Dandan Gong
Jessica Millar
Kerstin Millius
Reid Sherman
BPRO 29000
Photovoltaics vs. Solar Water Heating in California:
Creating Incentives for Green Energy
Table of Contents
Introduction .......................................................................................................................... 2
Photovoltaic Cells .................................................................................................................. 3
Solar Hot Water Heaters ...................................................................................................... 10
Cost-Benefit Analysis ........................................................................................................... 13
Benefits ....................................................................................................................................... 14
Costs ............................................................................................................................................ 17
Results ......................................................................................................................................... 18
Policy Considerations .......................................................................................................... 22
Federal Incentives ........................................................................................................................ 23
The California Solar Initiative ........................................................................................................ 24
Solar Water Heating and Efficiency Act of 2007 ............................................................................. 26
Opposition to Solar Installations ................................................................................................... 26
Conclusions ......................................................................................................................... 27
Bibliography ........................................................................................................................ 28
1
Introduction
The production of energy in California got a lot of national attention in 2000 and
2001 during the electricity crisis, when widespread blackouts caused then-Governor
Davis to declare a state of emergency. After the collapse of Enron and disclosure of its
manipulations of the energy market, it became much less of a public issue, but with
rising oil and natural gas prices and concerns about global warming, energy, especially
alternatives to fossil fuels, is on the minds of the public and politicians alike. The
abundance of clear, warm, sunny days that characterizes much of the state suggests
one particular stable and powerful alternative, the sun. In this study, we consider two
methods by which Californians can harness the sun’s energy: solar hot water heaters
and photovoltaic cells. These two types of systems are currently mass-produced and
available to consumers for individual residential use; solar hot water heaters, in
particular, have been used in thousands of California homes since the nineteenth
century.
California has much to gain by encouraging residential use of solar power. Solar
hot water heaters and photovoltaic cells offer significantly different methods by which
solar energy can be employed. Solar hot water heaters are relatively simple, efficient,
inexpensive systems, but contribute far less to the overall energy needs of a household
than photovoltaic cells do. Photovoltaic cells are far more expensive, but can provide a
greater amount of energy for the house, and the technology is constantly advancing to
greater efficiency. The two types of systems offer distinct advantages and
disadvantages to supplementing the energy production for use in California residences.
2
Certainly, encouraging the use of solar power makes sense, but there are
significant differences in the various systems by which Californians can harness the
sun’s energy. Photovoltaic cells and solar hot water heaters are two of the most readily
available of these options, but the two are significantly different, both in mechanism and
in economic and political implementation. At both the individual and state level,
resources are often limited and choices have to be made. If the state seeks to
implement subsidies for residential use of solar energies, should it emphasize
photovoltaic cells or solar hot water heating systems?
Photovoltaic Cells
Although Albert Einstein is most famous for his theories of relativity, the Nobel
Prize that he won in 1921 was for his explanation of the Photoelectric Effect. The
particle nature of light and its ability to move electrons in a conductor was an important
breakthrough for our understanding of the nature of light, and now it is serving as an
important breakthrough in the science of energy. In this section we will describe the
basic science behind solar cells and how they generate power, and discuss the sort of
systems that might be purchased using the incentives we are considering in this paper.
To generate a current in any system, two sides have to be made, one of which
has electrons at a higher energy state than on the other side. Because free-flowing
particles always travel towards the lower energy state, like balls rolling downhill, the
electrons will flow in a certain direction as long as a conductor connects the two sides,
causing a current. This is the basic principle behind a battery.
3
Batteries don’t work as a major source of energy because it takes as much
energy to make them as they produce and they are limited in lifetime: as soon as the
higher energy side runs out of electrons, the battery is dead and there’s no more
current. Here’s where the photoelectric effect comes in. With the proper materials and
configuration, photons can be utilized to move electrons back to the higher-energy
state, and the cell will work like a battery that is constantly recharging when light shines
on it.
To achieve this, semiconductors are used, most often crystal silicon. All atoms
have discrete energy shells that electrons can occupy, and electrons will tend occupy
the lowest possible shells. Silicon has 4 electrons in the outermost occupied shell.
When silicon forms a crystal, the neighboring silicon atoms share the outer electrons so
that for each atom, it acts as though the outermost occupied shell is fully occupied and
the shell above that is completely empty, which makes it very electrically stable and not
able to conduct electricity at all. If any electron got bumped up to the next level, it would
be called a “valence electron”, and it would be able to travel freely between all the
atoms, because that shell is unoccupied in most of the atoms. Since valence electrons
can move freely, the silicon crystal acts like a conductor for them (hence
“semiconductor”).
