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RE: [hreg] Cost of Solar

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  • Robert Johnston
    I feel like you and Tyra aren t listening to the core of my message! This all started because I offered an adjustment to Chris cost analysis of PV that takes
    Message 1 of 23 , Aug 5, 2009
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      I feel like you and Tyra aren’t listening to the core of my message!  This all started because I offered an adjustment to Chris’ cost analysis of PV that takes into account cost of capital, which was neglected in Chris’ calculations.  I said—REPEATEDLY!—that the comparison was with other renewable resources such as wind power!  So your rant is misdirected, I feel.  But whatever…  Let me tackle just a few of your points:

       

      ·         We defeated ourselves by pricing ourselves out of the manufacturing business through excessive labor and energy costs, not by being too focused on “economical”.  The rest of the world made things cheaper.  It is all economics.  Honest.  (Ask Walmart). 

      ·         Renewables creates jobs, but not enough to replace jobs lost by being “uneconomic”.  If you can buy electricity for $0.25/kwh and your competitor is buying it for $0.10/kwh, you’ll lose.  Consumers will buy your competitors’ equivalent quality but cheaper article.  China is building coal power plants at a prodigious rate while we argue cap-n-trade.  Do you seriously think that this will make our manufacturing more competitive than China’s?  Quite the opposite.  It won’t be long and they’ll be using that coal-powered electricity to manufacture PV panels to sell to us because our manufacturing costs, taxes and regulations are too high to build our own.  And our government will borrow money (from the Chinese) to enable us to buy more of the things to support our reduction in CO2 emissions.  Somehow out of the sequence of borrowing and buying from the Chinese we’ll become more economically successful?  I doubt it!

      ·         Relying on “lowest cost” oil was better for our economy than if we had tried to rely on something much more expensive.  Again, we are competing with manufacturers in countries creating low cost power plants.  We were successful in the past because we had cheap energy sources ourselves, but no longer.  If we unilaterally raise our energy costs while our competitors do not, we lose.  And don’t think that Americans won’t line up at Walmart and Home Depot to buy the cheapest products!

      ·         Electric vehicles are not ready for prime time.  Another pile of money down a black hole when we artificially mandate their use.  Let’s get the technology lined up, and then we can go mass market with them.  It’s coming, just not here yet.

      ·         The economic models are not the problem.  I see no evidence that socialism or communism or other political-economic systems have produced better solutions than democratic-capitalism.

       

      There, I can rant too!  ;-)

       

      Now, more seriously:  I think we all share the desire for a higher use of renewable energy.  The game is to buy as much as possible for the least amount of money, keeping a balance between short-term (have to be competitive now to survive) and long-term.  People of good will can argue in good faith about what the appropriate mix of short and long-term investments should be.  From a national energy policy perspective, PV is longer term than wind power.  So there is a case to be made for favoring the latter for installations while continuing investment in R&D/development of the former.  If you go overboard on the R&D side, you’ll fail to survive short-term and then not realize the benefits of the long-term R&D.  If you go overboard on the short-term, you’ll survive now but be less competitive later.  However, even this is an oversimplification.  In today’s world, with the ease of capital migration between nations, and the speed of technology transfer, we benefit from what other nations learn and vice versa.  So I think you have to overweight the short-term capability and trust that in the long-term we’ll all gain according to how attractive our nation is as a place to invest money.  If we don’t solve our huge government spending problems, the U.S. will not be an attractive place to invest.

       

      Energy policy is certainly not my expertise (neither is financial analysis, for that matter!).  I found an interesting article on renewable energy policy in Germany and other EU countries vs. US.  http://www.boell.org/docs/Rickerson_Grace_FINAL.pdf   Note the debate between feed-in tariffs in Germany and many EU countries vs. the RPS policies (specifying a % of energy output to be from renewable) as practiced in Texas and several other states as well as some other EU countries.  One argument is that the German approach (feed-in tariffs) reduces competition between RE technologies and thus is not as effective as RPS at driving down the cost of renewables (p. 9).  The report argues that in fact feed-in tariffs have resulted in lower payouts to wind operators (lower windfall profits) and that it is better at fostering longer term developmental technologies like PV.  This particular report favors the feed-in tariff approach.  Obviously, the particular mix of technologies is up to governments to decide when they mandate subsidies via either approach, but the feed-in approach is more directive towards particular technologies.  For all the focus on PV that you cite, you can see that Germany is actually much more focused on wind for short-term installations.  I was recently in Europe and saw lots of wind power projects while driving through Germany and Denmark.  So, they are not putting all their eggs in one basket, and neither should we, but the debate as to exactly how much to incentivize each particular technology is obviously one in which serious experts on disagree, and this report does a nice job of highlighting the various arguments and counter-arguments. 

