Is the cost primarily proportional to the size, or do inverters present a major fixed cost?

For the former it doesn't really matter how much you can cover, as it's simply an investment with a certain rate of return that has the amount you can invest limited by roof area.

I think all of the hardware will be very proportional to the size. In my case I had micro-inverters on each panel, so it was directly proportional, but this was actually more expensive than having a single large inverter (though more performant).

However, the marginal cost of things like engineering, installation and inspection will certainly go down with the size of the system. How much of that passes to the consumer I don't know, but some of it certainly does. You can imagine the cost of putting 1 solar panel on your roof is not going to be 10x less than putting 10 of them up there.

It is hard to get exact numbers from solar sites as they are very sales-oriented, but it seems like the hardware cost is estimated at anywhere from 20-50% of the total cost of the solar system. The rest of it is engineering, installation, inspection, customer acquisition, profit, etc.

I always find it a bit dishonest sounding when these things are referred to as producing a "savings". Solar on a residential rooftop is not financially sustainable when you consider the cost of capital and require a market ROI. So I assume that lessors in this case are receiving a non-trivial government subsidy. Which means, in the end, that whatever the lessee is "saving" and then some is being paid in additional taxes that wouldn't be there if there were no subsidy. All of which is fine for those that want to pay more for energy that is cleaner. But people should not be given the impression that they're paying less. If they really were we'd all have solar rooftops over night.

This is an argument detached from two realities: (1) that fossil fuels receive enormous subsidies in the US and worldwide, and (2) that there is an enormous impact of CO2 on global climate, health, and ecosystems (not to mention the local environmental and health impacts of coal mining and fracking). When accounting for these costs, it becomes increasingly dishonest to claim that fossil fuels are cheaper than renewables.

The reality is the reverse of what you state.

The people who think our current use of coal is "cheaper" are economically ignorant, as it generates many dollars of externalities in pollution that affect health. That cost is born by taxpayers, so by avoiding it, the country saves money and in return passes some on to the person with solar on their roof.

I personally would prefer the more direct and elegant solution of a revenue neutral carbon (& GHG) tax, rather than the current tangle of overlapping regulations, but the immediate result would be the same, people with solar installations would be better off than those who didn't since they'd not need to pay the cost of carbon for electricity they generate themselves.

If you ignore externalities, sure. But that's not how the realities of climate change and pollution work.

Mind your comment and wait and see what will happen after 20 years

20 years doesn't change their price today.

No, only make the world better for our kids, with a small premium to pay today instead of loaning from the future...

I wasn't. This was my first comment. And for me morals trump over dollars everytime.

Not to mention that huge ecological damage also has cost someone will have to pay eventually.

So as long as you still believe in your country (which will pay its toll) or your children (which will pay their toll) from that, there's a hidden cost there too.

I'm sorry but you jumped into the middle of a conversation and completely changed the subject so you could argue something that's been explicitly removed from the discussion. The argument was about "is this cheaper than whatever else". The response was "no but it will be in 20 years". That's the discussion. Yes morality and the environment come into play, but that's not what we're talking about.

You walked into a conversation about the impact The Beatles had on music recording technology and said "yeah but John Lennon was horrible to his wife". True, and it's an important point to make. Just not in this conversation.

>I'm sorry but you jumped into the middle of a conversation and completely changed the subject so you could argue something that's been explicitly removed from the discussion.

First, the discussion is precisly what the "people jumping in" contribute. This is not some closed circle of pre-determined friends, it's a public forum. Anybody can jump in. Note how the subthread wasn't even about the original post (Project Sunroof) in the first place, it had been diverted in discussing costs.

Second, I don't see how saying essentially monetary costs are inferior to environmental costs is "changing the subject" much less "completely". It's still about costs in general, and it's still about monetary costs in particular (it's about whether the extra monetary costs are worth the environmental impact, and it's also about the hidden indirect monetary costs from environmental damage).

>You walked into a conversation about the impact The Beatles had on music recording technology and said "yeah but John Lennon was horrible to his wife". True, and it's an important point to make. Just not in this conversation.

In your contrived example, what Lennon did to his wife has no relation to impact of Beatles on the music recording technology.

