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This study shows that emerging legislation proposed with FIT rates of 0.218 and 0.274 $/kWh[1] (depending on applicable 35 and 24.5% State tax rebates, respectively) eliminates PV systems smaller than 3 kW from being economically viable, and is thus sadly and disappointingly discriminatory against average home PV systems, which rarely exceed 3 kW.
To insure that our calculation method yields results consistent and comparable to those published by HECO, we verified that for small systems (7.04 $/W, used by HECO, which we inferred to correspond to a 2.83 kW PV size), our cost of PV-generated electricity of 26 ¢/kWh is close to HECO’s 25 ¢/kWh.
To read the full pdf document, with Table and Graph, click here. Some key conclusions were:
· Payback time for a 20 kW PV system is 7.5 years, with generated electricity cost at 7.2 cents/kWh and compound ROI of 6.59%/year, which seems reasonable enough. But
· Payback time with a 2.83 kW PV is 29.9 years, with generated electricity cost of 26 ¢/kWh and a compounded, annualized Return on Investment (CAROI) of minus 0.781 %/year, even with an extended FIT contract of 25 years, while feeding all generated electricity into the grid. A 2 kW PV system, under a 20 year fixed FIT contract, but consuming 50% of the generated electricity in-house, would realize a CAROI of 1.1 %/year. Clearly, the FIT contracts with the HECO-chosen “midrange” rate of 21.8 ¢/kWh for a wide range of small (< 0.5 kW to 20 kW) is not “reasonable” economically, even with full tax incentives.
· Increasing the FIT rate for the latter 2 kW system to the regular rate (~40 ¢/kWh) would increase the CAROI to a more reasonable level of ~ 4 %/year (still with a stinging 15.2-year payback). Eliminating the MMC (Minimum Monthly Charge) of $22.16 would increase that CAROI to ~6 %/year
· Small system economics could also be made “just and reasonable” by allowing annual FIT rate escalation, despite the (improbable) risk of negative escalation in some years
· The efforts to accelerate the move towards energy self sufficiency, via the emerging FIT regulations would even better served by having the PUC or HECO
1. Clarifying what PV ROI would be accepted as “just and reasonable” per PUC guidance and per HECO’s letter[9].
2. Creating a technical framework with legal and financial incentives to facilitate and promote distributed generation (DG) and storage.
3. Clarifying FIT accounting: The monthly FIT accounting – will it be based on the monthly net energy the grid delivered or received, rather than on total energy delivered to and total energy received from the grid.
These results were based on the proposed FIT of 21.8 ¢/kWh for PV systems < 20 kW DC, capacity factor of 17% as also used in HECO’s analysis[3], HELCO Monthly Minimum Charge (MMC) = $22.16 (assuming that such will still be charged with FIT systems), and with full 30% Fed and 35% State tax credits
Contrary to appearances due to HELCO (on Hawaii’s Big Island) high ~40 ¢/kWh residential rate, this analysis has shown that the proposed FIT rate of 21.8 ¢/kWh is reasonable for systems over 2.83 kW (installed for less than 7.04 $/W), provided that some (half or more) of the generated energy is used to offset the regular rate of ~40 ¢/kWh, thereby also benefitting from its likely escalation with time, even if the FIT rate stays fixed, as proposed.
To those concerned that PV deployment is premature because without government subsidy PVs may not yet be economically viable, it may be of interest to ponder the profitability of a 20 kW PV, $85,240 system (still in Tier-1) with(a) and without(b) government subsidies, both based on a 20-year-fixed FIT contract, 17% capacity factor, 4% bank loan interest, and 50% of the kWh output used on-site:
a. With full 30% Federal and 35% HI-State tax credits and a FIT rate of 21.8 ¢/kWh – the payback time is 4.77 years, CAROI is 8.19 and electricity cost is 8.2 ¢/kWh
b. Without any tax credits and a FIT rate of 27.4 ¢/kWh – the payback time is 10.73 years, CAROI is 4.13 and electricity cost is 18.6 ¢/kWh
To read the full pdf document, with Table and Graph, click here |