It takes a lot of energy to bump an electron out of the crystal into the valence
shell, and once there it is hard to direct the current, so pure silicon isn’t good for a
photovoltaic cell. However, silicon cells can be treated to have specific impurities in
them, in a process called “doping”. If silicon is doped with phosphorus, when the crystal
is created, there is one extra electron for every phosphorus atom (since phosphorus has
4
5 outer electrons instead of 4), and so there will be some valence electrons. This is
called “n-type” silicon, the “n” standing for negative, because of the extra electrons.
(This is a misnomer, however, because the phosphorus atoms also have an extra
proton each, so there is no net negative charge.) If silicon is doped with boron (which
has 3 outer electrons), then the shell with the shared electrons will have some missing,
and those extra spots where an electron could fit into the crystal are called “holes”. This
is “p-type” silicon, for positive. Since the holes are in a lower energy shell than the
valence electrons, if you put connect n-type and p-type silicon, then electrons will flow
from the n-type to the p-type, and you’ll get a brief current.
Figure 1: Valence electrons from the n-type silicon will drop into holes in the p-type silicon.
As the electrons flow to the p-type silicon, however, the n-type will run out
of valence electrons and, even before that, the p-type, because it is gaining electrons,
will become negatively charged enough to repel any more electrons. So some more
sophisticated configuration is needed. If a plate of p-type silicon is placed on a plate of
n-type silicon, there will be an initial rush of electrons as the valence electrons in the ntype side closest to the p-type side cross over to drop into the holes. This creates a
5
zone at the boundary between the two called a “junction” where the extra negative
charge on the p-type side and the extra positive charge on the n-type side result in a
directional electric field. Because of the electric field, electrons in the valence shell will
be pushed to the n-type side. So if photons with enough energy hit electrons in the
silicon and bump them up to the valence shell, they will tend to move to the n-type side,
and because the n-type side has no holes, it will stay in the valence shell. It (or another
valence electron on the n-type side) can then fall back into a hole on the p-type side as
long as a conduction path is provided that doesn’t go through the junction.
Figure 2: A photon of sufficient energy can bump an electron to the valence shell, where it will be
attracted by the net positive charge of the n-type silicon.
A common configuration is shown in Figure 3. Not shown are the wires from the
contact grid to the load, and then from the load to the back contact to complete the
circuit.
6
Figure 3: Anatomy of a typical solar cell (howstuffworks.com)
Advantages and Limitations of Solar Cells
The technology to generate electric power directly from radiation coming from the
sun is an amazing achievement. Almost all of the sources of our energy originate with
the sun, but usually we harness the energy after it has been cycled through complicated
processes, like photosynthesis in plants or the evaporation and precipitation of water.
Since every conversion comes with associated losses, the potential for solar energy
should be great. For example, more energy in solar radiation falls on a field than the
energy in the plants that could be grown on it. However, photovoltaic cells as a means
of collecting the sun’s energy have some significant challenges.
Like any other source of energy, there are theoretical limits to the energy that
photovoltaics can produce. With the configuration shown in Fig. 3, the top layer of
silicon must connect to a conductor, and the best conductors are opaque, so any
conductors attached reduce the sunlight incident on the cell. Putting too little
7
conducting material across the top lowers the efficiency and capacity to create current,
however, so a balance has to be reached.
Another limit that can’t be gotten around, at least with semiconductors, has to do
with the fact that photons from the sun come in all energies. Low energy photons don’t
have enough energy to bump an electron to the valence band, so their energy can’t be
used. When a high energy photon hits an electron, on the other hand, its energy can
bump the photon up to the valence band, and that energy can be used from the current
produced, but any additional energy over the gap between the energy shells goes into
kinetic energy of the electron, which cannot be harnessed, and is lost. So low energy
photons can’t be used at all, and only a fraction of the energy in a high-energy photon
can be.
There are other difficulties that might be overcome with future research and
development. Right now solar cells are not feasible to run power plants for two
reasons. One is that it is not a constant source of energy because it only runs when the
sun shines, whereas coal and nuclear plants, for instance, can run constantly for long
stretches of time. The energy could be collected during sunny times and used later, but
current battery technology is too expensive to be widely feasible. The other is that a
solar cell plants are much more expensive per kilowatt-hour than almost any other kind
of power plant. This will likely be true for the near future, but as seen in Fig. 4, the cost
of producing photovoltaics has been dropping quite drastically in recent years, and the
Department of Energy’s Solar Energy Technologies Program foresees the costs being
cut almost in half again by 2010.
8
Even if solar cells are never the best form for power plants, they still have some
interesting possibilities. One advantage of solar power is that it can be distributed to
many small producers, so that there is a greater power security buffer against a major
power plant failing or being taken offline (one of the causes of the California blackouts).
Another is that land can be used to create solar power that is already in use for other
purposes, like households or parking lots. Putting a roof of solar cells over a mall
parking lot, for instance, could power the mall during the day when the mall’s demands
are the greatest, and would also shade the cars, reducing air conditioner demands.