Whereas environmental costs are still costs (and even have a dollar value, even if implicit). Plus, they are still something to think about when deciding if something is "too expensive" or not.

So nothing like what you suggest at all.

Do you only check the price to determine "expensiveness"? Not build quality, materials, features, and among them, social issues, like environmental impact and working conditions?

From an economic standpoint, none of those things can be described by the word "cheaper".

"the claims that these systems are "cheaper" prey on economic ignorance."

That's the original assertion. Now, if alternative power really was cheaper than coal or oil, we would already have it because businesses would be stupid not to flock to the cheaper option. Instead it's fringe enough that people hold serious debates about whether or not it's a good idea to invest in it. Everyone would drive a Prius if it was cheaper. Everyone would have solar on their roof. But hardly anyone does, because it's not cheaper.

You want to talk about externalities, let's do that: from an economic standpoint, they don't matter. Because the people who are paying for the power plant aren't paying for the pollution. Until the day we hold them accountable and make them pay for the cleanup, traditional power sources will always be cheaper.

So there's your discussion on environmental costs when you're talking economics of power sources. It doesn't even come into play. I drive a gas powered car because a gas powered car is cheaper. If I had an electric car, the power would come from coal, because coal is cheaper. The ship that transports the coal to my local plant is powered by diesel, because diesel is cheaper. And no where along the way is anyone forcing anyone to pay for the cleanup of their mess.

Now you want to talk morals? Yes we all should be embarrassed and we should be fined high and low for what we're doing to our environment. Shame on all of us. You know how often I drive my car when I could have walked? What the hell is wrong with me? I hate myself sometimes. But no one is making me pay for the damage I'm doing. Force me to pay for being lazy! Force the price of gas up, the price of coal! Force solar and wind to be major forces in power generation! But until that day happens, environmental costs are irrelevant when discussing the microeconomics of solar versus traditional power. Traditional power wins every time when you're talking real, direct dollars.

If you don't know if this is the case, how can you say that you know that this systems are not cheaper?

This was true several years ago, but the cost of solar has come down substantially even without considering tax subsidies, and is continuing to decrease at a healthy rate.

For example, Sunroof estimates that a 5.75kWh system would cost $21,500 before subsidies (about $15k after, but we're ignoring that), and that it will save you (gross) $60,000 over 20 years in utility bill costs. You can either:

a) Invest that capital. At a stable 7%, after 20 years, your balance would be about $86.8k.

b) Purchase a solar system for that $21.5k, and invest the difference on your power bill each month. Assuming a base power bill of $200, and the 2.2% annual rate increase that Sunroof uses, you would invest $2400 the first year, $2452.80 the second year, etc. At the same 7% return, then in 20 years your investment balance would be $122.8k, and your power bills would continue to be $0. Remember, these numbers assume an unsubsidized system.

The gain comes from the fact that after the break-even point (at year 12), you are continuing to invest your power bill equivalent, rather than paying it to the power company, whereas in the non-solar case, the increased power bill will never earn you a return.

The downside is that it (with those numbers) takes 12 years for you to come out ahead, and solar tech is moving so fast that the opportunity cost of committing capital to solar today rather than investing it and then liquidating that investment tomorrow to pay for a cheaper and more efficient system may be substantial, but is arguably specifically unknowable. If you don't offset your full cost, the numbers change a bit, as well (but you can certainly compute what happens at a 50% offset for a smaller upfront capital investment easily enough, as well). There are certainly scenarios in which solar is viable unsubsidized today, though.

Feel free to check my math and assumptions: https://docs.google.com/spreadsheets/d/1JoJxX5t7VmRhV1LDI1UF...

I wish "who pays for the system" and "where the system is installed" are decoupled, via a market that lets investors finance the system and the installation and own the resulting energy, and house owners or other sites that merely provide a place to install the panels in return for $x worth of free energy every month. If you're a house owner, you'll bid on the X, or different energy companies could make you offers, and you'd pick one that you like. If you're an investor, you'd presumably choose the site that gives you the greatest ROI — the most sunlight, the highest grid prices, and the least rent to be paid to the house owner (x above).

