Perpetual Innovation

Category: solar

Solar 2020 and Sustainability: Looking for the Silver Lining

Kelly Pickerel, Editor in Chief of Solar Power World
magazine was cautiously optimistic in January when discussing the impact of US
Import tariffs on the Solar industry and still solar installations were up 14%
during 2019. She hoped that an even year, 2020, would bode well for solar.
She concluded her opening letter by the editor in the January
2020 Trends in Solar edition of SPW: “Superstitious or not, I’m crossing my
fingers for a calm, prosperous year in solar. Knock on wood.”
Wow! Nobody could have envisioned the coronavirus pandemic
and its impact on all industries including solar. But, the environment is
taking a breather: Environment
Wins with Reduced Human Activity.

During the Great Recession, Hall (2010) argued that a
massive opportunity was lost by not by not focusing on sustainability related
projects and human capital (education). He argued for spending more on specific
infrastructure: especially energy efficiency and renewables. He liked projects
that would pay back for decades while reducing our collective human footprint. Federal
bailout funding should target, long-term, sustainable projects. The destructive
innovation associated with recessions should allow industries (and companies)
to fail if they are not sustainable.

Make no doubt about it, the COVID Recession will be unlike
anything we have ever seen before. It’s like putting parts of the economy in a
self-induced coma, while waiting out the passage of the virus. However, waking
up exactly where we left off is probably not going to happen. So, what’s the
best way to move forward, and why not try to leverage this sudden break in the
world’s business-as-usual routine into more permanent action on becoming more
sustainable.

Look for SustainZine blogs and articles on video meetings,
teleschool, online university and telecommuting. We suddenly have reduced our
carbon footprint worldwide by what, 20%. Not the way we would have liked to
launch such a massive initiative, but let’s work with the deflection we are
given.

People are now at home more than ever, let’s get them to
start monitoring their carbon footprint. How much are they saving by working,
schooling and entertaining at home. Imagine someone reducing their carbon
footprint by 35% in one week? for several weeks? Wouldn’t it be nice measure
that savings and celebrate the win!? Wouldn’t it be nice to keep measuring the
reduction in carbon footprint and continue to make incremental moves?

The savings associated with remote work are huge. Once
workers who can work remotely get the chance to do so, the genie will be out of
the bottle. The savings are massive: employer, employee and environment. The
reduction in carbon footprint immense. Measuring and monitoring the savings
will justify the future workforce to frequently work remotely.

For the homeowner, first would be energy efficiency, like
insulation. Start with an energy audit.

Then, with the reduced power usage, most homes should move
to renewable energy (solar).

Once we see and visualize the gains, it could become habit
forming. Let’s keep our collective fingers crossed.

See upcoming articles by Hall about the crazy profitable
proposition for businesses to go solar, and for homeowners to feel good and
save money by going solar.

Mother Earth is our one and only habitable planet. It’s time
we started taking better care of her. Maybe the coronavirus pandemic will be a
wake-up call about how serious we all need to be about the health of our planet?

References

Hall, E. (2010). Lessons of
recessions: Sustainability education and jobs may be the answer. Journal of Sustainability and Green
Management. Jacksonville, FL: Academic and Business Research Institute.
Retrieved from: http://www.aabri.com/manuscripts/10659.pdf

27 March 2020
Opportunity Lost by Waiting until 2020 for Solar Investment

[UPDATE: 30% Investment Tax Credit on renewables in the
IRA Act 2022. See our Blog post here. This makes all the financial discussions
below much more profitable. Also, higher inflation and higher power inflation.]

The Renewable Investment Tax Credit, which is currently in
2019 at 30% of the qualifying investment, is a wonderful incentive to put in
renewable power including solar, wind and qualifying battery backup. The ITC
will drop down by 4% in 2020 and then again by 4% in 2021. After 2021, the ITC
drops off a cliff, to 10% for businesses and zero (0%) for residential. Here is
the stepdown in Solar Investment Tax Credit (ITC): https://seia.org/initiatives/solar-investment-tax-credit-itc

You can still get your foot in the door on the tax credits
in December. The “Safe Harbor” on ITC pertains to launching the investment in
the current year and locking in that higher level of tax credit. The safe
harbor allows businesses to take advantage of the current ITC rate even though
they didn’t allow enough time to fully install this year. Generally, figure 5%
or more down payment in the current year and continuous progress toward the
finished project. One reason for the safe harbor, in general, is that someone
might want to launch in 2020, but there is such an end-of-year demand for solar
panels that it is not possible to get them before January 1^st.
Winter storms, trade storms, government permits during holidays, etc., might
delay the full installation before the year ends.