(Makhijani 2007)
Figure 4: Decreasing cost and increasing capacity of PV systems over time (US Department of
Energy – Energy Efficiency and Renewable Energy)
9
Solar Hot Water Heaters
Solar water heating is nothing new: the sun has been used to provide hot water,
in one form or another, for centuries. Since the invention of commercially viable home
solar water heaters in the early nineteenth century, using the sun’s energy for water
heating has been especially popular when prices for other types of energy, such as oil,
gas and electricity, have risen.
With a warm, sunny climate and scarce energy resources, California took
particular advantage of solar hot water heaters at the beginning of the nineteenth
century. By 1900, nine years after the invention of the first commercial solar water
heater, sixteen hundred units were in use in Southern California, including a third of
houses in Pasadena alone. In the 1920s and 30s, Californians were able to replace
relatively expensive energy resources like imported coal and wood with natural gas from
the large deposit found in the Los Angeles basin. As a result, California’s brief dance
with large-scale solar water heater use came to an end, and further innovations were
concentrated elsewhere in the nation and the world.
Currently, there are three types of solar energy collector systems in use: the flat
plate collector, composed of a glazed, insulated, weather-proofed boxes containing a
dark absorber plate; the integral collector-storage system, which involves a back-up
conventional water heater and performs better in mild-freeze climates; and the
evacuated-tube solar collector, which is more efficient by preventing radiative heat loss,
and is more frequently used in commercial, rather than residential contexts. For
California, we consider the simple flat-plate collector; this equipment is already used
most extensively where residents seek solar water heating technologies.
10
The flat plate collector is a reasonably simple piece of equipment. Composed of
copper tubing on an aluminum plate and covered by one or more layers of irontempered glass, these collectors are efficient enough to be used year-round, even in
moderately cold climates. They operate using a simple property of liquids: colder liquid
is denser than warmer liquid, so when liquid of two distinct temperatures is mixed, the
colder falls while the warmer rises. Flat plate collectors contain a number of parallel
copper tubes, tilted (often, aligned with a tilted roof) so that gravity acts on the water in
each tube. Cold water enters the collector from a pipe at the bottom of the collector,
while hot water leaves via a pipe at the top of the collector (Figure 5). In between these
two pipes, the density differential created as solar heat warms the water in the copper
pipes makes the warmest water rise to the top pipe, for use in the rest of the system.
Figure 5: Water flow in flat-plate collector. Cold water is inputted at bottom right; hot water leaves
at top left. (US Department of Energy – Energy Efficiency and Renewable Energy)
System types can be divided into active and passive heating systems; the former
is more efficient but more expensive, while the latter is less efficient, but less expensive.
Active systems include direct circulation systems, which require climates where it rarely
freezes; and indirect circulation systems, which can withstand low temperatures and
thus are more popular in colder climates with frequent freezing temperatures. Passive
11
systems include integrated collector-storage systems, which work best in warmer
climates, and – because of the integration of back-up conventional hot water systems –
best serve households where there are significant daytime and evening hot water
needs. A second type of passive system is called a thermosyphon system, which is
more expensive and more complicated to install, but yields more reliable results if
installed correctly.
For the purposes of this study, we choose a single system for study: the active,
direct circulation solar water heater (Figure 6). This choice makes sense for several
reasons. Though the energy needed for an active pumping mechanism makes active
solar water heating systems less efficient than passive ones, they are less expensive
and less complicated to install than passive systems. California’s moderate climate
does not call for the additional technology involved in producing a freeze-proof indirect
circulation system, which also involves greater expense. Finally, the active direct
circulation system is most frequently installed in California homes already, so
contractors are most familiar with the installation of these systems.
12
Figure 6: Active, closed loop solar water heater. (US Department of Energy – Energy
Efficiency and Renewable Energy)
Active direct circulation systems, like the flat plate collector, operate via relatively
simple mechanisms. Cold water inputted into the storage unit is pumped upwards into
the collector, where it is warmed by the sun and falls back down into the tank, leaving
via a pipe at the top of the tank for use in the house. Figure 6 shows a slightly more
complicated version, where an intermediary fluid such as antifreeze is circulated in the
collector instead, heating water in the storage tank indirectly. This mechanism is meant
to guard against pipe freeze in colder climates; in California, where temperatures rarely
dip below freezing, the water travels up into the collector and back to the tank itself.
Cost-Benefit Analysis
A cost-benefit analysis is conducted for both technologies to calculate the net
present benefit or cost of each technology for residential use. We will then compare
13
and evaluate the net benefit of both technologies over their lifetime to make policy
recommendations.
Benefits
The benefits of all solar technology for society are twofold, namely, economic
savings in energy costs, and environmental savings in reduction of greenhouse gas
emissions as we switch from using fossil fuels.
