Small scale residential solar – Solar Dad and John Bleasby debate the challenges
"I can say with complete conviction that if a solar system doesn't save money and pay for itself within 5 or 6 years, homeowners will not buy it."
January 26, 2018 by canadiancontractor
First a couple of qualifiers – I’ve been in the solar business in Ontario for almost 40 years and have installed over 1,000 – most thermal – solar systems. I’ve said from the beginning that solar electric (PV) systems are barely green – since they are displacing “fairly clean” Ontario hydro power. (90+% of Ontario’s electricity comes from non-CO2 emitting generators, nuclear and hydro.
Your article contains a number of mistakes. You pay per-kilowatt hour charges for: delivery, administration (and if a commercial property debt retirement) that add another 4 to 5 cents per kilowatt hour the time-of-use cost. So your average cost per kilowatt is going to be between 16 an 18 cents per kilowatt hour. EXCEPT – if you install a Net-metered PV system you automatically go onto flat-rate billing and now your average kilowatt hour cost is about 12 cents. BTW – don’t forget that you will also save the HST on the electricity you don’t have to buy. (that is another 1 – 2 cents per Khr saved….)
People who bought solar PV systems did not buy them because they are green – they bought them ONLY TO MAKE MONEY! The fact that they were sold as being “green” is because the hordes of inexperienced solar companies that jumped into the market when the FIT (Feed In Tariff) program started in Ontario in 2009 needed to point to something other than greed to sell the systems. (600+ solar companies in 2009 now down to less than 40 – and shrinking fast)
Despite the claims of the solar PV industry, they had NOTHING to do with the shut down of the coal-fired electric plants in Ontario – that’s exclusively due to energy conservation efforts and a shrinking manufacturing sector.
Back to your system. (By the way – did you actually talk to any solar companies when researching this article – it doesn’t look like it!)
You cannot install a system larger than 10 Kilowatts in Ontario if you are connected to the electrical grid. (some exceptions exist but are costly to explore) $28,000 is a real low-ball cost – did you remember to include the HST which you will have to pay?
Wise people don’t install PV systems so large that they generate more power than they can get credit for – you probably only need a 9 Kilowatt system, which will not create an annual surplus and cost less to install. BTW electric water heaters are much more efficient than almost every natural gas water heater out there. Are you confusing “more efficient” with “costs less to operate”?
You are correct in surmising that trying to store electric power for on-peak use is a waste of time. This is because net metered connected homes are not charged time of use rates – they are charged the same rate 24/7, actually dropping when you exceed 700 Kwh a month.
Your financial analysis is flawed for a number of reasons. First, the cost per Kwh amount saved is higher than you’ve allowed. Second, there is no allowance for the cost of electricity rising faster than the rate of inflation – which will happen again after 3 to 4 years. I think it’s also foolish to amortize anything over 10 years. Would you buy a medium priced car and finance it over 25 years?? Longer amortization = more cost = foolish. If you can’t afford to pay for it outright don’t buy it – I’ve always said this about PV systems. Homeowners can’t write-off the cost of home improvements the way businesses can. (Which is why so many farmers have PV systems – they can write of the cost of the PV system and the income it generates – a great deal for small businesses!)
Your table seems to imply that the only cost to be considered is the cost of the loan. I would suggest that the cost of the solar system $28,000 (+HST) must be part of the amortization amount. After 25 years sitting on a roof the PV system will have deteriorated and may need to be completely replaced. Maintenance can also be costly…
Solar in Ontario is dead – for at least 5 years.
There will “never” be programs like the FIT program again in Ontario – no political party will go there again. Just look at the moronic politically-motivated comments already posted here. Solar thermal (heating) systems work well and can displace 10 times as much CO2 as a PV system for much less money – but – with natural gas being 50% cheaper now than 10 years ago – they are just not cost effective. This is true even for solar pool heating systems that cost $4,500 installed and displace 4 tonnes of CO2 a year.
Something else to point out. Net Zero Homes are already so energy efficient, almost any energy saving technology added to them is no longer cost effective – because there is so little energy to be saved….