Safe Harbor requires continuous progress on the solar project,
and there is a fixed deadline when the system must be completed to maintain the
qualification for the higher tax credit. Here are some details on when the
investment must start, and finalize, in order to be eligible for the higher
ITC: https://www.foley.com/en/insights/publications/2019/09/solar-renewable-energy-investment-tax-credits

Solar Example in December of 2019

So let’s work an example for a business that has a $100,000
solar investment in consideration in 2019. (See the table below.)

First there’s the $30k tax credit that reduces the business tax
liabilities, dollar for dollar. This is money that you simply do not pay out to
the IRS. Then there’s the possibility of 100% depreciation of an asset in the
first year, so the tax shield is based on the reduction in net income based on
depreciation. (The tax shield is equal to the tax rate times the amount of
depreciation; the asset basis is reduced by half of the ITC, or 33% of $85k in
this example.) Therefore, the actual investment is only about 42% of the solar
system costs, once all the tax benefits of the investment are considered. If
the savings are $7,200 yearly (assuming no increases in power costs), then
there’s a 17% return on investment each year. Simple payback is less than 6
years!

That is crazy profitable for a long-term investment. It is especially
profitable when considering that the business is already committing to paying
for power indefinitely from the power company. So, taking a loan of say 15
years could result in loan payments that are lower than the payments for power,
especially when considering that the power company raises rates (you should
figure at least the rate of CPI inflation). At 2% power inflation, the net
present value (NPV) of the investment jumps to $108k from about $75k (30 years
at 4.5% loan rate).

So the investment is profitable. Very profitable. But what
if you want to do the investment next year? What is the cost of waiting? I’m
glad you asked!

With the safe harbor on Solar ITC you can lock in the ITC
savings this year. You will need to put 5% down in 2019 and starting progress
on the system. Here’s what your cashflow would look like for 2019: $30k ITC
savings in taxes less the $5k deposit on the solar system. That’s a positive
$25k cash flow this year.

Since the investment tax credit drops by 4% (to 26% in 2020)
the lost ITC is $4,000 if you buy the solar system and take the tax credit in
2020. The $4,000 opportunity loss, compared to the $5,000 deposit in 2019 is only
$1,000 difference. If you plan to do the solar system anyway, then the costs of delay are relatively large, especially when adding a year of power savings. The delay for a year could easily be a loss of $10k or
more in opportunity lost.

Solar is a Different Kind of Investment

There are two major points, however, that make this
different from most typical investment analyses. (Three, really, if you were to
discuss the environmental savings, but that’s for another article.) First, the
money your spending is committed money for power as long as the business is
open and operating. Taking a loan to buy the solar system might prove to be
cash positive indefinitely. Take $100,000 loan; pay interest only of $4,500
(4.5%) for first year or two until you realize the tax benefits of the solar
ITC and depreciation; apply the tax savings to the loan; and then make payments
on the loan for 8 years. The loan payments could be about $1,000 less per year
than what you would have paid in electric bills, especially as the cost of
power from the utility company increase over time. Once the loan is paid off,
the price of power that you generate for yourself is pure profit!

Speaking of profit, here is the second point. Every dollar
you reduce your power bill is pure profit. Things like smart thermostats, insulation,
weather stripping, adjusting habits/processes, etc. might result in reducing
the power bill by 5% to 25% at little or no out-of-pocket costs. That could
result in a perpetuity of savings. If the firm’s cost of capital is, let’s say 8%,
then the present value of the perpetuity of savings of $1,200 per year
($100/mo) would be $15,000 in present value terms. Plus, being more energy
efficient means that a smaller system is required when going solar.

An even more interesting concept related to energy savings
is looking at the sales volume required to equal the $7,200 savings annually.
If the firm has a 10% profit margin, the sales to cover the power bill is
$72,000 per year (once the loan is payed off). In the current loan example,
cash flows (savings really) are positive every year and go up based on power
inflation. When the loan is payed off in year 11 you start to realize huge
savings (profits).