Solar water heating
The most direct monetary benefit is savings from paying for the energy
conventionally used for water heating. The dominant types of energy used to heat
water in homes are electricity and natural gas: about 2/3s of homes in California use
natural gas and the rest use electricity. Other water heating methods do exist but their
usage, and hence impact, is negligibly small.
Most solar water heaters are currently only able to supply a fraction of the
amount of hot water a typical home needs, and therefore substitutes a fraction of the
energy conventionally used in water heating. Typically, a solar water heater can
guarantee 60% - 80% of home water heating; for the purpose of this paper, this
substitution rate will be assumed to be 70% on average. Hence, the first benefit of solar
water heating will be 70% savings in the electricity or natural gas otherwise needed for
water heating. We adjusted this savings in future years in our analysis to take account
of long-term rise in electricity and natural gas prices.
Next, the reduced usage of natural gas and fossil fuels that generates electricity
translates to reduction in carbon emissions. Both electricity generation and natural gas
14
mainly emit carbon dioxide. The amount of reduced emission is calculated from
multiplying the average rate of emissions from electricity generation and natural gas
water heating, termed the emission coefficient, by the total quantity of emission ordinary
resulted from water heating. Multiplying the result by the per-unit social cost of carbon
dioxide, in dollars per ton, generates the total reduced social cost of carbon emissions
per system.
The evaluation of the social cost of carbon dioxide has not reached a universal
consensus. Literature review indicates values ranging between $5/ton to $125/ton.
This paper will use assume $25/ ton, as do many other such analyses, and this value is
also used by the Kyoto Protocol as the price of an emissions permit. As the Kyoto
Protocol is from 1997 and prices on carbon trading markets have been rising recently,
this might be somewhat undervaluing the benefits of reduction of carbon dioxide
emissions in the long run, but such a complicated situation as the impacts of global
warming is impossible to put a single number on, so following the example of the Kyoto
Protocol is, we felt, a reasonable assumption.
Electricity generation and natural gas use also results in the emission of other
greenhouse gases such as nitrous oxide and sulphur dioxide. However, their social
costs have not been assessed in detail in available literature, and the respective
quantity of emission is not as significant, hence these other greenhouse gases will not
be incorporated into this analysis. Because of this, our analysis, with only evaluation of
carbon dioxide, undervalues the true benefit of solar technology.
Photovoltaic cells
15
The benefits of photovoltaic systems are of the same kind, namely the lower bills
and lower carbon emissions. In this case, the savings to the consumer will be in the
electricity bill as compared to the conventional case, with electricity supplied by a large
utility companies. Some photovoltaic systems have built in batteries, so that the home
user is able to use electricity from storage even in times when the PV itself is not
generating electricity at the moment. These systems are much more expensive and so
we will consider systems without batteries, but that are grid-connected, so that
electricity can be pulled off the grid from the utility company when the sun is not out,
and excess energy can be fed into the grid when the sun is out but usage is low. With
net metering, the homeowner pays only the difference between electricity use and
production, without regard to when each occurred. Hence, owning a photovoltaic
system can potentially fully substitute conventional electricity usage. We assumed the
system purchased would be of the capacity to provide all the electricity needs to current
use but not projected increases in electricity use, so that over the lifetime of the system
the reduction in electricity bill would start at 100% and decrease as the electricity use of
the home rose without a corresponding rise in system capacity. We calculated this
savings by the current average home usage of electricity times the price of electricity in
dollars per kilo-Watt-hour, adjusted in future years for inflation in energy costs.
The secondary benefit is reduction in carbon emissions. Electricity generation
uses a number of different fossil fuels and each has a different emissions rate. One
way to calculate total carbon emissions is by calculating the percentage of electricity
generated by each type of fossil fuel and then multiplying by that fossil fuel’s emissions
rate. Conveniently, various reports have taken this variety into account and calculated
16
the average aggregate emissions rate per quantity of electricity generated, which is
what this analysis will use. Hence, total emissions avoided will be calculated by
multiplying this average emissions rate, in tons per kilo-Watt-hour, by the total quantity
of electricity generated by the photovoltaic system.
Costs
Costs of most small-scale residential use systems are again twofold, being the
cost of installation, which includes the purchase price of the unit, and subsequent
annual operating and maintenance costs, if any.
Solar Water heater
For the solar water heater, the per-unit price as sold on the market is $3000.
This is a one-time cost for the first year of installation. In addition, each system costs
$117 per year to maintain, which will become the annual cost for the lifetime of the
system, estimated at 20 years.
Photovoltaic cells
For a photovoltaic system, the price of the unit is dependent on usage and the
dimension of the system. The current price of photovoltaic systems is about $9/ peak
watt (meaning watt of production at maximum output). With the weather in California
and the average amount of sun available throughout the year, a system that is able to
supply an average home’s full usage of 7050kWh per year will cost $35,400. The
annual maintenance and operations cost of PV systems are negligibly small.