This addresses your point about upgrading. You can install the newer system on another roof, without incurring cost of removing the older system, and generate power (and therefore income) from both panels at once. As long as the older system is generating more power than its annual maintenance cost, it doesn't make economic sense to dismantle it.

Decoupling also means that if you decide to invest in solar energy, you can have it installed in whichever part of the world (or at least your country) gives the greatest ROI: the most sunlight, and the highest electricity tariffs. Maybe you live in a rented house or an apartment where you can't install solar panels. Giving a higher return will encourage more people to invest in solar.

Other advantages of decoupling will be the ability to invest the amount you want, whether $1000 or $100K, rather than the price of one solar system, the ability to make additional investments if you have more money later on, and the ability to liquidate an investment any time you need the money, or in a financial emergency. People will also be able to dip their toes into this market with a small investment, and see how it performs, before making a larger investment.

What you're describing is what every solar company does right now. SolarCity doesn't sell you panels, they sell you 2 products. The first is electricity from panels they own on your roof. The other is a lease of panels they own on your roof that you get electricity from.

In essence SolarCity and everyone else bids for your roof and business through their pricing. (which currently undercuts utilities).

And SolarCity in return is creating solar bond products essentially, where the market can invest their capital in these roofs that SC is producing energy on, with the monthly bills as interest.

But it doesn't solve the issue the person you replied to highlighted, which is that it may or may not be financially advisable to 'hold out', and buy solar when the price has come down. After all, even if you don't buy and own the panels, the lease is still a 20 year contract. And there's no way SolarCity or any company would reduce those to short-term contracts because there are fixed costs that can't be recuperated in the short-term, meaning you need long-term contracts to get an ROI. (sending technicians to replace installations every few years wouldn't make financial sense).

So the end result right now is that yes, you could in a way (by investing in solar companies or their financial products) invest in other people's roofs, despite not dismantling panels on your roof, in say 5 years from now when new installations are financially better performing than your roof panels. But it doesn't magically make your investment in your own roof (or anyone's roof, 5 years ago, for that matter) disappear. The money is still locked up in that roof (whether you paid for it, or locked up money by signing a 20 year contract), and so merely decoupling everything doesn't solve that issue, and in many ways we're already decoupling to a large extent with the securitisation of roof installations.

I see. Thanks for educating me on how SolarCity, and solar companies in general, work. Your post makes a lost of sense, and it seems that we agree on many things.

As for money locked up in solar panels, that's no different from traditional investments. If a factory is built, a better factory may be built a few years down the line, rendering the first one an inefficient use of capital. That's an unsolvable problem (unless you have a crystal ball), and it doesn't deter people from making investments. What makes solar different?

What we really need to do this is the breakdown in cost between the hardware and the labor required to install and certify the panels. The hardware is likely to continue to fall rapidly, but the labor costs is likely to fall much more slowly (or at all). At some point even if the panels are free the labor required to install them means that the prices will reach a plateau.

https://www.db.com/cr/en/docs/cost-trajectory-s.png via https://www.db.com/cr/en/concrete-deutsche-bank-report-solar...

The common definition of "savings" is a reduction of cash outlay for the purchaser. The fact that there are government subsidies (or surcharges) involved is not relevant for that calculation.

The Google site is extremely thorough -- for the case where the consumer is buying the panels, they calculate the time to break even, but also a net present value given a 4% cost of capital. Same thing for the lease cases -- for an example I ran, the lease would cost $96 per month (fixed for the 20-year life of the lease), and offset $115 of a monthly $120 electrical bill at today's rates. So, it would generate cash savings for me from day one. Most solar leases in fact GUARANTEE that you will pay less for electricity after the install. So, "savings" should not be in quotes, it's a real savings for the lessee.

As for your argument that we might all be better off if we didn't have to pay higher taxes for the subsidy -- maybe, but my decision to install solar or not is going to have a negligible impact on my personal tax rate, so I should value any savings against a fixed tax rate that doesn't change as a function of my decision.

You are correct - the impact on your personal tax is negligible. Solar accounts for something well under 2% of total energy generation and residential rooftop far less. So almost all of your subsidy is paid by others. That doesn't make the over all analysis any more sound. What if we all had solar on our rooftop? Energy would cost more. The savings would be negative.

