Selling Residential Solar

1
Selling Residential SolarA Market Based
Approach Presented by Gerald Bernstein,
Stanford Transportation Group and Claire
Starry, TDS Economics Presented to Silicon
Valley Chapter National Association for Business
Economics October 13, 2009
2
Introduction

• Brief Review of the Status of Solar PV
• Costs of Residential Solar PV
• Costs of utility-provided electricity
• The basic economics (or lack-thereof) of
  residential solar
• High electricity consumerswhere to focus if CA
  is to economically achieve emission-reduction
  targets

3
Current Situation Solar Has A Long Way to Grow
4
Residential System Component Costs

• Residential System Costs in California (/DC W)-
  Panels 5.00- Inverter 1.00- Balance of
  System 2.00- Installation Labor 2.00-
  TOTAL 9.00
• Residential typically are 3 4 kW, 27,000 -
  36,000
• Due to oversupply, panel prices are down
• Due to recession, labor costs are down

5
Residential Systems with Rebates and Tax
Credits(4 kW system)

• Nominal System Cost 36,000
• Federal Tax Credit (30) -
  10,800
• CA Solar Initiative (CSI) Rebate 1.55/W -
  6,200
• San Francisco Rebate (2,000 - 4,000) -
  4,000
• NET INSTALLATION COST 15,000(approximate
  A/C output in SF 6,000 kWh/yr)
• Some locations (Berkeley, Sonoma Co) offer
  upfront loans repaid with 20-year charges on
  property tax bills
• New Jersey uses market-based Solar Renewable
  Energy Credits (SERC) with the utility buying
  credits annually from homeowners
• Germanys Feed-In Tariffs have propelled it to 1
  worldwide. But solar has not met its intended
  purpose of replacing nuclear reactors

6
Estimating Financial Returns for Residential
Solar Installation First step is to compare the
costs of purchasing from electric utilities
versus the cost of installing rooftop solar
systems.
7
Estimating Financial Returns for Residential
Solar Installation The next step is to identify
the baseline consumption levels Tier 2 goes to
30 over baselineTier 3 goes to 100 over
baselineTiers 4 and 5 are those where rates are
the highest. Baseline Amounts kWh per year
  PGE SDGE SCE LAWP PA SMUD
Gas Electric            
Low 3,700 3,832 3,705 4,200 3,650 7,920
High 5,300 5,494 10,475 6,000    
All Electric            
Low 6,400 4,818 4,780 4,200 3,650 10,920
High 10,100 8,742 12,793 6,000    
8
Estimating Financial Returns for Residential
Solar Installation Estimated IRR for PV Solar
Systems for Households Consuming 20,000 kWh per
Year and Served by Investor-Owned Utilities
Sources TDS Economics and Stanford
Transportation Group
9
Finding Households that Benefit fromResidential
Solar InstallationDistribution of CA
Residential Accounts by Investor-Owned Versus
Municipal Utility
Accts. 2004 MWh 2004
(Millions) (Millions)
12.3 84.0
(Percent) (Percent)
Investor-Owned Utilities 79 78
PGE 36 35
SDGE 9 8
SCE 33 33

Publicly-Owned Utilities 21 22
LAWP 10 9
SMUD 4 5
Source California Energy Commission
10
Finding Households that Benefit fromResidential
Solar InstallationDistribution of CA Households
by Annual Electricity Consumption
Source 2005 RECS Survey, DOE, 2009
11
Finding Households that Benefit fromResidential
Solar Installation

• Criteria used to select solar households
• Single family dwelling units.
• Households served by investor-owned utilities
• Smallest system installed is 2 kW
• A household would be willing to install solar
  only if it can financially justify a 2kW system
  (generating about 2,500 kWh per year) based on an
  expected IRR of 5 or higher.
• For respondents living in single family attached
  or detached housing with consumption exceeding
  14,500 kWh per year with all-electric utilities
  and 10,500 kWh per year for other households, we
  assumed that 75 would have a financial incentive
  to put in sufficient solar power to generate
  enough electricity to lower their purchases from
  utilities to 12,000 kWh (all-electric households)
  or 8,000 kWh (gas and electric households).

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Finding Households that Benefit fromResidential
Solar Installation Estimated Number of
Households with Financial Potential to Install
Solar Panels
Number of Households Amount of Electricity Consumed Potential for Solar Solar as a Percent of Total
Million Million kWh Million kWh Percent
Total Households 12.1 84,588 9,539 11
Not Candidates for Solar Power 10.3 59,380 - 0
Candidates for Solar Power 1.8 25,208 9,539 38
Sources TDS Economics, Stanford Transportation
Group
13
ConclusionMarket Forces Can be Used to Help the
State Meet Its Million Roofs Goals

• More than 1 million CA households can benefit
  financially from rooftop solar systems with the
  potential of installing over 10 times the states
  goal of 577 MW of residential capacity.
• The state should focus on the limited group of
  households with a financial incentive to install
  solar systems. This would reduce the need for
  subsidies.
• We expect programs to finance solar systems to
  continue to evolve. Any form of emission or
  carbon tax will accelerate solar developments.
• But we remain a LONG way from widespread
  adoption.