Table 1: Assumptions
Value
Unit
Source
17
Emissions coefficients
Electricity generation (CA)
0.61
lb/kWh
EIA
13.446
lb/therm
PG&E
7080
kWh
DOE
2537
kWh
EIA
18
kft3
EIA
0.1251
$/kWh
CEC
Natural gas (CA)
10
$/kft3
CEC
Social cost of CO2
25
$/ton
Kyoto
Solar Water Heater Performance
Rate of increase in residential electricity
consumption
70
%
1
%/year
Natural gas
Average home electricity use
Water heating energy use
Electricity
Natural Gas
Energy price
Electricity (CA)
DOE
Rate of increase in price
Electricity
2%
DOE
Natural gas
2%
DOE
Electricity
36%
DOE
Natural gas
64%
DOE
Portion of fuel used for water heating
Results
The cost and benefits are calculated over 20 years, the lifetime of the system.
The following tables only show figures for first five years; figures from the years after are
omitted due to page width constraints. Overall, solar water heating provides the most
benefits for the least cost: it has a benefit-cost ratio of 0.66, while photovoltaics have a
cost-benefit ratio of 0.36.
We assumed a discount rate of 7%, at which the lifetime costs outweigh the
benefits for both types of systems, though much more so for photovoltaic cells. We did
18
find that at a discount rate of 0.8%, solar water heaters break even, and at any lower
discount rate than that, the benefits of solar water heaters outweigh the costs.
We also considered the impact of reductions in price through government
incentives (although better technology or other reductions in price would be equivalent).
At a 7% discount rate, a 50% subsidy would be enough to have the net present value of
the solar water heater system break even. At a 5% discount rate, a 39% subsidy would
be sufficient.
Photovoltaic systems are not nearly as close to having a positive net present
value. Even with a 30% subsidy and a 0% discount rate, the net present value is still
negative (though in this case with a benefit-cost ratio of 0.72). So for residential PV
systems to be a good bet, at least in purely economic terms, better technology or a very
significant drop in price will be necessary.
19
Table 2: Solar Water Heater - First Five Years of Operation
Year
Without Scenario
Average annual home water heating electricity usage (kWh)
Average annual home water heating natural gas usage (kcf)
Cost of electricity based water heating ($)
Cost of natural gas based water heating ($)
2009
2010
2011
2012
2013
2,537
18
317
180
2,537
18
324
184
2,537
18
330
187
2,537
18
337
191
2,537
18
344
195
Units installed
Performance (%)
1
70%
1
70%
1
70%
1
70%
1
70%
CO2 emission from electricity (ton)
CO2 emission from natural gas (ton)
0.70
1.13
0.70
1.13
0.70
1.13
0.70
1.13
0.70
1.13
18
28
3,000
117
18
28
3,000
117
18
28
3,000
117
18
28
3,000
117
18
28
3,000
117
80
81
4
13
178
83
84
4
13
184
86
87
4
13
191
90
91
4
13
198
94
95
4
13
205
3,000
117
3,117
0
117
117
0
117
117
0
117
117
0
117
117
Discount to present at 7% opp cost of capital
-2,939
7%
-2,939
67
7%
63
74
7%
65
81
7%
66
88
7%
67
TOTAL NET PRESENT VALUE over system life time ($)
-1,509
Total Social cost of electricity CO2 emission ($)
Total Social cost of natural gas CO2 emission ($)
Per unit cost ($)
Operations and Maintenance ($)
Benefits
Reduction in electricity bill ($)1
Reduction in natural gas bill ($)
Reduction in social cost of electricity carbon emissions ($)
Reduction in social cost of natural gas emissions ($)
TOTAL BENEFITS
Costs
Total cost per unit per household
Total annual operating cost
TOTAL COSTS
NET BENEFIT
1
Reductions are weighted according to the mix of energy used for hot water heating in California:
64%*(normal natural gas usage) and 36%*(normal electricity usage).
