Jim Weedman
“I am no expert in US power contracts, so I’ll have to believe that you have got a very good deal here.”
An OK deal. Had I been willing to do it myself, I think I could have got the $16,500 4 KW system installed for $14,000. That $2500 is (roughly) the profit to the solar installer (which other than standard warrantee, has no residual financial risk). For that, and for 20 years of somebody else managing my solar system – I’ll pay $2500. There is a lot of competition in this market.
Why does NRG put a solar panel on my house rather than build a large centralized plant? I think Latimer nails it:
“b. There is some regulatory constraint that means it is obliged to offer favourable terms (bad regulatory constraints can be changed)
c. There is some form of subsidy that makes this worth their while (bad…subsidies can go as fast as they come)”
Here are the subsidies that I would get that I sign over to NRG:
- $4950 federal tax credit (this is within the year) This subsidy goes for another couple of years.
- $1000 state tax credit (this is within the year). Not sure how much longer this one lasts
- $2205 power company credit (this is over a period of years). This one is going away soon.
I am not sure what subsidies are available to standalone solar installations. Recall that the environmentalists were opposed to one near the Imperial valley in California because of the required transmission infrastructure.
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So NRG gets almost half the cost of the system back from guaranteed payers over the first few years of the life of the system.
NRG gets to depreciate the system over some small number of years. I bet they get to depreciate the entire $16,500 capital cost. As a homeowner, I do not get this “subsidy”.
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Finally, to get the 6.6 TO 7.7 cents/kWh I prepay all or part of the lease. Most people prepay little or non of the lease. In those cases, the cost of the power jumps up close to 11 cents per kWh, which is a nice little profit to NRG over the course of the lease.
The advantage to me to prepay the lease is that I can depend on all of those other payng installations to keep NRG engaged in this endeavor for the life of the lease.
So back to the numbers:
DIY minus subsidies means the sustem would cost me about $8500.
Prepaid lease means the system would cost me $8300 with a system on my roof to be addressed in 20 years.
Other ways to look at the econmomics:
In AZ with decent citing, 1 kW of PV capacity produces an average of 1500 kWh per year over 20 years. The cost of the panels (which is still half of the cost of a system even at todays depressed panel prices) is about $2,000/kW. The value of the power that the 1500 kWh offsets is roughly $300/year at todays price schedule. Hard to nail this number down because power price rages from a high of $0.245 peak summer to $0.195 peak winter to $0.065 off peak. About half of the panel production is peak hours.
Other thoughts
Subsidies almost exactly offset the cost of the panel or half the cost of the system.
My power company, APS, has promised price stability for the next 4 years.
All of APS marginal capacity is now Natural Gas. One wonders how long NG prices will remain insanely depressed in relation to its BTU value.
“Since carbon offset credits are an entirely hypothetical entity with only a nominal and hence highly volatile (including zero) value, the whole scheme involves the power company moving the risk of their future value from the power company to you.”
Two considerations:
1. If the power company goes away then I still have a functioning solar system on my roof with a 25 year warrantee on the panels – which may also be worthless given the carnage in the panel producer ranks. So in addition to the power panel breaking, the lessor has to disappear. The current scheme is based on history of many years of solar installations in AZ.
2. There is no residual financial risk to me. I pay what the contract says. For thousands who are not prepaying the lease, they do not pay if the lessor does not perform.
