Googling ‘social benefits of solar power’ or something similar retrieves a large number of solar company articles talking about things like local jobs, less pollution, less fossil fuel generation, blah, blah, blah.
While there may be some truth to this, mostly it is an appeal to the tree-hugger in you to entice you to sign a contract.
To be clear, as outlined in previous posts, we installed our panels to help ourselves. We are lowering future budgeted costs to reduce the amount spent from drawing down retirement savings on these costs, perhaps if we so choose, to spend them on something else. When was the last time you heard someone express joy upon paying their electric bill?
This is nothing more than the invisible hand at work. However, as with most tax policy, the government has deemed it socially desirable to reward higher earning taxpayers for doing something they feel benfits society, in exchange for reducing their taxes. In effect, the government has added a few fingers to the invisible hand.
The combined Federal, State, and County purchase incentives account for over 42% of the purchase price for the system we bought. The combination of electric bill reduction to near zero (about $100 a year for the meter) plus the potential for $600 – $800 per year in income for the next 25 years, justifies the purchase in and of itself.
About that $600-800 number. This comes from estimating our production overage at 2 MWh per year (worth about $176 at today’s rates) plus the current SREC rate of about $50 per MWh * 12 MWh output estimated per year generates this yet to be proven number. Note that all items here are variables subject to change, so the cash flow is also likely to be volatile.
When I first started journaling this effort, SRECs were only worth about $15 each after brokerage fees. The Maryland legislature has since mandated an increase in renewable energy incrementally over the next decade or so, including an increasing amount from solar. The day the legislation passed, the SREC market in Maryland jumped to $55 ($50 net to owners after the brokerage fee). We will probably generate about 12 MWh per year.
Spelling that out:
SRECs: 12*$50 = $600
Excess Power = 2 MWh * $88/MWh = $176
$600 + $176 = $776
SRECs trade in a marketplace subject to supply and demand. The utility companies buy SRECs in lieu of producing their own solar power – this is the demand. The supply of course are the rooftops (and any solar farms communities might deploy). If this legislation results in a large increase in deployed solar panels in Maryland the market price of SRECs will drop accordingly.
The paragraphs above explain how the government is incentivizing high earning taxpayers to install solar. That does not really answer the original question, what is the social utility of going solar – it just describes the economic price the various government units are willing to pay.
To understand the benefit to society in real terms, understand this very important fact about electricity – it is used immediately upon generation.
You may read about some battery storage systems in Australia or some water pumping schemes to move water uphill when demand and rates are low and flow it through generators when rates are high.
These storage or time of day arbitrage efforts are real but to date represent a small percentage of electricity generation. For the most part, as of today, electricity is generated and used. Or not. If the electricity is generated and not used it is for the most part wasted.
To complete the thought we will use a traffic analogy. Picture any of the various loops (beltways) that surround many of our cities. They may be 6 lane in some places, 8 lanes in others, maybe even more in some larger cities. No matter how wide they are, there is still a time of day when traffic is very dense and moves very slowly.
There is typically other times of the day (or weekends and holidays) when these roads are under used. An accident can realy mess things up, especially at rush hour. (Why do they call it rush hour anyway? – no one is moving very quickly – an oxymoron if there ever was one!)
It is impossible to build these roads to perfectly accomodate demand. Some highways are adding time of use tolls, HOV lanes and reversible lanes to accomodate and/or shape demand. These can help, but there are limits to what they can accomplish.
Electric utilities have their own time of day usage patterns. Demand rises as people rise in the morning, levels off as they go to work, increases again when they get home, and lowers greatly when everyone goes to bed.
Just as it would be economically and practically foolish/difficult to build enough highway capacity for the worst rush hour traffic, it is similarly economically and practically foolish/difficult for the electric company to build enough capacity to satisfy the highest demand.
Electricity plants (whatever their source) are expensive. So is electricity storage – maybe that will change but it is true today. So building enough to supply at the highest demand results in either:
- generation of electricity that is wasted when no one wants it, or
- building plants that sit idle much of the time.
Neither option is smart.
Instead, utilities generate enough of their own power to satisfy some reasonable amount of demand and then buy the rest of the electricity from external suppliers as needed. This is known as the spot market.
Spot prices can vary – as mentioned above, unused electricity is wasted. So when the larger market (beyond the local utility) is not demanding much electricity from external suppliers, the spot market is inexpensive.
Given all of this information, here are some ways that rooftop solar systems help utilities and their neighbors:
- to the extent we are using our own electricity at times of high demand, the utility has that much less it needs to supply and therefore that much less it needs to buy on the spot market at high prices.
- if we are generating more electricity than we need at times of high demand we are effectively supplying our neighbors with our surplus, as it goes back through the net-meter, reducing the amount utilties may have to buy fromthe spot market.
- to some extent, these first two factors must be reducing the load on the wires from the nearest substation to our neighborhood, hopefully reducing the likliehood of transformers or other components failing.
- to some extent, these first two factors are also reducing the likelihood of brownouts and blackouts, assuming they reduce the peak demand on transmission components.
- in some markets the utilities can sell excess capacity to the spot market and will do so when the spot market is buying for a price higher than what they sell it their customers. So the electricity generated by rooftop solar frees up additional capacity for them to sell. This helps the utility make more money, which benefits its shareholders, but should have some impact on keeping rate hikes for customers down, either by amount or by frequency.
This line of reasoning supports something we did not do, but something utilities should encourage: installing panels on the west side of a house. One counter-argument to my reasoning above is that solar panels produce less as the sun is setting, when demand is rising. This is of course specific to certain times of the year.
If the sun is not setting until 8:30 or later, this is past the surge point, although to be fair, solar power is dropping off for me at 5 PM, though it continues at a lower rate until close to sunset.
There are two factors at play in our situation:
- no west facing panels
- generation 1 solar system – we have a large tree on the west side of our house that is close enough and large enough to provide the original solar power – shade, and lots of it. So as we pass 5 PM the ever lengthening shadows cover not only the west side of my house, but the southern roof where my panels are.
During times other than the peak summer days, when leaves are not on this tree and the sun sets more to the southwest, we are still providing power when people come home from work and at a minimum, we are not contributing much, if anything to the increase in demand.
In summary, install solar if you benefit economically from it. If enough people make this selfish decision, the community as a whole will benefit. All the other arguments about fossil fuel reduction, cleaner air, etc. are nice, but are not germane to helping you achieve your financial goals.