20
Table 3: Photovoltaic System -- First five years of operation
Year
Without Scenario
Average annual home usage (kWh)
Average annual home electricity bill ($)
2009
2010
2011
2012
2013
7,080
1,015
7,151
1,046
7,222
1,077
7,295
1,110
7,367
1,143
1
9
1
9
1
9
1
9
1
9
Electricity bill ($)
886
912
940
968
998
CO2 emission from electricity (ton)
1.96
1.98
2.00
2.02
2.04
49
35,400
0
49
0
0
50
0
0
50
0
0
51
0
0
886
49
935
903
49
953
921
50
971
940
50
990
959
51
1,010
35,400
0
35,400
0
0
0
0
0
0
0
0
0
0
0
0
Discount to present at 7% opp cost of capital
-34,465
7%
-34,465
953
7%
891
971
7%
849
990
7%
808
1,010
7%
770
TOTAL NET PRESENT VALUE over system life time
($)
-22,432
Units installed
Performance (kWh/ peak W)
Total Social cost of electricity CO2 emission ($)
Per unit cost ($)
Operations and Maintenance ($)
Benefits
Reduction in electricity bill ($)
Reduction in social cost of electricity carbon emissions ($)
TOTAL BENEFITS
Costs
Total cost per unit per household
Total annual operating cost
TOTAL COSTS
NET BENEFIT
21
Policy Considerations
Neither photovoltaics nor solar hot water heating have made serious inroads in
the overall energy production in the United States. Solar makes up only 0.1% of U.S.
energy sources, and at best will only triple by 2030. (The National Academies 2008)
Nationwide, only 0.2MW of photovoltaic modules are sold in the U.S. every year.
(Energy Information Administration n.d.) Similarly, Americans purchase only 8,500 solar
hot water systems a year. (Kateley 2007) At this rate, even if all 8,500 heaters were
sold every year to California, it would still take over 1,000 years to get one heater to
every family of four in California alone.
As we can see from the Cost-Benefit Analysis, the main limiting factor for both
photovoltaics and solar water heating systems is cost. Photovoltaic systems cost an
average of $35,400, while Solar Hot Water systems typically cost $3000. Unless
property value increases are taken into account, neither system ever pays for itself
during its life. The high upfront cost discourages many homeowners from installing their
own solar power systems, and therefore should be the main target of any incentive
designed to increase solar installations. Nationwide, compared to other energy
sources, such as nuclear and coal, the solar industry gets very little government
assistance for capital costs of installation or for research and development, thus
increasing the cost the individual faces in the marketplace.
Popular perception about the aesthetics of solar installations also limits their
widespread adoption. Large solar panels typically blend in with only the most modern of
22
architecture, and many homeowners associations do not want them in their
neighborhoods (see “Opposition to Solar Installations” below). However, aesthetics are
improving, especially for photovoltaic installations, which can be seamlessly integrated
into homeowners’ roofs. (Faiers and Neame 2006)
Federal Incentives
Energy Policy Act of 2005
As a part of the Energy Policy Act of 2005, the federal government offers equal
incentives for residential installations of both solar hot water and photovoltaic systems.
The incentives cover 30% of the cost of the installation, up to $2,000, and are obtained
through a rebate on the owner’s federal taxes. The credits cover only systems intended
for household use and only the parts of the electrical/heating system that directly involve
solar energy. The credits are set to expire in December 2008.
Solar heating systems for swimming pools or hot tubs are not eligible for this tax
rebate. This is curious, given that the ostensible goal of this incentive is to reduce the
percentage of water heated by non-renewable energy in U.S. households. Given that
swimming pools tend to be concentrated in areas where solar radiation is the most
available (i.e. “Sunbelt States”), if pool owners want to heat their pools, it would be most
efficient for them to do so via solar power. The government would thereby ensure that
a greater percentage of its credits for solar water heating went to the states that use the
solar heaters most efficiently.
Solar America Initiative
23
The Solar America Initiative focuses specifically on research and development as
a means to get Photovoltaics to be cost-competitive by the year 2015. The Department
of Energy, which runs the program, boasts that since federal funding was available for
solar research in the 1970’s, the cost of photovoltaics has been reduced by 90%, from
$2/kWh to $0.20/kWh. It expects that further reductions in cost, coupled with increased
future demand, will lead to the installation of 5 GW of solar power by 2015.
Figure 7: Solar America Initiative – Projections for Future Costs and Installed Solar Capacity
The California Solar Initiative
The California Solar Initiative aims to provide California with 3,000MW of solar
power by 2017. This ambitious plan would require over a ten-fold increase in solar
panel installations given the estimated 280MW currently installed in the state.
24
(California Energy Commission 2007) California has dedicated $3.3 billion to the
project, mainly in the form of rebates tied to the size and efficiency of newly-installed
photovoltaic systems.
There are a number requirements in place before a homeowner is deemed
eligible for a rebate: the installation must be pre-approved by the program administrator;
the system must be installed with performance meters; the home must receive an
energy audit; and finally, the system must be tied to the electric grid and net-metered
(meaning the owner pays/receives payment for the difference between his electricity
consumption and the electricity actually produced by the panels). Net-metering is a big
boon to consumers economically because of the resulting decoupling of timing of
energy production and use without the energy company profiting off of the consumer’s
solar panels. However, it does not allow the solar panels to work as a back-up in case
of blackout, because the system must be connected to the grid, and will not work well if
solar panels become a large fraction of statewide energy production (though this is
clearly not plausible in the near future and not of major concern). The incentive system
is also complicated by the different requirements for customers of private versus public
utilities. Overall, California’s requirements are much more stringent than those at the
federal level, and their number and complexity may actually constitute a barrier to entry
for homeowners who are not astute enough to figure out the regulations for themselves.
