declines and relatively low prevailing interest rates, solar is cost competitive without subsidy now so the ROI is real. As cumulative solar installations continue to grow, we will continue down the cost curve shown on slide 13 and that will be true for more and more people. Which means that subsidies today can actually lead to long term lower energy costs as prices continue to drop. On that topic, we should all be thanking Germany for being farsighted enough to invest in subsidies to keep the industry going for long enough to get us down to where we are on the cost curve today. Bloomberg new energy finance talk slide deck: http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_2014-04-08-ML-Summit-Keynote_Final.pdf http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_2...

cheald 11y ago

This was true several years ago, but the cost of solar has come down substantially even without considering tax subsidies, and is continuing to decrease at a healthy rate. For example, Sunroof estimates that a 5.75kWh system would cost $21,500 before subsidies (about $15k after, but we're ignoring that), and that it will save you (gross) $60,000 over 20 years in utility bill costs. You can either: a) Invest that capital. At a stable 7%, after 20 years, your balance would be about $86.8k. b) Purchase a solar system for that $21.5k, and invest the difference on your power bill each month. Assuming a base power bill of $200, and the 2.2% annual rate increase that Sunroof uses, you would invest $2400 the first year, $2452.80 the second year, etc. At the same 7% return, then in 20 years your investment balance would be $122.8k, and your power bills would continue to be $0. Remember, these numbers assume an unsubsidized system. The gain comes from the fact that after the break-even point (at year 12), you are continuing to invest your power bill equivalent, rather than paying it to the power company, whereas in the non-solar case, the increased power bill will never earn you a return. The downside is that it (with those numbers) takes 12 years for you to come out ahead, and solar tech is moving so fast that the opportunity cost of committing capital to solar today rather than investing it and then liquidating that investment tomorrow to pay for a cheaper and more efficient system may be substantial, but is arguably specifically unknowable. If you don't offset your full cost, the numbers change a bit, as well (but you can certainly compute what happens at a 50% offset for a smaller upfront capital investment easily enough, as well). There are certainly scenarios in which solar is viable unsubsidized today, though. Feel free to check my math and assumptions: https://docs.google.com/spreadsheets/d/1JoJxX5t7VmRhV1LDI1UFZ1-f_5yrX62ypS9Bi6AwfBs/edit?usp=sharing https://docs.google.com/spreadsheets/d/1JoJxX5t7VmRhV1LDI1UF...

kartickvad 11y ago
I wish "who pays for the system" and "where the system is installed" are decoupled, via a market that lets investors finance the system and the installation and own the resulting energy, and house owners or other sites that merely provide a place to install the panels in return for $x worth of free energy every month. If you're a house owner, you'll bid on the X, or different energy companies could make you offers, and you'd pick one that you like. If you're an investor, you'd presumably choose the site that gives you the greatest ROI — the most sunlight, the highest grid prices, and the least rent to be paid to the house owner (x above). This addresses your point about upgrading. You can install the newer system on another roof, without incurring cost of removing the older system, and generate power (and therefore income) from both panels at once. As long as the older system is generating more power than its annual maintenance cost, it doesn't make economic sense to dismantle it. Decoupling also means that if you decide to invest in solar energy, you can have it installed in whichever part of the world (or at least your country) gives the greatest ROI: the most sunlight, and the highest electricity tariffs. Maybe you live in a rented house or an apartment where you can't install solar panels. Giving a higher return will encourage more people to invest in solar. Other advantages of decoupling will be the ability to invest the amount you want, whether $1000 or $100K, rather than the price of one solar system, the ability to make additional investments if you have more money later on, and the ability to liquidate an investment any time you need the money, or in a financial emergency. People will also be able to dip their toes into this market with a small investment, and see how it performs, before making a larger investment.

IkmoIkmo 11y ago

Actually in many places solar is currently cheaper than the utility, without having to be a cheaper generation source. For example a cost of 15c per kwh cost from solar is pretty trivial in many parts of the world nowadays. But here's the thing, for example in the Netherlands, I pay 7c per kwh for electricity, and then about 13c in energy specific tariffs, and then VAT on the whole lot. My final electricity price is about 3x (22c) the cost of the electricity itself. But for every kwh I generate myself and don't buy, I save 22c. In other words, at a hypothetical cost of 15c per kwh, twice as much as electricity from my utility, I save almost half of my bill. That situation differs radically between countries and even states, but again, savings on solar are a very typical story nowadays. I'd say most solar buyers today are saving money. 5-6 years ago that was different, when most people who bought were still buying with a moral position in mind and paid a slight premium. Mostly, I don't think people realise how incredibly subsidised solar is. Per unit of energy generated, direct taxes/subsidies are much, much higher than oil. The other part of that story is that we have path dependency in oil and that the carter doctrine has cost trillions of dollars, and that externalities aren't priced in much for fossil. (e.g. cost of pollution, droughts etc). For example, here's an interesting thought. For every $1m you buy in solar, you get about half a MW in capacity, which generates a little under 1 GWH per year (rounding it up very heavily here but you'll see it's mostly irrelevant). Now here's what that means. First of all, you can get a 30% tax credit, which you can sell. That's $300k recuperated. Then on a portion of the cost, 85% iirc, you can depreciate within 5 years or so. At a tax rate of 35%, that's a total of $300k in tax avoidance due to depreciation. So right off the bat in tax structuring, you've already gotten more than 50% off. Then, your almost 1 GWH per year generates solar credits, which you can sell, too, for about $100k per year. And yes you can presell these for 10 years into the future. And then and only then, after you've paid $1m, received $600k in tax back from the government and sold solar credits for just the first 10 years for $1m (on a system with 20-40 years of lifetime at least), when you already made $600k accounting profit without generating a single electron, then you can start to actually sell the energy to an offtaker (like an Amazon warehouse) for about 10c per kwh, making you a little under $100k a year. So you invest $1m, you get $1m, you get $600k in tax benefits and annual income of a little under $100k. Sounds insane? Well it sort of is. It depends on the state, some states are crap (low cost of electricity, low price of solar credit market, little offtaker demand, few solar resources (sun), difficult regulations etc etc), some are great. And beyond that, solar is simply becoming cheaper really fast. For example, SolarFirst just signed a contract for a 100 MW solar project at a kwh price of 3.8c. Pretty insane. Anyway in short the notion that solar savings are disingenuous is completely false. In fact virtually all of the big solar companies offer leases right now, where you pay nothing upfront, you don't own the panels, but you lease them on your roof and pay an electricity bill that's lower in the vast majority of cases than your utility. That's their main selling point.