Solar Electic Power

The DealSuppose you are an American homeowner living in a house worth $153,000. You now spend $1403 a year on electricity. Pro has a deal for you. Consider it carefully. First save up $90,283, then buy and install a rooftop solar electric power system for your home. The system will require $410 a year for extra insurance, you'll have to clean off the snow whenever it snows and take care of the batteries needed to run at night, and your real real estate taxes will go up. Your solar electric system will last 25 years, providing all the electricity you need for those 25 years. Then you'll need to replace it using new saved cash. Are you ready to sign up for that deal? I think it's not plausible, but if you're not sure, then the controversy over the exact costs and risks follow. I think the average homeowner would be ready for the exit right after the "save up $90,283" part. People aspire to pay off their mortgage, buy a better house, and put their kids through college, not become their own a mini electric utility. But that's just my opinion. Areas of Agreement We have agreed to important facts relevant to the debate, including the numbers cited above. We agreed to how much power is consumed by the average homeowner and what it now costs. I don't think there's anything controversial there. To carefully evaluate the investment, we agreed that money not spent on solar, the $90,283, could be put into a long term investment earning 4.3% interest. To limit the scope of the debate, I agreed to electric utility costs rising at 4.6% per year including, although logically rates ought to drop due to advancing technology. (Oil isn't used significantly for power generation.) More doubtful, we agreed to use an inflation rate of 2.5% for the 25 year period. The real estate tax rate is agreed to start at $10 per $1000 of assessed value. Maintenance, taxes, and insurance all increase at the inflation rate. We agreed not to count government subsidies for solar electric. The obvious subsidies are government tax rebates. The debate is about the real economics. We needed numbers to evaluate the solar electric investment, but their is risk in all the numbers. No one really knows what will happen to electric rates, taxes, or inflation. That's inherent in investment decisions. There are many risks to consider as part of this debate, and they count in assessing the viability of the solar alternative. The do-it-yourself option Installation and maintenance costs are significant. Pro offers the option of the homeowner doing his own installation and counting the homeowners labor as having no cost. It's like saying that you could either pay to take a ferry across the river to work, or you could build your own boat and use that. In the latter case only the cost of the wood for the boat should count. Pro says the minimum solar equipment cost is $44,283. I say it is more because he has underestimated the battery storage and that the part to tying into the house electrical system requires a professional electrician to meet code requirements. The do-it-yourself requirement is not an apples-and-apples comparison, so it shouldn't be part of the debate at all. If we were going to compare the cost of washing clothes at the laundromat versus using a washing machine at home, w wouldn't consider the option of building your own washing machine. For solar, or whatever else, we are comparing one ready solution to another ready solution. I pointed out that assuming free infinite labor makes many uneconomic projects appear economic even though they are not. There are many reason why a homeowner could not use the do-it-yourself alternative. Physical limitations may prevent roof work or limited skills might risk successful completion. The homeowner might not have the free time. The debate is about whether solar is a practical alternative, and the do-it-yourself option is not practical for many homeowners. I also also questioned if homeowner labor couldn't be better spent on more valuable work. The premise of the debate is that homeowner is able to save a lot of free cash, Pro says at least $44,000 for the equipment. That implies a very good job, not a typical household income of $50,000. I argue that our lawyer-living-in-a-$153K-home will be better of doing the work he qualified to do rather than playing solar pioneer. Pro rebuts that, no, it's just a salaried guy who has the time and no other work option. The problem is the unrealistic root assumption of having a large bundle of ready cash. The most realistic way to resolve that is to suppose the money is borrowed, but that blows up the cost of the solar electric system with high interest expenses. Borrowing $44K would have over $4K in yearly interest compared to the $1403 electric bill. That's out, and we are left assuming a very well paid homeowner. Maintenance costs Pro's plan is to use neighborhood kids to clean snow off the roof and other maintenance. I said you need some sort of a business to do that. Pro rebutted that the skills are minimal. Pro missed my point, which as not at all about skills, it was about liability insurance. I challenged Pro to include the cost of insuring an unlicensed neighborhood kid to work on a roof. I said I don't think it's possible to get such insurance. Pro didn't respond. There's a big downside risk to the kid falling off the roof. Aside from cost, you could end up in jail for child endangerment. I cited reference [3] on the required battery maintenance that includes inspection and cleaning off corrosion on the terminals and inspecting for bad batteries. The system is running at household voltage, 120 or 240 volts. That's anther another liability problem with kids working with high voltages. If one battery failed the whole set would ordinarily have to be replaced. Pro said he planned on replacing them all at end-of-life. That's not the problem. It poses a cost risk if one fails prematurely. You will get a new battery on warranty, but probably not a whole set. Taxes Pro argues adding the $90,000 system to the home will only increase the assessment by $30,000 or so. that would be logical, but localities are interested in collecting as much tax as possible so "... a cost based approach may be used." http://en.wikipedia.org... They use what it costs rather than what it's worth to a new owner. Being our own electric utility Pro counts on selling electricity into the power grid whenever surplus power is produced by the systems. Now, laws require that the utilities accept the power and pay for it. The requirement is a subsidy to home solar. The cost to the utility of providing electricity is mainly in the fuel for generators; Pro didn't contest that's only about a third. Two-thirds is in the capital costs including maintaining the grid. Utilities do buy power from outside their grid system, but they get to choose when to buy it and how much to buy. Meeting peak demands is the major need, as late on hot summer days when the air conditioning loads peak. That's precisely when home solar power does not have any spare to sell. Pro's notion of selling power into the grid evades all the costs of setting up and running the grid. For the power company, they save a little fuel cost if they can throttle back some generators, but the capital and maintenance costs are not paid by a system that only sells into the system when he wants to. Pro suggested that if the power company didn't want the power, it could be sold to neighbors. I pointed out that requires permission to set up a competing utility, and he dropped that idea. The bottom line My numbers in R3 withstand scrutiny. If the money put into solar were invested instead, after 25 years there would be $214,000 in the account, and $59,000 worth of electricity would have been purchased from the power company. Including the cost of capital, the solar electric system cost would 5.0 times the grid cost. The resolution is negated. Vote Con. Thanks for a good debate.