I don't accept your conclusion. If we all had solar on our roofs, there are many possible factors that could reduce power rates (including tax burden, by your definition):

-- fossil fuel prices would drop, since demand would fall -- we would spend less tax money on grants and subsidies for oil and gas marine terminals -- fewer emergency responses, disaster clean ups, etc. for fuel transportation mishaps -- maybe we could avoid or sit out the next land war in the Middle East ...

Additionally, even without a tax subsidy, installing solar on my roof in CA would generate a positive NPV over 20 years. Here in CA, it's just plain cheaper than the utilities, even without the (nice to have) tax subsidies.

I don't understand how people connect oil and gas imports to electricity generation. Go read this article http://www.washingtonpost.com/graphics/national/power-plants...

Now how much electricity is generated from oil in the US? A whopping 1%.

Now while it is true that we import a lot of natural gas... "Natural gas imports to the United States, 98% of which arrive via pipeline from Canada, have decreased almost every year since 2007, and in 2014 reached the lowest level (2,636 Bcf) since January 1995." According to http://www.eia.gov/naturalgas/importsexports/annual/.

So if you think putting solar on your roof, or wind, is going to make any OPEC countries upset please think again.

Absolutely true, but nuance is necessary.

For one, a major part of energy use today is non-electric because it makes more sense to use fossil directly, than to use fossil to generate electricity and use that. But once you have cheaper electricity than fossil, and cleaner, you can start to see these industries shift towards electric.

Not everything is susceptible to that, like say chewing gum made of oil partially will not go electric obviously. But transportation likely will, and heating could possible go renewable (not necessarily electric. e.g. geothermal, solar thermal etc).

And so the cleaner electricity is, the fewer barrels of oil one would need in some non/low electricity industries right now, transportation being the biggest.

Secondly, it's true that the majority of US oil isn't from the middle east, but that doesn't mean it doesn't matter to the US, that's a silly argument to make. What happens if the middle east produced 0 oil the next 100 years? You can't say 'who cares', obviously the world would go into a state of shock. Oil prices would skyrocket, production and consumption and worldwide trade would all drop sharply and recessions would break out. Which leads to unemployment, social welfare issues, friction, don't even get started on wars between countries, civil wars would be damaging enough.

The 1970s showed how brutal oil politics could be to the economy, and that was small-scale compared to the most far reaching scenario.

And beyond that, anyone who exports to the US, like Canada, would think twice, after all why not sell it to China who's willing to pay $500 a barrel, too?

Also, even if you don't import the energy yourself, that doesn't mean the US can't profit or doesn't profit when US companies are involved in the oil industry in the middle east, even if the region doesn't export the majority of its oil to the US.

And lastly, even if you don't import it yourself, you may want to control who has access to the oil, and in what currency it's sold. You wouldn't mind Germany selling Nuclear reactors to the Netherlands or vice versa, it's a different story for Iran. Just like you might want to have some control over oil reserves because your control means China doesn't have it, despite not being a top customer yourself.

As for the final point, the concept of petrodollars is real, and the fact oil trades are denominated in dollars, and the effect the standing as a reserve currency has on the US is significant.

The US doesn't have to be a customer of middle east oil to have a benefit in controlling it, that's naive and it's getting a bit tiring to see everyone act like you're a dumbass when you make this claim, always immediately pointing to charts of Saudi Arabian and Iraqi oil imports being so small compared to 'omg lol US production & Canadian imports, you're so dumb, bet you didn't know that'. Don't get me wrong not saying you do this but it's a common theme when discussing the issue.

And really just look at history. You don't have to be a conspiracy theorist to look at the middle east and conclude oil plays a role. When Iraq was getting decimated on forged evidence of WMD, guess who was developing WMD, admitted having WMD, and tested WMD, not just any kind but the nuclear kind? North Korea. Otherwise a beacon of democracy and human rights and quality of life. Comparing the eagerness and focus on invading this country and Iraq is telling.