If & when it ultimately comes down to what dollar value homeowners put on greenhouse gas mitigation – we’re all doomed. After speaking to tens of thousands of people over the past 40 years about solar and selling and also installing over 1,000 (very cost effective) solar systems – I can say with complete conviction that if a solar system doesn’t save money and pay for itself within 5 or 6 years, homeowners will not buy it. PV will never get that cheap – its cost has already started to plateau and there are real limits about how much can be added to the grid – take a look at the situation in Hawaii.
Solar, thermal or PV will not become a viable business or persistent technology in Ontario (or the rest of Canada) until it is required by the building code – similar to how specific levels of insulation are required in walls and roofs. I suspect that is at least decade away from happening – if ever.
Reply from John Bleasby…
Good morning SolarDad,
Thank you for taking the time to outline your thoughts regarding the economic viability of small scale residential solar installations. We seem to agree on most of the issues, but not all.
First of all, I stand by the way I calculated my numbers. I did not include any HST in any financial calculations because HST varies across the country based on the provincial rate applicable. Electricity rates themselves vary across the country too. As a result, I prefer to simply look at the kilowatt hours generated and used — it tells the story well enough. I did in fact call solar companies and used the average estimate for the installation on my house. You suggest a 9kWh system for my house versus an 11kWh system, but also say my 11kWh installation costs are too low. Let’s call that a wash, OK?
I used both a 10 year and 25 year amortization for the loan cost calculations. Many proponents of solar for new homes suggest the cost be added to the mortgage, which is usually 25 years. Those who borrow might easily consider a 10 year loan. You say, “If you can’t afford to pay for it outright don’t buy it.” For those who do, they must consider the investment opportunity cost of paying cash. Not much to argue here. I also did not include any maintenance or efficiency deterioration factors. They both obviously have negative implications on viability, however any estimates made could be disputed. Instead, I thought it best to keep things as cheerful as possible for solar.
I disagree that electricity costs will always go up. I watch the wholesale electricity costs as determined by prices paid by utilities at auction, see them dropping dramatically, and as a result come away unconvinced that there is a forever upward trajectory. There is a glut of electricity generation in North America; the rules of supply and demand will ultimately govern.
I simply sought to ask the question about solar’s future, however you have pronounced the “Solar in Ontario is dead. (for at least 5 years)”. That might be so. Most homeowners looking at PV arrays will be motivated by the potential for financial gain. However, that potential gain cannot exist without government intervention. As public finding of small scale residential solar all but disappears, the sector’s growth prospects appear cloudy. I think you and I can both agree on that.
Reply from SolarDad…
Thank you for your response. I recognize the conundrum of writing an article for a magazine that is distributed nationally – trying to make a general case work in jurisdictions that have widely varying utility arrangements. In Ontario, we have a public electric utility that operates Hydro and Nuclear stations. We have high electrical rates. Alberta, with largely private utilities usually have much lower electrical rates – for the moment.
Ontario’s solar program paid solar generators for the electricity they produced & sold to the public utility. Alberta currently only subsidizes the cost of the solar equipment and pays nothing for the electricity.
There is a short term “glut” of electrical generation in some regions of North America. We don’t have a national electrical grid, let alone international grid. This means regional surpluses are not easily shared with areas that have shortages. It also takes decades to build conventional electrical generation plants – and old plants wear out and do need to be replaced – and they are always more expensive than their predecessors. Like it or not electricity is going to continue to get more expensive – and solar alone is not the answer, because electrical energy storage of a scale to make it possible to run a grid is horrendously expensive and really does not exist yet (despite Musk’s assertions).
More and more energy consumption is going electric – so demand is going to start growing again. Transportation (trains & cars) are going electric and will consume more electricity than is currently being generated. A large amount of the “easy” electrical energy conservation measures has been done. Now the tougher, more expensive electrical conservation measures are left to complete – and that will happen slower, so the savings are going to diminish and the consumption will catch up.
Solar will not become a significant component of the energy supply until building codes mandate its inclusion in new construction and renovations. Many jurisdictions around the world have done this – but it may take years – decades – for it to happen in Canada in any meaningful way.
Solar does need to be part of the energy mix, and it could grow to be a significant part if supported properly. I don’t think this will happen any time soon in Canada. Too much petro-power influence in the political circles.