Wednesday, April 27, 2011

PA Solar Power Costs 60% Less Than Grid Power

Residential solar systems in Pennsylvania have a lifetime cost of about 5 cents per kilowatt-hour compared to about 12 cents per kilowatt-hour on average that residential customers pay for electricity from the grid. 

Don't believe it?

Take a look at these numbers.  Assume that the cost of a kilowatt of residential solar is $5.50 per watt installed or $5,500 per kilowatt.  Assume that the federal tax credit of 30% is applied, reducing the customer cost to $3.85 per watt or $3,850 per watt. Assume that the kilowatt generates 1,100 kilowatt-hours per year or 27,500 over the life of the system.

After the federal tax credit is applied the cost per kilowatt-hour over the life of the system is about 14 cents or a bit more than today's 12 cents grid power.  What will grid power cost 5 years or 10 years from now?  The probability is high that the cost will be more than today's on average 12 cents.  And so investing in solar could make sense if the analysis stops here.

But most importantly the solar cost to the consumer is not 14 cents, because that assumes the solar installation creates no new value for the home. Zero is a false assumption.

In fact installing solar increases the value of an existing home by about $5 per watt according to the new and important Lawrence Berkeley National Laboratory study of solar's impact on home values.

If one is cautious about the increased value of a home after solar is installed and assumes just 50% of the LBL study number or $2.50 per watt, then the per watt cost of solar in Pennsylvania declines from $3.85 per watt after the federal tax credit to $1.35 per watt.

With just the federal tax credit and 50% of the LBL home value increase, solar in Pennsylvania costs about 5 cents per kilowatt-hour or 60% less than the average residential grid rate.

Residential solar for an existing home is a very attractive investment.


  1. United States Joint Forces Command:
    “A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment. To what extent conservation measures, investments in alternative energy production, and efforts to expand petroleum production from tar sands and shale would mitigate such a period of adjustment is difficult to predict. One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest...By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day...The implications for future conflict are ominous, if energy supplies cannot keep up with demand and should states see the need to militarily secure dwindling energy resources.”

    According to the Energy Information Administration (EIA)
    out of approximately 19 million barrels of oil the US consumes each day 8.989 million barrels of oil is consumed as gasoline.

    Using an analogy to put into perspective the U.S. JOINT OPERATING ENVIRONMENT REPORT 2010, a 10M-barrel per day shortfall in global supply would be similar to having every gasoline station in the United States going dry. Imagine every road, every city street, every state highway, and every interstate highway across all 50 states vacant of automobiles. Yet according to the JOE Report that global shortfall in capacity could be upon us by mid decade.

    What is meant by a massive expansion for new production?

    IEA World Energy Outlook 2008
    Main text
    The projected increase in global oil output hinges on adequate and timely investment. Some 64 mb/d of additional gross capacity — the equivalent of almost six times that of Saudi Arabia today — needs to be brought on stream between 2007 and 2030. Some 30 mb/d of new capacity is needed by 2015. There remains a real risk that under-investment will cause an oil-supply crunch in that time frame. The current wave of upstream investment looks set to boost net oil-production capacity in the next two to three years, pushing up spare capacity modestly. However, capacity additions from current projects tail off after 2010. This largely reflects the upstream development cycle: many new projects will undoubtedly be sanctioned in the near term as oil companies complete existing projects and move on to new ones. But the gap now evident between what is currently being built and what will be needed to keep pace with demand is set to widen sharply after 2010. Around 7 mb/d of additional capacity (over and above that from all current projects) needs to be brought on stream by 2015, most of which will need to be sanctioned within the next two years, to avoid a fall in spare capacity towards the middle of the next decade.

    That represents a new Saudi Arabia being put online every 3.8 years between years 2007 and 2030.

    While solar is a great for electricity it doesn't address the real energy issue, oil.

    In his power point presentation, The Crash Course, Chris Matenson points out that the energy equivalent of the oil imported into the US represents the energy output of 750 nuclear power plants.

