Creating Individual Incentives for Green Energy
PHOTOVOLTAICS VS. SOLAR WATER
HEATING
THE QUESTION
Should States emphasize photovoltaics
or solar hot water heating systems
when implementing subsidies for
solar energy?
We will use California as our test case.
WHY SHOULD WE CARE?
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.

WHAT WE’VE FOUND
PHOTOVOLTAICS
U.S. Department
of Energy's
Photovoltaics
Program
SOLAR HOT WATER HEATERS
Flat-plate collector, Pomona Valley, CA, 1911
Source: Perlin, 2005.
SOLAR HOT WATER SYSTEMS
Solar heat collection:
Flat plate collector
Heating water:
Direct Circulation System
CURRENT MARKET PENETRATION
0.2 MW of Photovoltaic Modules
and
8,500 Solar Hot Water Heaters
sold for domestic use every year
FEDERAL INCENTIVES

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
STATE INCENTIVES
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 $2.50 per watt up for PV installations
of up to 1 megawatt in size.
 Similar incentives for Solar Hot Water Systems.
CBA– SOLAR HOT WATER
Year
Average annual home water heating electricity usage (kWh)
Average annual home water heating natural gas usage (kcf)
Cost of electricity based water heating ($)
Cost of natural gas based water heating ($)
Units installed
First year
2,537
18
317
180
1
Performance (%)
70%
CO2 emission from electricity (ton)
CO2 emission from natural gas (ton)
0.70
1.13
Total Social cost of electricity CO2 emission
Total Social cost of natural gas CO2 emission
Per unit cost ($)
Operations and Maintenance
Benefits
Reduction in electricity bill ($)
Reduction in natural gas bill ($)
Reduction in social cost of electricity carbon emissions ($)
Reduction in social cost of natural gas emissions ($)
TOTAL BENEFITS ($)
18
28
3,000
117
222
126
18
28
366
Costs
Total cost per unit per household ($)
Total annual operating cost
3,000
117
TOTAL COSTS ($)
3,117
NET BENEFIT first year ($)
Net Benefit year after ($)
Total net value over 20 years (undiscounted) ($)
Discount rate
TOTAL NET PRESENT VALUE over 20 years ($)
-2,751
249
2,472
7%
-56
CBA – PHOTOVOLTAIC MODULES
Year
Average annual home usage (kWh)
Average annual home electricity bill ($)
Units installed
Performance (kWh/ peak W)
First Year
7,080
1,015
1
9
Electricity bill ($)
886
CO2 emission from electricity (ton)
1.96
Total Social cost of electricity CO2 emission
Per unit cost ($)
Operations and Maintenance
49
35,400
0
Benefits
Reduction in electricity bill ($)
Reduction in social cost of electricity carbon emissions ($)
TOTAL BENEFITS
886
49
935
Costs
Total cost per unit per household
Total annual operating cost
35,400
0
TOTAL COSTS
35,400
NET BENEFIT
Total net value over life time (undiscounted)
Discount rate
-34,465
-12,527
7%
TOTAL NET PRESENT VALUE ($)
-23,414
FINDINGS
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
