Creating Individual Incentives for Green Energy

Should States emphasize photovoltaics or solar hot water

heating systems when implementing subsidies for solar energy?

We will use California as our test case.

Solar-power systems are currently available.

Solar can be both generated and used on an individual level.

A large majority of solar hot water heaters are run on natural gas.

Distributed energy production creates a buffer against market fluctuations or disruptions in fossil fuel supply.

U.S. Department of Energy's Photovoltaics Program

Flat-plate collector, Pomona Valley, CA, 1911

Source: Perlin, 2005.

Solar heat collection: Flat plate collector

Heating water:Direct Circulation System

0.2 MW of Photovoltaic Modules and

8,500 Solar Hot Water Heaters sold for domestic use every year

Energy Act of 2005 30% of system cost, up to $2000 Same for Solar Hot Water Heating and

Photovoltaic systems Expires December 31, 2008

Solar America Initiative

Typically cover around 30% of cost Range from $800 - $46,500 maximum rebate Differ on requirements for “net-metering” CALIFORNIA:

Residential and commercial customers will receive incentives of $2.50 per watt up for PV installations of up to 1 megawatt in size.

Similar incentives for Solar Hot Water Systems.

Year First yearAverage annual home water heating electricity usage (kWh) 2,537Average annual home water heating natural gas usage (kcf) 18Cost of electricity based water heating ($) 317Cost of natural gas based water heating ($) 180Units installed 1

Performance (%) 70%

CO2 emission from electricity (ton) 0.70CO2 emission from natural gas (ton) 1.13

Total Social cost of electricity CO2 emission 18Total Social cost of natural gas CO2 emission 28Per unit cost ($) 3,000Operations and Maintenance 117   BenefitsReduction in electricity bill ($) 222 Reduction in natural gas bill ($) 126 Reduction in social cost of electricity carbon emissions ($) 18 Reduction in social cost of natural gas emissions ($) 28 TOTAL BENEFITS ($) 366

Costs

Total cost per unit per household ($) 3,000Total annual operating cost 117

TOTAL COSTS ($) 3,117

NET BENEFIT first year ($) -2,751Net Benefit year after ($) 249Total net value over 20 years (undiscounted) ($) 2,472

Discount rate 7%TOTAL NET PRESENT VALUE over 20 years ($) -56

Year First YearAverage annual home usage (kWh) 7,080Average annual home electricity bill ($) 1,015

Units installed 1Performance (kWh/ peak W) 9

Electricity bill ($) 886

CO2 emission from electricity (ton) 1.96

Total Social cost of electricity CO2 emission 49Per unit cost ($) 35,400Operations and Maintenance 0   Benefits

Reduction in electricity bill ($) 886

Reduction in social cost of electricity carbon emissions ($) 49

TOTAL BENEFITS 935

CostsTotal cost per unit per household 35,400Total annual operating cost 0

TOTAL COSTS 35,400

NET BENEFIT -34,465Total net value over life time (undiscounted) -12,527Discount rate 7%

TOTAL NET PRESENT VALUE ($) -23,414

Current Federal and State incentives completely cover the individual’s net costs for Solar Hot Water Heaters

Photovoltaic systems are not completely covered.

Economies of Scale & Research and Development are the two most important factors in developing the solar market