  2. continuing:
    IEA Word Energy Outlook 2008 Press Release
    The prospect of accelerating declines in production at individual oilfields is adding to these uncertainties. The findings of an unprecedented field-by-field analysis of the historical production trends of 800 oilfields indicate that decline rates are likely to rise significantly in the long term, from an average of 6.7% today to 8.6% in 2030. "Despite all the attention that is given to demand growth, decline rates are actually a far more important determinant of investment needs. Even if oil demand was to remain flat to 2030, 45 mb/d of gross capacity - roughly four times the current capacity of Saudi Arabia - would need to be built by 2030 just to offset the effect of oilfield decline", Mr. Tanaka added

    And that represents needing a new Saudi Arabia every 5 years just to keep production from declining.
    "The Energy Information Administration, an arm of the U.S. government, forecast last year that, all things being equal, world energy consumption would increase 50 percent by 2030. That's a good round number, summing up the desire of people across the world for refrigerators, televisions, ice cubes, hamburgers, motorbikes, and maybe even a little air-conditioning in the tropics.”

    “But it's not at all clear where that energy can come from, because we happen to be alive at the moment when the oil is starting to run out. In November 2008 the International Energy Agency estimated that production from the world's mature oil fields was declining 6.7 percent a year, a rate that is expected to get even worse over time. Offsetting this decline will require finding a new ***Kuwait's*** worth of output every year, or somehow squeezing that much more from existing fields. Many observers think we've already passed the peak of oil production. An optimist in this world is someone who thinks it might still be a matter of years. But there's little question where the future lies, which is why the cost of a barrel of oil spiked to $147 last year. It took the prospect of a Great Recession to bring it back down to $40. Curbing high gas prices with recurrent economic slumps is probably not the smartest of remedies."

    World oil consumption of 85 million barrels per day converted into 55-gallon steel drums: If we laid those steel drums end to end how many miles long would they stretch?

    (85,000,000 x 42gal) / 55gal = 64,909,090 steel drums of oil being consumed each day.

    (64,9090,090 x 3 feet tall drums) / 5280ft = 36,880 miles long. That's how much oil the world consumes each day.

    It's a volume of oil capable of filling enough steel drums to encircle the earth 1 1/2 times each day. 36,880 miles / 24,900 = 1.48 times each day.

    Or, it's enough steel drums of oil capable of encircling the earth 540 times each year:
    (36,880 x 365days) / 24,900 = 540.

  3. The point was for my two posts, John, is while solar is great it doesn't solve the impending oil crisis.

    Why isn't the public being informed about the extent of this crisis? Where is D.C., the media like Fox and CNN? What's your take?

  4. I am agnostic about peak oil but oil markets are tight whether as a result of supply limits or demand increases. Right now demand increases from China, India, developing world seem more responsible.

    But for the USA oil is a risky commodity no matter whether peak oil is happening now or later. We import 70% of our oil needs and cannot afford it.

    Solar and gas can help meet energy needs significantly around the world. Both can be an electricity source. Gas can be a substitute for oil in transportation, as can electricity with electric vehicles now just starting to arrive in the marketplace.

    The nation needs a single-minded focus on cutting oil use. We should make it a priority to cut oil use by 3% per year for the next 20 years. Doing so would break our addiction and doing so is possible.

  5. John, if oil production declines are 6.7% per year and we can't put online those 4 new Saudi Arabias by 2030 you won't have to be concerned about how we'll cut back on imported oil. It's going to happen, and as is does we, as a nation, will not be able to service our national debt equivalent to a present value of $104 trillion according to the president of the Dallas Federal Reserve

    maybe you are agnostic about the peak oil but I'm not...I'm actually in the oil & gas business as an independent producer.

    Furthermore these men with their industry credentials are not agnostics.

    Why is it that government reps can't/don't deal with what's actually going on with the economy?

    We live in the petroleum age, not information age. Oil was responsible for the 20th centuries economic expansion. Telling a petrosapiens they'
    re addicted to oil is like telling fish they're addicted to water.

    If China is growing at 7% per year it means that rate of growth, like compounded interest, will produce the equivalent of 2 Chinas within 10 years. That's 2 Chinas wanting twice as much oil as today, twice as much copper, steel, concrete, asphalt, etc.