I mean do you really think trillions of dollars were spent on an intelligence fluke? Or that the carter doctrine was some minor policy plan that has nothing to do with oil?

Besides it's not like this is a secret. People like Cheney openly talked about the importance of controlling oil reserves, how demand would outstrip supply in the coming decades, and talking about how 2/3rd of oil is in the middle east and that access is important. Which brings up the final obvious point, which is that the US isn't running energy policy because of today's needs, but the needs in 50 years from now, so pointing to today's import charts is not comprehensive enough an argument.

So hell yes, renewables have a substantial impact on all of that. They're not the entire story, but a substantial part of it.

"Additionally, even without a tax subsidy, installing solar on my roof in CA would generate a positive NPV over 20 years." I would like to see this analysis. I know that there are certain (mostly remote and very sunny) areas of the U.S. that have demonstrated unsubsidized market viability. But even then only with utility scale installations. I would think rooftop surpassing grid parity with conventional energy would be a pretty big milestone. Not doubting you, but I'd love to see it on paper.

Go pick an address in Silicon Valley (take for example 2 College Ave, Los Gatos). Set the monthly electric bill to $125. The calculator recommends a 4.25 kW installation, which has a 20 year NPV of $12,056, if you click into the detailed analysis and check the last line.

Subtract out the $5028 Federal tax benefit, and you are still left with a $7000 20-year NPV (assuming 4% cost of capital).

Still a positive ROI over and above inflation, even without a rebate.

I guess it depends on what you count as government support.

For example if you pay $50k for your installation, you could depreciate it within 5 years or so by 85%, which reduces your tax payments in total, at a 35% tax rate, by $15k.

That's $15k saved, whether you call that government support depends on whether you think that's 'normal business depreciation' or 'solar specific fiscal policy' I guess.

Same with RECs, they're government support in the sense the government sets requirements on companies to buy them, thus creating a market for solar producers to sell them. This isn't energy being sold, it's more like a carbon tax thingy. You could see that purely as a tax on non-renewables (which imo it is), or as government support to renewables (which it's technically structured as).

So the federal tax benefit, while large, is far from the only incentive.

OK, but as an individual homeowner, I can not take depreciation, nor can I sell REC's. I'm just buying solar panels and putting them on my roof ...

... And again, to compare apples to apples, you'd have to tease apart the tax benefits given to existing energy companies over the years to get a real accounting.

You're replying to a guy who talked about 'even utility solar'. So I'm just giving the story for utility solar.

And it's import to note that the biggest solar companies right now aren't residential, but utility, so we're not talking about some niche aspect of the industry here.

And even the biggest residential solar companies their main products are leases right now, meaning they do get to depreciate their installation costs and then either let you rent the panels or buy electricity from them.

So in the vast, vast majority of installed solar panels, depreciation plays a gigantic role.

As for SRECs, you could sell them actually, don't need to be a business to do so.

Actually by the standards of rates of change in the energy industry, we are going to all have solar panels powering our homes 'overnight' (see the rapid growth of solar forecast in slide 33 of the doc linked below). In many areas, due to rapid price declines and relatively low prevailing interest rates, solar is cost competitive without subsidy now so the ROI is real. As cumulative solar installations continue to grow, we will continue down the cost curve shown on slide 13 and that will be true for more and more people. Which means that subsidies today can actually lead to long term lower energy costs as prices continue to drop. On that topic, we should all be thanking Germany for being farsighted enough to invest in subsidies to keep the industry going for long enough to get us down to where we are on the cost curve today.

Bloomberg new energy finance talk slide deck: http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_2...

Well, look at the subsidies for the existing energy companies. Nuclear companies get the waste handling for free, if they break regulations, often the government pays the bill...

Coal companies never pay for the damages to the environment their huge quarries do...

Subsidies for solar are just one part of it.

If you take these subsidies that you give the energy companies, and add them as tax to the electricity price, you end up with electricity costs like in Germany – 0.40$ per kWh

If what you're saying is correct, if subsidies were removed across the board taxes would go down, energy costs would go up and solar would take off and replace coal because it would be the (real) best deal.

What do you think why German electricity companies are trying to sell their gas and coal business and focus on renewables as much as possible?