By the way, someone buying this property would pay more for
the business because it comes with “free” electricity. A Lawrence-Berkley study
found that some properties would appreciate by 20 times the annual electric
savings. Therefore, the property might be worth about $144k more based on 20
times the $7,200 annual savings. Since the net investment after taxes is about
$42k, the property could appreciate about $102k over the solar investment.
That’s a property appreciation of almost 3.5 times the net investment.

In short, the investment in solar power can be crazy
profitable. After January, it is not quite so crazy profitable. But, if you are
planning to go solar in 2020, you need to seriously consider launching the
project in 2019 and reaping the additional tax savings (and energy) savings.

About SBP.
Strategic Business Planning Company has been working on various telework, solar
and energy efficiency projects. There are several factors that we consider in a
more comprehensive analysis of a Solar investment that are not represented
here. We also enjoy doing the planning associated with Intellectual Property
(Patents) ventures; look for our Perpetual
Innovation™ line of books on patent commercialization.

20 December 2019
Renewable energy of Wind and Solar no longer needs subsidies

Nice Bloomberg article here. Renewable of Wind and Solar are now cheaper than coal, oil, gas, nuclear. No big need for subsidies to make them competitive.
But, there’s also no need, quite the contrary given the externality costs, for subsidizing fossil fuels!
Nice article with great graphics show the fall in price for wind and solar.

19 September 2019
Wind n Sun are now cheaper/better than Coal, NatGas, etc

By now you probably knew it was happening, but you probably didn’t realize how much and how fast. If you figure subsidies, Solar and Wind are a slam-dunk powerful option.
Wind prices have been dropping fast and solar has been dripping like lead… Solar prices have dropped about 86% over the last 8 years.
Check out the latest 2018 report by Lazard. Note that they also analyze renewables with storage (batteries).
The Solar incentives make the solar option for most settings (especially in Sunny Florida) crazy profitable. For example, the investment of $100 for a rather serious system (much more than a home residence would need) would have a tax credit of 30%, plus 100% depreciation in the first year. So, if you had a 20% tax rate, your investment would look like this:
$100k Investment
-30k Tax Credit
-20k Depreciation
=50k Net investment. (Thant’s only 50% of the original investment.)

Payback would be less than 8 years, maybe 5.
The power company has historically increased prices by 3% (or more in Florida)… Not a problem if you are producing your own power.

Return on investment would probably be 20% or greater after 20 years.
Solar in sunny places like Florida is a pretty good investment; but with the tax benefits solar is a crazy profitable investment. Plus you are saving lots of other resources including water and carbon dioxide.
We’re working on a few calculators. Solar and Renewable Energy. This is a positive investment that keeps on giving.

8 November 2018
Backup to a Better Backup Generator Solution

You may already have a backup generator for the house. In
fact, you may have the backup generator with you just about everywhere you go.
Plus, it might be totally quiet, for hours.

Yep, we are talking about your hybrid gas-electric vehicle.
Hybrids have been selling like crazy on the farms because they can easily be
used to generate 120-volt electricity to run hand tools and generally provide
backup power.

Most newer vehicles offer a 120 plug, but they won’t power
much. What you need is an inverter that will power whatever you want,
frequently 300 to 400 watts will be sufficient for many applications. Smaller
inverters can be simply plugged into a cigarette lighter, but bigger inverters
should be wired directly to the battery.

A backup solution for the house is rather awkward,
inconvenient and requires fuel at a time when the least fuel is available,
storms and outages. Here’s the cost for a generator solution.

Generator

The generator solution costs something like this:

·
Generator $500 (or about $500 to $1,000 for an
inverter that is much quieter and provides smoother power).

·
Fuel, maybe 8 to 12 gals per day. At 10 gals x
$3 is $30 per day.

·
Storage of generator and fuel cans.

Traditional generators (gas or propane or diesel) provide
lots of smoke, noise, and require maintenance. The generator produces
electricity, even under very low loads, so much (maybe most) of the electricity
(and fuel) is wasted.

Generators are best used some distance from the house so as
not to asphyxiate the inhabitants.

Tip. Make sure not to allow the generator to run out of
fuel, the sputtering causes the generator to surge which kills off appliances
at an alarming rate.