       

      I think there is a place for PV in the mix, but I don’t think it makes sense to put $0.25/kwh into PV if you could put $0.05-0.10/kwh into wind power.  For the same money, you could get 2x reduction in fossil fuels!  There is not an unlimited supply of money, folks!  Germany has high unemployment—is that what we want, just so we can support somebody’s idea of the “best” way to run our economy/energy policy?  Germany is in a very different situation than the U.S.  They are dependent on natural gas from a very unreliable source—Russia.  Maybe for them they feel it is their national interest to put PV on rooftops even though they get relatively little solar radiance.  They also have significantly higher retail electric rates than we do (the report indicates around $0.26/kwh for the EU).  Thus, the economics of PV vs. conventional may be more attractive there than here.

       

      Anyway, if you’ve stayed with me this long, PLEASE:  ignore the rants (mine and others) and understand than the only point I REALLY am trying to make is simply that home-based PV is still 2x the cost of grid-based renewable energy at the retail electric level, if you take into account cost of capital (and some insurance adjustment).  That’s all.

       

      Robert

       

      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Kevin Conlin
      Sent: Wednesday, August 05, 2009 1:41 PM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

       

      I have to agree with Tyra.

       

      In my career I have watched as the US went from THE world leader is solar to our status now as an also ran.

       

      All too often we defeated ourselves with the well known refrain "it's not economical", or "it will cost jobs" while the rest of the world boldly moved forward, with a clear long term vision and goals.

       

      As a result they are now enjoying the benefits she mentions, and we are playing catch-up, while special interests are still making those self defeating arguments.

       

      Turns out renewables didn't cost jobs, it created them.

       

      Turns out relying on "lowest cost" foreign oil wasn't good for our economy, and is contributing to a national debt that is out of control. I won't go into the military aspects....

       

      Turns out those "not economical" electric vehicles may be a good idea after all, especially when you look at the big picture of lost jobs in the auto industry and a more resilient grid.

       

      Nissan just announced a pure electric vehicle, and they sure didn't seem to be hesitant or afraid to do so.

       

      Even NJ is establishing itself as the #2 state for solar, while Texas, with the greatest potential for renewables, is dithering.

       

      As Albert Einstein once said " You can't solve a problem with the same mindset that created it".

       

      It's time for us to abandon the economic models that got us in this fix in the first place.

       

       

      My apologies for not keeping my word about not posting on this topic again......couldn't resist.

       

       

       

      Kevin Conlin

      Heliosolar Design, Inc.

      13534 Quetzal Lane

      Houston, TX 77083

      C:  (281) 202-9629

      H:  (281) 530-7501

      F:  (281) 530-7501

      kevin@...

       

       

       

       


      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Tyra Rankin
      Sent: Wednesday, August 05, 2009 12:54 PM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

      Robert:

      Your theories would be nice – if we wanted to add solar tech to the mix in the year 2050 perhaps.  But in countries like Germany, Spain, Italy, Japan, Turkey – solar is and has been playing a huge role in reducing dependence on fossil fuels for the last 15 years!  Texas is way behind the market curve, dead last in the US in solar production.  So if Texas does not intend to play a role in the market – that is fine – the loss belongs to Texas and its citizens.

      Tyra


      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Robert Johnston
      Sent: Wednesday, August 05, 2009 11:13 AM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

      I don’t think research and progress will stop—the prize is too great!—but prematurely force-feeding the market with technology that isn’t economical isn’t a viable long term business model.  To answer your question, the way I’d get PV to market is to continue funding R&D (as part of a diversified national energy R&D program) until the projected cost of the technology is less than the cost of competitive technologies.  At that point, if I need to jumpstart the market to get economies of scale (i.e., if off-the-grid applications and other higher value PV applications aren’t sufficient to build the required critical volume), I’d consider consumer subsidies if I felt it was in the nation’s strategic interest to do so.  (I’m assuming that I would have first removed counterproductive subsidies to competing industries/technologies, else I’d be shooting myself in the foot!).  Subsidies before the technology is cost-competitive are expensive and may hinder the development of some other technology that perhaps better deserves to be the leading technology, whether that be wind, safe-nuclear, solar tower, or whatever.

