Calculating Your Solar Return

If you are installing your system with a microFIT contract in mind, then the bottom line is how much revenue will the system generate in 20 years? Unfortunately the sun has a mind of its own and doesn’t exactly shine all the time, so how can you do this with some degree of accuracy? 

Actually it isn’t that difficult. 

There are numerous sources on the internet with calculators that take into account data from NASA and ground based instruments that have been monitoring solar insolation for years.  So the sunlight guess is going to be as accurate as can be.  Then it is just a matter of plugging in the appropriate numbers and you have your revenue projections.

Keep reading and you will see the links below to a few calculators that I’ve found very valuable. 

Of course, the solar installer should have access to more sophisticated software that is available providing a more detailed accounting and in fact, their quote to you should probably have used one of these systems as part of the site survey analysis. But let’s start with the simplest type of calculation.

This calculation is simple but fairly accurate, although it produces slightly conservative yearly average output:

(PV array wattage) x (average hours of sun) x 75% = daily watt-hours.

 PV array wattage is the STC panel rating times the number of modules. (If you have 10 Canadian Solar 215W modules the PV array wattage is 2,150W.) Average hours of sun is the yearly average of noontime-equivalent hours. This ranges from 4.0 to 5.5 hours for most of the US and southern Canada.  NREL did a great study for this that you can read it to calculate average hours, but it has info only on U.S locations.

http://rredc.nrel.gov/solar/pubs/redbook

For Canadian locations check out this Natural Resources Canada site:

http://pv.nrcan.gc.ca/

The fudge factor of 75 percent takes into account all the real-world effects of dirty modules, dirty air, high humidity, hot modules, wiring losses, small bits of shading, inverter inefficiency and all of the other little things that effect efficiency. For off-grid systems assume 70%. If your array is perfectly shading-free and you are in a dry, high altitude you can use 80%.

Thus 2,150 watts x 5.5 hours x .75 = 8,868 watt-hours or 8.86 kWh per day. Remember this is a yearly average. You will see nearly 2x in the summer as in the winter. This is a conservative way to calculate the real-world output, but it is a good rule of thumb.  As well, keep in mind this is for one year only as your systems’ efficiency would deteriorate year over year.   This isnn’t much, but it would make a difference over 20 years if you are on microFIT.  But  it’s a starting point, as you need this figure to calculate your final return.

PV Watts seems to be the standard that people use to get their initial information on solar insolation (amount of sun) and revenue.  It is very simple to use and allows you to changes a number of variables.  It also provides international locations-not just American.  This should be your starting point.

http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/

Other ways to evaluate cost of PV

The levelized cost of electricity(LCOE)requires considering the cost of the energy generating system and the energy generated over its lifetime to provide a cost in $/kWh (or $/MWh or cents/kWh).  The info would be interesting for someone who has a microFIT contract but it really is a metric for large producers to find out what the cost per kilowatt over the lifetime of the investment is.  For example, I figure my LCOE is between 30 and 40 cents CDN over 20 years.  That’s pretty high when you consider that power in Ontario sells for between 6.5 and 11.7 cents (does not include distribution and other taxes etc.) right now but allows me to make a reasonable return on my investment.

http://www.ontarioenergyboard.ca/OEB/Consumers/Electricity/Electricity+Prices

What should the installation cost?  Well, installing a PV system is less expensive today than it was a year ago.  In fact, year over year the costs have come down to the point where in some locations. such as the Netherlands it has reached grid parity (their electricity costs far more than what we pay in Ontario).  But we are still paying far too much if you are to believe the following comments I found in this blog:

http://www.ilsr.org/why-pay-double-solar-america/ http://www.ilsr.org/why-pay-double-solar-america/

Prices in 2012 for modules in Canada are around $2-$3 per watt.

http://www.solarbuzz.com/facts-and-figures/retail-price-environment/module-prices

From my review of the web and personal experience, pricing should be in the neighbourhood of $5,000 to $8,000 per Kw installed in 2012.  I have heard figures as low as $4,000 per Kw but I find that hard to believe in Ontario using a reputable installer.  If you are installing your project through microFIT, because of the 60% made in Ontario provision, options are limited as to what hardware, modules, and inverters we can buy.  For example in Ontario we cannot buy the cheap Chinese modules that are presently (2012) flooding the U.S market or purchase from a retailer/wholesaler in the States or  elsewhere that sell a product at lower cost.  We also cannot buy, in some cases the best solution for our particular situation.  But I guess this is necessary if you want to kick start an industry.

Revenue and Expenses

When calculating your revenue and expenses don’t forget to allow for the following:

• Installation and equipment (should include all permits and engineering fees/drawings)
• Insurance
• Finance costs (if any)
• Inverter replacement costs/ minor O & M (ownership and maintenance costs- Inverters are guaranteed for 10 to 15 years nowadays so there is a possibility of replacement. extended guarantees are offered by some manufacturers Microinverters do not have enough of a history to really get a handle on real world failure rates, but I personally would allocate some dollars for replacement.  Even if the piece of hardware fails and is replaced you may have to pay for the labour to do the replacement.
• LDC billing fee
• LDC connection fee
• Roof replacement (if applicable)

Don’t forget to add the rate of loss of production year to year for your modules

• Depreciation- CRA (Canadian Revenue Agency)  allows for accelerated CCA (capital cost allowance)
• Taxes- if you obtain an HST number form the CRA (which you should) you will have to pay tax on your income but not for a number of years since the CCA (depreciation will offset this)

http://www.rlb.ca/hst-news/indepth-hst-articles/hst-consider-ontarios-microfit-solar-energy-program.html

One item, you may want to include in your calculation is the removal of the system at a certain point in the future.  Since the system should be viable for greater than 20 plus years, I am not sure it really matters and why would you want to remove it unless to replace the roof.  But still a point to consider.

 Financial Calculator

This is the best calculator I have found on the web for microFIT calculations:  I think SWITCH Kingston did a fantastic job in promoting and providing information on Solar.  I would recommend their entire site for great well written information as well as this calculator.  You can change the specific values based upon your location and specific needs.

http://switchkingston.ca/wiki/doku.php?id=microfit:calculator

 As a final word, what I wouldn’t do is “cheap out” on the installation or installer.  This is a long term installation where the key to making money. In a microFit scenario you don’t want any ongoing hassles that will either reduce your electrical generating capability or cost you money.  But there is another aspect that isn’t talked about a lot and that is safety,  as a bad installation could lead to fire and that may cost lives and a lot more money in the end.  In my mind it is worth giving up some revenue for piece of mind.

http://www.rlb.ca/hst-news/indepth-hst-articles/hst-consider-ontarios-microFIT-solar-energy-program.html

http://www.greentoronto.me/?p=1074