As a result, California homeowners may install many fewer systems than they would if
they faced a more simplified process.
25
Solar Water Heating and Efficiency Act of 2007
Although the CSI does not fund solar hot water system, a similar initiative passed
in October 2007, aims to install 200,000 such systems in California. (Parker 2007) The
Solar Water Heating and Efficiency Act created a $25 million/year, 10-year incentive
program for solar hot water systems that would be funded through a $0.13 monthly
surcharge on gas bills. Further details of the program (such as the amount of the
incentive per customer) will be decided pending the results of a pilot program in San
Diego.
The creation of a mainstream market for solar water heating systems is expected
to have a huge impact on California’s consumption of natural gas. Currently,
California’s imports nearly 85% of its natural gas, 24% of which is used for residential
hot water heating. (Huffman 2007) According to Environment California, solar heating
used to be the norm in parts of the state, with areas such as Pasedena suppling more
than 1/3 of its hot water through solar systems in the late 1800’s. However, in the late
70’s and 80’s, tax breaks for solar heaters led to a mini solar-bubble, which, when burst,
left owners with systems of dubious quality and doubts about the viability of solar
heating systems. (Del Chiaro and Telleen-Lawton 2007) The linkage of incentives to
systems approved by independent rating agencies, such as the Solar Rating and
Certification Corporation and Underwriters Laboratories, helps to avoid this problem
today.
Opposition to Solar Installations
Residential solar installations, though seemingly unobtrusive, are not without
their controversies. Earlier this year, a dispute between neighbors became national
26
news when California courts required a homeowner to remove three redwood trees that
were blocking her neighbor’s solar panels in violation of California’s 1978 Solar Shade
Act. To prevent further disputes, State Senator Joe Simitian has introduced a bill that
would protect trees that are planted before solar panels are installed. (Barringer 2008)
Often solar panels become a point of controversy simply as a matter of
aesthetics. Homeowners associations throughout the U.S., from Los Gatos, California,
to Bellerose, New York, have denied residents the right to install solar panels on their
roofs for fear they would destroy the architectural integrity of their neighborhoods.
(Barringer, 2008; Groc, 2007; Fischler, 2007) To combat this practice, California
passed the Solar Rights Act in 2004 to minimize the power of local authorities to restrict
solar installations based on aesthetic reasons alone. (Broehl 2004)
Conclusions
Currently, solar energy is an extremely small part of the energy market. Very few
systems are manufactured and sold in the United States despite an ample amount of
sunshine and energy demand in the rapidly growing Sunbelt. This is largely due to cost.
Dollar for dollar, solar hot water heating provides the greatest amount of benefits in the
solar market, but it is still not economical in the energy market when compared to coal
or even wind power. Unless the capital cost of these systems --especially photovoltaic
systems -- can be drastically reduced, they do not appear to be a smart social
investment at this time.
One way to reduce these costs would be to take advantage of economies of
scale. The Solar Rating and Certification Corporation currently lists 64 different
manufacturers of Solar Heaters and PV panels. While competition is great for
27
promoting efficiency, this large number of manufacturers combined with a small amount
of aggregate output, means that each manufacturer has an extraordinarily small
production line. Encouraging a greater demand for solar products then, has great
potential to bring down the per-unit cost due to economies of scale.
In addition, unlike solar hot water heating, photovoltaic technology is relatively
new and could potentially benefit from advances in engineering and science. Society
can best stimulate these through support for research and development such as that
offered by the Solar America Initiative. However, care must be taken that the market for
PV systems is not stifled as consumers wait for prices to come down. One way to not
stifle the market is to encourage net-metering regulations, as discussed above, which
allow consumers to install PV systems connected to the grid without worrying about
capacity and without the electricity they generate being sold at a profit by a utility.
Therefore, sound policies for the solar market should place an emphasis on
increasing the demand and production of solar water heaters. This is precisely the goal
of current Federal and State incentives, which completely cover the individual’s net
costs for solar hot water heaters. While PV systems are somewhat subsidized, further
scientific advances are needed to bring costs in line with its energy competitors. To that
end, research and development should continue to be more heavily supported than
market incentives. In all, continuation of current policies should be adequate to
developing the solar market at a socially beneficial level.
Bibliography
Aldous, Scott. "How Solar Cells Work." 01 April 2000. HowStuffWorks.com.
http://science.howstuffworks.com/solar-cell.htm.
28
Barringer, Felicity. "Trees Block Solar Panels, and a Feud Ends in Court." The New
York Times, April 7, 2008.