Auto with Inverter

Hooking an inverter to the vehicle may be a very good
solution for many purposes, especially lower loads in the house such as
refrigerator, lights and fans. However, you will have to go start the vehicle before
the battery gets too low. (Taking regular lead batteries below 50% will
seriously erode their life span.)

A 1000-Watt inverter can cost between $80 and $110
(modified-sine wave), and about twice that for the higher quality output of a
pure-sine wave recommended for sensitive electronics.

Your vehicle is rather quiet, and rather fuel efficient
compared to a generator. Your typical vehicle will not be able to handle large
loads, however. One approach is to set up a battery (or battery bank) that can
be recharged via the vehicle.

Even better is to hook up to your hybrid vehicle.

Hybrid Vehicle with Inverter

The hybrid vehicle is a wonderful backup power supply, just
like the uninterruptable power supply (UPS) you use for your computers and wifi.
You can have continuous power as needed, when needed. Plus, the hybrid vehicle is
designed to start up the motor and recharge when the collective batteries get
low. Very cool.

Here’s how you do it. Hook up your power inverter directly
to the 12-Volt (direct current) battery of the hybrid vehicle to produce
alternating current (120 AC). Put the vehicle in the “on” mode, but with all
the vehicle electronics turned off, i.e., turn the air conditioner and lights
off. Now, when the batteries run low, the vehicle will automatically start to
recharge all the batteries, lithium as well as the 12-volt battery.

Tip: Please make sure the vehicle is in a safely ventilated
area. Do not set this arrangement up in the garage!

Add in a Battery
(Bank) and a Solar Panel (or More)

So good news, you now have an inverter with your vehicle so
you can use good, clean, quiet power anywhere you and your Prius happen to be.
Yippee!

But how about the home or cabin when the Prius is away?

Get a battery or more, and hook up the inverter to it. This
should help you get through several hours with just the refrigerator. Batteries
of this type (deep cycle, for example) will cost $150 to $350 each.

Then, get a solar panel, or more, and hook them up to
recharge your batteries during sunlight hours. (Costco has a 100W Coleman with
8.5 amp charge controller for $159.)

Now, I have continuous power for low load (the battery plus
a 1100W inverter at $90, all for under $400). I’ll buy more batteries and/or
more solar panels as and when I need them. The 1100-watt inverter does
everything that I want to do in emergency or in the cabin. It does a small air
conditioner (window unit or small mini-split for a short period of time; a
refrigerator for several hours; LED lights and fans for days). It won’t do
central air, well pump, oven, dryer, hot-water heater, microwave, or several
heavy load items simultaneously. Bigger load electronics include blenders
(making Hurricanes and Margaritas), blow dryer; coffee pots, electric saw, etc…

Be careful putting together your system and your battery
banks. Hooking two 12V 100 amp batteries together can result in doubling of the
voltage (48 Volt in series) or double the amps (200 amp hours in parallel)
depending on how you hook them together. Make sure you get the right inverter
to match the higher voltage if you go in series. Try to get the same batteries
if you bank ‘em.

I can see you eyeing your electric golf cart, you already
have your own battery bank on wheels. Unfortunately, the voltage will be 36 or
48 Volts (say 6 x 6-volt batteries hooked up in series is 36 volt). Your
inverter would need to match the voltage of your cart (or carefully hook up a 12-volt inverter to 12-volt battery equivalent,
which in this case is two 6-volt batteries).

In short, you may already have a great backup power supply
solution. Hook up your hybrid to an inverter and you are good to go. Add in a
battery (or more) and a solar panel (or more) and you have a nice, quiet,
renewable power solution.

Tip. Use a volt meter. The meter is cheap. Burning out electronics
can be expensive, cause fires, shock the bejeebers out of you, and generally be
very inconvenient!

Tip2. When you buy your new hybrid vehicle you get “up to”
$7,500 back in the form of current-year tax credits! The federal tax credits for new
EV and PHEV cars (and for home solar, as well) are phasing down, so you might
want to accelerate your purchasing decisions. (See ins
and outs of tax credit for vehicles at Edmonds.)

Do we all need to rethink the way the design/plan for (emergency) backup power? Let us know what you think?

31 August 2018