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Does Efficiency Really Save When Installing a PV System?

Posted by Dan Chiras, Guest Columnist

Jan 11, 2017 11:08:16 AM

Several readers have questioned the validity of my assertion that energy efficiency can dramatically reduce the initial cost of a solar electric system.

In my blog “Making Solar Electricity Affordable,” I noted that each dollar invested in efficiency can save $3 to $5 in initial costs. The reason for this is that it is much cheaper to save energy than to generate it with a PV system.

To illustrate my point, I’ve included a table from my book entitled Power from the Sun. This data was provided to me courtesy of Kurt Nelson, an experienced PV installer and teacher.

Power from the Sun

In Table 1, I listed four energy efficiency measures and how much they’ll save a homeowner in kilowatt-hours or kWh (column 4). Column five shows the cost of each measure. Take a moment to study the table.

Table 1

The Cost of Energy Measures and Energy Savings

Efficiency Measure

New Consumption

Old Consumption

Energy Savings

Cost to implement

New Refrigerator

1,300 Wh/day

2,200 Wh/day

900 Wh/day

$849

New Chest Freezer

900 Wh/day

1,800 Wh/day

900 Wh/day

$799

6 – 18 Watt CFLs

432 Wh/day

(@4 hr/day)

1,800 Wh/day

(6 - 75 w @ 4hrs/day)

1,368 Wh/day

$24

Eliminate Phantom Loads via Power Strip

0

384 Wh/day

384 Wh/day

$13

Table 2 lists the daily and annual savings in kWh and the total cost of the improvements. It also lists the annual savings and the cost of the system. As you can see, the return on investment is 5.5%. As shown here, these measures will save about 1,296 kWh of electricity per year. These changes cost nearly $1,700.

Table 2

Energy and Economic Savings from Efficiency Measures

Daily Energy Savings

3,552 watt-hours per day

Annual Energy Savings

1,296 kilowatt-hours

Annual  Savings

$92

Cost of the Improvements

$1,685

Return on Investment

5.5%

Now, here’s where things get interesting. Table 3 shows how much it would cost to generate this same amount of electricity via a grid-connected solar electric system, the cheapest of all PV systems, I might add. As shown, a PV system that generates 1,296 kWh per year would cost about $10,000 in Wisconsin. As you can see, it is nearly six times more expensive to generate electricity than to conserve it.

Factoring in the 30% federal tax credit drives the system cost down to $7,000. Even so, it is still 4 times more expensive to generate electricity via a PV system than to save it through efficiency measures. Every dollar invested in efficiency would save $4 in system cost.

Remember, too, energy efficiency measures will reduce the initial cost of  battery-based systems even more, because batteries add substantially to the cost of these systems. And, off-grid systems also don’t qualify for Federal tax credits. In this example, an off-grid system that  produces 1,296 kWH of electricity per year could easily cost $14,000. In this case, a PV system is 8 times more expensive than efficiency. Every dollar you’d invest in efficiency could save $8 in installation costs.                            

Table 3

Comparison of Costs and Savings from Efficiency vs. PVs

 

Energy Efficiency

PV System

Cost

$1,685

$10,000

Annual Savings

$92

$92

Return on Investment

5.5%

0.9%

All this is to say, that efficiency measures are far cheaper than a new PV system. I’m not trying to discourage people from installing PV systems, just trying to encourage people to implement efficiency measures first. That way, they’ll end up spending less on a PV system.

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