      I’m sure most of you are glad I don’t make national energy policy!  ;-)     

      Robert

      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Tyra Rankin
      Sent: Tuesday, August 04, 2009 11:24 PM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

      Robert:

      So how will you get solar technology – not just PV to the market to get those price reductions?  Where will those “off the grid” applications come from and how will they be adopted? 

      Interestingly, some of the “on the grid” applications are cheapest at the moment.

      Tyra


      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Robert Johnston
      Sent: Tuesday, August 04, 2009 10:58 PM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

      Tyra, the performance of your portfolio or mine is irrelevant to the point I made about investing instead of buying PV.  If a person invests in stocks with a 1-2 year outlook, they are violating general principles of stock investing.  The stock market is not the place for those with a 1-2 year outlook.  On the other hand, those with a 25 year outlook generally do very well, with approximately a 7% after inflation return being the trend over long periods during the past century.

      I’m not arguing that wind is free of subsidies; it has them just as PV does (and oil, etc., as well).  My point is that people should take a hard look at grid-based sources vs. PV if they are looking for the best return financially (while still supporting renewable energy sources if they wish).  I’m all for bringing the cost of PV down, but I think the reduction in cost should not be artificial but should be based on true technology breakthroughs that drive the actual (vs. subsidized) cost into the competitive range.  Until that happens, is it better to spend millions on subsidizing purchases of noncompetitive systems, or is it better to spend the millions on R&D or on other non-PV but more cost competitive technologies (possibly even safe-nuclear)?  I think that solar will always have a place, and if it would be allowed to develop in off-the-grid type applications where it makes economic sense, instead of heavily subsidized, we’d find that in due time the technological breakthroughs would happen and support a larger scale implementation of PV without artificial pricing and heavy government involvement.

      Robert

      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Tyra Rankin
      Sent: Tuesday, August 04, 2009 12:39 PM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

      Robert:

      I don’t know about you, but my diversified stock mutual funds are worth 50% less than they were a year ago – their 5 year average is a minus.

      We fall into a thinking trap when we set up calculations that refer to solar technology as a having a “price premium” over wind.  There are tons of assumptions and unacknowledged incentives behind the model offered.  It is fair to say that today most solar technologies cost more than wind.  Solar is a different and more emergent technology.   Just like heart surgery is different than knee surgery.  Would we say that we are going to charge a “price premium” for heart surgery over knee surgery and will only perform heart surgery when it can compete with knees?

      Here is a list of the (incorrect) assumptions:

      1. Wind is enough – we don’t need to add solar
      2. Texas selected wind on the basis of price competiveness alone and therefore wind is the best choice
      3. If solar could compete in the market it would be readily and widely adopted
      4. If people wanted solar they would choose it

      Texas uses wind to supply electricity solely because of a combination of 2 incentives, State and Federal – Federally, the Production Tax Credit and at the state level, the Renewable Portfolio Standard (RPS) passed in Texas in 1999.  Texas would have NO wind product today without these two policies and a smart use of short and long term utility contracts.  It might surprise some to know that the RPS is a trading system – Renewable Energy Credits (RECs) are issued for qualifying generation and are traded.  Ex-Enron folks in Texas have been quietly busy for years trading wind RECs.  Together, they are why Texas added wind to the grid.

      The RPS policy does not work for solar.  Texas will not adopt solar on the grand scale needed until it gets the right policy.  Solar technology prices have proven to decrease more quickly than other technologies at scale.  But they don’t get to market and to production scale without policy engineering.

      Best to all,

      Tyra


      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Robert Johnston
      Sent: Monday, August 03, 2009 9:13 PM
      To: hreg@yahoogroups.com
      Subject: RE: [hreg] Cost of Solar

       

      Chris, you outline precisely the correct approach, in my view (assuming we are being hard-nosed financial analysts and discounting any intangible benefits that others find worth the price premium for PV—and by that I mean premium over wind power via the grid, which still accomplishes the desired benefits/intangibles associated with lower CO2 emissions, oil imports, etc.).  But where we differ is in the assumptions.  I do not consider myself an expert on energy policy or analysis of evolving trends in electrical generating capacity and utilization in the US.  I do consider the DOE to be in a good position to make such assessments (though, of course, NOBODY knows the future with precision!).  Therefore, rather than try to do my own extrapolation into the future, I prefer to use their forecast of 0.6% increase per year (after adjusting for inflation) for residential electricity costs through 2030.  As for investment, I would never choose to invest 25 year money in a savings account!  I would put it into a diversified stock mutual fund, which historically returns 7% after adjustment for inflation (with dividends reinvested).  With these assumptions, it is obviously more sensible to get power from the grid and invest the saved capital.  You could buy a lot of intangibles with the savings, btw!  (Probably not an after-life, Kevin, but maybe a vacation in an Italian monastery to bolster your belief in one!  <ggg>).