In Germany, the effect is even stronger: As we are taxed per kWh, the electricity is quite expensive. On the other hand, this money is then spent on subsidies for solar and wind. Overall making solar and wind so extremely cost effective that anything else becomes stupid.

And, at the same time, it leads to people saving really a lot of energy. A family of 4 using 3000kWh per year or less is common.

Even fairly conservative estimates of the negative externalities of coal do in fact indicate this for daytime loads.

Actually in many places solar is currently cheaper than the utility, without having to be a cheaper generation source.

For example a cost of 15c per kwh cost from solar is pretty trivial in many parts of the world nowadays. But here's the thing, for example in the Netherlands, I pay 7c per kwh for electricity, and then about 13c in energy specific tariffs, and then VAT on the whole lot. My final electricity price is about 3x (22c) the cost of the electricity itself. But for every kwh I generate myself and don't buy, I save 22c.

In other words, at a hypothetical cost of 15c per kwh, twice as much as electricity from my utility, I save almost half of my bill.

That situation differs radically between countries and even states, but again, savings on solar are a very typical story nowadays. I'd say most solar buyers today are saving money. 5-6 years ago that was different, when most people who bought were still buying with a moral position in mind and paid a slight premium.

Mostly, I don't think people realise how incredibly subsidised solar is. Per unit of energy generated, direct taxes/subsidies are much, much higher than oil. The other part of that story is that we have path dependency in oil and that the carter doctrine has cost trillions of dollars, and that externalities aren't priced in much for fossil. (e.g. cost of pollution, droughts etc).

For example, here's an interesting thought. For every $1m you buy in solar, you get about half a MW in capacity, which generates a little under 1 GWH per year (rounding it up very heavily here but you'll see it's mostly irrelevant). Now here's what that means. First of all, you can get a 30% tax credit, which you can sell. That's $300k recuperated. Then on a portion of the cost, 85% iirc, you can depreciate within 5 years or so. At a tax rate of 35%, that's a total of $300k in tax avoidance due to depreciation. So right off the bat in tax structuring, you've already gotten more than 50% off. Then, your almost 1 GWH per year generates solar credits, which you can sell, too, for about $100k per year. And yes you can presell these for 10 years into the future.

And then and only then, after you've paid $1m, received $600k in tax back from the government and sold solar credits for just the first 10 years for $1m (on a system with 20-40 years of lifetime at least), when you already made $600k accounting profit without generating a single electron, then you can start to actually sell the energy to an offtaker (like an Amazon warehouse) for about 10c per kwh, making you a little under $100k a year.

So you invest $1m, you get $1m, you get $600k in tax benefits and annual income of a little under $100k. Sounds insane? Well it sort of is. It depends on the state, some states are crap (low cost of electricity, low price of solar credit market, little offtaker demand, few solar resources (sun), difficult regulations etc etc), some are great.

And beyond that, solar is simply becoming cheaper really fast. For example, SolarFirst just signed a contract for a 100 MW solar project at a kwh price of 3.8c. Pretty insane.

Anyway in short the notion that solar savings are disingenuous is completely false. In fact virtually all of the big solar companies offer leases right now, where you pay nothing upfront, you don't own the panels, but you lease them on your roof and pay an electricity bill that's lower in the vast majority of cases than your utility. That's their main selling point.

Their vendors also don't include the roofing type. For example, I have a flat tar roof and many vendors, such as Sungevity, won't install on it. Local vendors will, but are not on the list, and require I install a new roof first. There goes the $24k in savings for buying outright!

Would that be a sunk cost, or would a new roof increase the value of your home?

Which installer did you choose, and would you recommend them?

I used Luminalt [1] and they did a great job throughout the whole process. The installation job was at the highest degree of quality and professionalism that I've experienced.

Though it hasn't been inspected or turned on yet (happens later this week), so I'll see how close their projections were to reality over the coming months as the juice is generated. I did my own projections independently and found that their projections seemed to be on the conservative side, so I'm optimistic.

1: http://www.yelp.com/biz/luminalt-solar-energy-solutions-san-...

Did you choose to lease, loan or buy? Would be interested in knowing the factors driving your decision.