Bezdek, Roger, and Alan Hirshberg. "Economic Feasibility of Solar Water and Space
Heating." Science, March 1979.
Borenstein, Severin. The Market Value and Cost of Solar Photovoltaic Electricity
Production. University of California Energy Institute, Center for the Study of Energy
Markets, 2008.
Broehl, Jesse. California Law Shines on New Solar Energy Projects. October 20, 2004.
http://www.renewableenergyworld.com/rea/news/story?id=16988 (accessed May 18,
2008).
California Energy Commission. 2006 Gross System Electricity Production.
http://www.energy.ca.gov/electricity/gross_system_power.html (accessed May 17,
2008).
—. California Electricity Consumption by Sector.
http://www.energy.ca.gov/electricity/consumption_by_sector.html.
—. California Natural Gas Facts and Figures.
http://www.energy.ca.gov/naturalgas/natural_gas_facts.html.
—. Frequently Asked Questions about the California Solar Initiative. 2008.
http://www.gosolarcalifornia.ca.gov/csi/faqs.html (accessed May 17, 2008).
—. Solar Statistics. 2007. http://www.gosolarcalifornia.ca.gov/news/statistics/index.html
(accessed May 17, 2008).
Del Chiaro, Bernadette, and Timothy Telleen-Lawton. Solar Water Heating: How
California Can Reduce Its Dependence on Natural Gas. Los Angeles: Environment
California Research & Policy Center, 2007.
Diakoulaki, D, A Zervos, J Sarafidis, and S Mirasgedis. "Cost Benefit Analysis for Solar
Water Heating Systems." Energy Conversion and Management, 2001.
Energy Information Administration. Carbon Dioxide Emissions from the Generation of
Electric Power in the United States, 2002.
http://tonto.eia.doe.gov/ftproot/environment/co2emiss00.pdf.
—. Electric Power Annual 2006 – State Data Tables.
http://www.eia.doe.gov/cneaf/electricity/epa/epa_sprdshts.html.
29
—. Emissions of Greenhouse Gases Report.
http://www.eia.doe.gov/oiaf/1605/ggrpt/carbon.html#residential.
—. Estimated Emissions for U.S. Electric Power Industry by State, 1990-2006.
http://www.eia.doe.gov/cneaf/electricity/epa/emission_state.xls.
—. Residential Energy Consumption Survey. http://www.eia.doe.gov/emeu/recs/.
—. Solar Photovoltaic.
http://www.eia.doe.gov/cneaf/solar.renewables/page/solarphotv/solarpv.html (accessed
May 18, 2008).
—. Updated State-level Greenhouse Gas Emission Coefficients for Electricity
Generation 1998 – 2000. http://www.eia.doe.gov/pub/oiaf/1605/cdrom/pdf/e-supdoc.pdf.
—. Voluntary Reporting of Greenhouse Gases Program.
http://www.eia.doe.gov/oiaf/1605/coefficients.html.
Faiers, Adam, and Charles Neame. "Consumer Attitudes Towards Domestic Solar
Power Systems." Energy Policy 34, no. 14 (September 2006): 1797-1806.
Fischler, Marcelle S. "When Solar Power Is Short on Charm." The New York Times,
November 25, 2007.
Groc, Isabelle. "When the Joneses go solar." High Country News, July 23, 2007.
Huffman. FACT SHEET: AB 1470 – Solar Water Heating and Efficiency Act of 2007.
California, 2007.
Kateley, Sue. "Public Commentary Re: ENERGY STAR Residential Water Heaters:
Draft Criteria Analysis." California Solar Energy Industries Association. May 28, 2007.
http://www.energystar.gov/ia/partners/prod_development/new_specs/downloads/water_
heaters/CALSEIA_052807.pdf (accessed May 18, 2008).
Knier, Gil. "How do Photovoltaics Work?" Science@NASA.
http://science.nasa.gov/headlines/y2002/solarcells.htm.
Makhijani, Arjun. Carbon-Free and Nuclear-Free: A Roadmap for U.S. Energy Policy.
Institute for Energy and Environmental Research, 2007.
Parker, Sara. Solar Hot Water Set To Go Mainstream with California's AB 1470.
October 17, 2007. http://www.renewableenergy.name/rea/news/story?id=50298
(accessed May 17, 2008).
Perlin, John. Solar Hot Water Heating.
http://www.californiasolarcenter.org/history_solarthermal.html.
30
PG&E. Carbon Footprint Calculator Assumptions.
http://www.pge.com/about/environment/calculator/assumptions.shtml.
The National Academies. "What You Need to Know About Energy." 2008.
U.S. Department of Energy - Energy Efficiency and Renewable Energy. A Consumer's
Guide to Energy Efficiency and Renewable Energy. http://www.eere.energy.gov.
—. DOE Solar Energy Technologies Program: Overview and Highlights, May 2006.
31