      The argument over incentives is not one I was making, though others commented on it.  I agree that both are subsidized, and I wish neither were.  But that is a separate argument and not one I care to pursue, as political philosophies vary and can be debated whereas I believe the financial analysis is not subject to debate; there is a correct way to do it and that is one that factors in cost of capital.  I just shudder to think of the debt we are piling on our kids!

      Robert

      From: hreg@yahoogroups.com [mailto:hreg@yahoogroups.com] On Behalf Of Chris Boyer
      Sent: Monday, August 03, 2009 8:26 PM
      To: hreg@yahoogroups.com
      Subject: [hreg] Cost of Solar

       

      Robert,

      If you really want to get into a financial study, then do a comparison of how much present day money you would need to invest to 1) buy a PV system that would provide you with electricity for 25 years and 2) set up a fund that would pay your electric bill for the next 25 years.  We have to assume, based on history and what the utilities are saying, that electric costs are going to go up by between 5 and 10% per year on average.  A secure fund will probably not give a return of that value.  I did the calculation and found that a 10 kW system now will cost $38,500 to install, and yet, it would require a utility fund of $78,618 to pay the utility bills (assumed 7% electric rate escalation and 3% interest on the fund).  Viewed this way, solar electricity is half the cost of utility electricity.

      Should solar be given incentives?  All energy is given incentives: oil, gas, coal, & nuclear enjoy very generous incentives worth nearly a trillion $ per year (http://www.iags.org/costofoil.html, http://climateprogress.org/2009/01/05/study-cost-risks-new-nuclear-power-plants/).  Energy is the food of an economy (if money is the blood).  Also, solar has the promise of becoming more economical with scale.  Already, in the last few years the cost has come down 25%.  Other energy sources only have the promise of becoming more expensive. 

      Regards,

      Chris

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    • phil6142@aol.com
      Robert, Last bit of your post:  Anyway, if you’ve stayed with me this long, PLEASE:  ignore the rants (mine and others) and understand than the only point
      Message 2 of 23 , Aug 6, 2009
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        Robert,

        Last bit of your post: 

        Anyway, if you’ve stayed with me this long, PLEASE:  ignore the rants (mine and others) and understand than the only point I REALLY am trying to make is simply that home-based PV is still 2x the cost of grid-based renewable energy at the retail electric level, if you take into account cost of capital (and some insurance adjustment).  That’s all.
         
        Robert


        While I find the discussion of national energy polotics interesting, it is not my focus at the moment so I would like to discuss a little further the implications to an individual for home-based PV.  (Since at the moment I have little control over the national polotics but I have complete control over where I spend my money.)   The discount rate of ~5% that you used to determine the cost of the capital is the primary thing driving the cost of installed PV to $0.25/kWh.  I think the value that an individual (and it is unique individual making purchases for residential solar PV) should use for this should reflect what that individual realisticly believes they can get as a return on their money.  If you are going to get a loan for the panels I guess that it would be most reasonable to use the interest rate on the loan amount. You believe that you can make >5% return in the stock market so that is the value that you should use for the cost of capital if you have the money to spend.  I recently read however that the average casual investor seldom does much better than the rate of inflation (granted this study was put out by an investment company who wanted you to pay them for thier services), but at any rate I don't have the expertise or interest to study various companies and mutual funds to feel sure that I could do as well as you in the stock market therefore for my capital I think that value is too high.  The rate that I can get on long term CD's right now is ~1 to 1.5% I feel pretty sure about that investment so perhaps for my individual spending dollars a discount rate of 1.25% would be more appropriate.  If I were a person who distrusted banks and I was going to keep my $40,000 stuffed under my mattress then perhaps the discount rate should be 0%. 

        I also don't intend to purchase insurance on the panels if I decide to purchase them at all.  Instead I will do my best to protect them and live with the risk my self rather than paying the insurance company to cover the risk for me.

        I believe that we the assumptions most relevant to me and my capital (that is no insurance and capital discount rate of 1.25%) that the cost of the PV installation is around $0 .15 to 0.16/kWh.  I currently pay ~$0.14/kWh for grid electricity.  So then I need to decide if the intangibles mentioned here are worth to me an extra penny or two per kiloWatt. 

