Question: Does $150,000 installed cost for approximately 45 MW make sense?

Answer: Yes, but only in Honolulu.

Explanation: There’s a lot involved, so read on…

This Honolulu central business district rooftop installation has 183 photovoltaic (PV) panels. At the common electricity generation rate of 250 Watts per panel this system has a total capacity of 46,000 Watts. Based on a prominent local solar company, this can be installed for $150,000. Installation cost on the US mainland could be 10%-30% lower than Honolulu’s, but this varies by location.

Panels come with 20+ year warranties. Borrowing $150,000 from a bank at a 4% rate would cost $11,373 per year for 20 years.

Using a capacity factor of 20% this system is estimated to generate about 220 KWh per day.  The US Energy Information Administration suggests a 25% capacity for PV, but the factor needs to be adjusted for each location.

Besides the capacity factor, one has to be careful with the size of the system because:

  • If all the PV generated energy is used by the building, then the savings accrue at the rate of 33 cents per KWh, or whatever the local company charges per KWh.
  • If the system generates more power than needed and some of the PV generated energy is sold to power company (HECO in this example), then for the power sold to the utility revenues accrue at the rate of 6 cents per KWh.

Sample results for three scenarios over 20 years for this PV system in Honolulu are as follows:

  • If 100% of the system’s power is used internally, then the owner of the building will save $14,918 per year.
  • If 50% of the system’s power is used internally, then the owner of the building will save $4,038 per year.
  • If only 25% of the system’s power is used internally, then the owner of the building will lose $1,402 per year.

These estimations suggest the following lessons:

  • Hawaii has the highest power rates in the nation so PV works even without subsidy as long as money borrowing rates are low and most of the produced power is consumed internally.
  • Unsubsidized PV does not work for places that enjoy low power rates. That would be most of the US.
  • The rate paid for solar power vis-a-vis its cost is low, so developing PV farms on rooftops is not a great business decision. (The rate paid by HECO is normal.)
  • Developing PV farms on Hawaii’s land is not a good decision given the scarcity and cost of land, and the low productivity of PV per acre. On the other hand, unused rooftops have minimal land value and the PVs help cool the roof and lower the building’s cooling cost.
  • Location is important because the capacity factor can vary widely between 10% and 30% in Hawaii. Use of a high factor value at a low capacity location can cause financial ruin. Solar installers tend to use conservative estimates. Trust but verify, by using reputable sun radiance resources (e.g., www.solar-estimate.org/solar_radiance.pdf)

Clearly high rises may consider PV in order to lower their utility bills. Here is a word of caution. As a past board member and president of the AOAO of a large residential building that had to do major work on heat pumps, elevators and sealing of the roof, I recommend that AOAOs be careful with PV installations on the roof of high rise buildings. Heat pumps and large elevator parts for these buildings are often installed by helicopter. This would become very difficult with solar panels in close proximity. Also re-roofing and roof resealing would be problematic. Think through all the constraints to engineer the right solution.

 

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