        I think that with the cost of capital being such a strong driver for the cost of residential PV it is very important to get a realistic picture of the cost of capital for the individual investing and not just look at averages.  Because just because you (or even if the average person) can get 5+% in the stock market it doesn't mean that I can perhaps I am a bad investor so that in my hands capital in the stock market is not worth so much.  I am not saying that 5+% is unreasonable for you, or that this number is necessarily too high, my company for instance uses a discount factor of 15% when evaluating capital investiments so they would say that 5% is way too low.  Just that to get a realistic picture of how much home-based PV will cost at your home it is essential to get a realistic value for what YOU can make on the capital rather than just looking at averages. 

        Phillip (not the same Philip with the batteries though I hate batteries)
      • jay.ring@ymail.com
        I think your interest rate is a little low. A 25 year treasury is yielding about 4.5%, 5-year FDIC insured CDs are about 3%. If you have a mortgage, you use
        Message 3 of 23 , Aug 7, 2009
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          I think your interest rate is a little low.

          A 25 year treasury is yielding about 4.5%, 5-year FDIC insured CDs are about 3%.

          If you have a mortgage, you use that interest rate, since any money spent on PV will be money you didn't use to pay it off sooner. Since you can refinance to 5%, anyone who hasn't paid off their house is effectively borrowing the money at 5%.




          --- In hreg@yahoogroups.com, phil6142@... wrote:
          >
          >
          > Robert,
          >
          > Last bit of your post: 
          >
          > Anyway, if you’ve stayed with me this long, PLEASE:  ignore the rants (mine and others) and understand than the only point I REALLY am trying to make is simply that home-based PV is still 2x the cost of grid-based renewable energy at the retail electric level, if you take into account cost of capital (and some insurance adjustment).  That’s all.
          >
          >  
          >
          > Robert
          >
          >
          > While I find the discussion of national energy polotics interesting, it is not my focus at the moment so I would like to discuss a little further the implications to an individual for home-based PV.  (Since at the moment I have little control over the national polotics but I have complete control over where I spend my money.)   The discount rate of ~5% that you used to determine the cost of the capital is the primary thing driving the cost of installed PV to $0.25/kWh.  I think the value that an individual (and it is unique individual making purchases for residential solar PV) should use for this should reflect what that individual realisticly believes they can get as a return on their money.  If you are going to get a loan for the panels I guess that it would be most reasonable to use the interest rate on the loan amount. You believe that you can make >5% return in the stock market so that is the value that you should use for the cost of capital if you have the money to spend.  I recently read however that the average casual
          > investor seldom does much better than the rate of inflation (granted this study was put out by an investment company who wanted you to pay them for thier services), but at any rate I don't have the expertise or interest to study various companies and mutual funds to feel sure that I could do as well as you in the stock market therefore for my capital I think that value is too high.  The rate that I can get on long term CD's right now is ~1 to 1.5% I feel pretty sure about that investment so perhaps for my individual spending dollars a discount rate of 1.25% would be more appropriate.  If I were a person who distrusted banks and I was going to keep my $40,000 stuffed under my mattress then perhaps the discount rate should be 0%. 
          >
          > I also don't intend to purchase insurance on the panels if I decide to purchase them at all.  Instead I will do my best to protect them and live with the risk my self rather than paying the insurance company to cover the risk for me.
          >
          > I believe that we the assumptions most relevant to me and my capital (that is no insurance and capital discount rate of 1.25%) that the cost of the PV installation is around $0.15 to 0.16/kWh.  I currently pay ~$0.14/kWh for grid electricity.  So then I need to decide if the intangibles mentioned here are worth to me an extra penny or two per kiloWatt. 
          >
          > I think that with the cost of capital being such a strong driver for the cost of residential PV it is very important=2
          > 0to get a realistic picture of the cost of capital for the individual investing and not just look at averages.  Because just because you (or even if the average person) can get 5+% in the stock market it doesn't mean that I can perhaps I am a bad investor so that in my hands capital in the stock market is not worth so much.  I am not saying that 5+% is unreasonable for you, or that this number is necessarily too high, my company for instance uses a discount factor of 15% when evaluating capital investiments so they would say that 5% is way too low.  Just that to get a realistic picture of how much home-based PV will cost at your home it is essential to get a realistic value for what YOU can make on the capital rather than just looking at averages. 
          >
          > Phillip (not the same Philip with the batteries though I hate batteries)
          >
        • Al Source
          Please let me know if any one of you had taken John Peyton s Solar installation course and how you rank it with other courses.   Thanks,   Ali  Please let
          Message 4 of 23 , Aug 7, 2009
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            Please let me know if any one of you had taken John Peyton's Solar installation course and how you rank it with other courses.

             

            Thanks,

             

            Ali 


          • phil6142@aol.com
            I only checked with one Bank on the CD so the number I got could have been too low.  But you make a good point on the mortgage and that is more than the CD
            Message 5 of 23 , Aug 7, 2009
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              I only checked with one Bank on the CD so the number I got could have been too low.  But you make a good point on the mortgage and that is more than the CD anyway.  We still get a goverment subsidy to pay mortgage interest at the moment since money paid for mortgage interest is untaxed income but at any rate that is a discount rate up around 4+% that you can be pretty sure of if you have mortgage. 

              Thanks,

              Phillip

              -----Original Message-----
              From: jay.ring@... <txses@...>
              To: hreg@yahoogroups.com
              Sent: Fri, Aug 7, 2009 8:29 am
              Subject: [hreg] Re: Cost of Solar

               
              I think your interest rate is a little low.

              A 25 year treasury is yielding about 4.5%, 5-year FDIC insured CDs are about 3%.

              If you have a mortgage, you use that interest rate, since any money spent on PV will be money you didn't use to pay it off sooner. Since you can refinance to 5%, anyone who hasn't paid off their house is effectively borrowing the money at 5%.

              --- In hreg@yahoogroups. com, phil6142@... wrote:
              >
              >
              > Robert,
              >
              > Last bit of your post: 
              >
              > Anyway, if you’ve stayed with me this long, PLEASE:  ignore the rants (mine and others) and understand than the only point I REALLY am trying to make is simply that home-based PV is still 2x the cost of grid-based renewable energy at the retail electric level, if you take into account cost of capital (and some insurance adjustment).  That’s all.
              >
              >  
              >
              > Robert
              >
              >
              > While I find the discussion of national energy polotics interesting, it is not my focus at the moment so I would like to discuss a little further the implications to an individual for home-based PV.  (Since at the moment I have little control over the national polotics but I have complete control over where I spend my money.)   The discount rate of ~5% that you used to determine the cost of the capital is the primary thing driving the cost of installed PV to $0.25/kWh.  I think the value that an individual (and it is unique individual making purchases for residential solar PV) should use for this should reflect what that individual realisticly believes they can get as a return on their money.  If you are going to get a loan for the panels I guess that it would be most reasonable to use the interest rate on the loan amount. You believe that you can make >5% return in the stock market so that is the value that you should use for the cost of capital if you have the money to spend.  I recently read however that the average casual
              > investor seldom does much better than the rate of inflation (granted this study was put out by an investment company who wanted you to pay them for thier services), but at any rate I don't have the expertise or interest to study various companies and mutual funds to feel sure that I could do as well as you in the stock market therefore for my capital I think that value is too high.  The rate that I can get on long term CD's right now is ~1 to 1.5% I feel pretty sure about that investment so perhaps for my individual spending dollars a discount rate of 1.25% would be more appropriate.  If I were a person who distrusted banks and I was going to keep my $40,000 stuffed under my mattress then perhaps the discount rate should be 0%. 
              >
              > I also don't intend to purchase insurance on the panels if I decide to purchase them at all.  Instead I will do my best to protect them and live with the risk my self rather than paying the insurance company to cover the risk for me.
              >
              > I believe that we the assumptions most relevant to me and my capital (that is no insurance and capital discount rate of 1.25%) that the cost of the PV installation is around $0.15 to 0.16/kWh.  I currently pay ~$0.14/kWh for grid electricity.  So then I need to decide if the intangibles mentioned here are worth to me an extra penny or two per kiloWatt. 
              >
              > I think that with the cost of capital being such a strong driver for the cost of residential PV it is very important=2
              > 0to get a realistic picture of the cost of capital for the individual investing and not just look at averages.  Because just because you (or even if the average person) can get 5+% in the stock market it doesn't mean that I can perhaps I am a bad investor so that in my hands capital in the stock market is not worth so much.  I am not saying that 5+% is unreasonable for you, or that this number is necessarily too high, my company for instance uses a discount factor of 15% when evaluating capital investiments so they would say that 5% is way too low.  Just that to get a realistic picture of how much home-based PV will cost at your home it is essential to get a realistic value for what YOU can make on the capital rather than just looking at averages. 
              >
              > Phillip (not the same Philip with the batteries though I hate batteries)
              >

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