Creating Individual Incentives for Green Energy

Should States emphasize photovoltaics or solar hot water heating systems when implementing subsidies for solar energy? We will use California as our test case.

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.

U.S. Department of Energy's Photovoltaics Program

Flat-plate collector, Pomona Valley, CA, 1911 Source: Perlin, 2005.

Solar heat collection: Flat plate collector Heating water: Direct Circulation System

0.2 MW of Photovoltaic Modules and 8,500 Solar Hot Water Heaters sold for domestic use every year

Energy Act of % of system cost, up to $2000 Same for Solar Hot Water Heating and Photovoltaic systems Expires December 31, 2008 Solar America Initiative

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.

YearFirst year Average annual home water heating electricity usage (kWh)2,537 Average annual home water heating natural gas usage (kcf)18 Cost of electricity based water heating ($)317 Cost of natural gas based water heating ($)180 Units installed1 Performance (%)70% CO2 emission from electricity (ton)0.70 CO2 emission from natural gas (ton)1.13 Total Social cost of electricity CO2 emission18 Total Social cost of natural gas CO2 emission28 Per unit cost ($)3,000 Operations and Maintenance117 Benefits Reduction in electricity bill ($) 222 Reduction in natural gas bill ($) 126 Reduction in social cost of electricity carbon emissions ($) 18 Reduction in social cost of natural gas emissions ($) 28 TOTAL BENEFITS ($) 366 Costs Total cost per unit per household ($)3,000 Total annual operating cost117 TOTAL COSTS ($) 3,117 NET BENEFIT first year ($)-2,751 Net Benefit year after ($)249 Total net value over 20 years (undiscounted) ($)2,472 Discount rate7% TOTAL NET PRESENT VALUE over 20 years ($) -56

YearFirst Year Average annual home usage (kWh)7,080 Average annual home electricity bill ($)1,015 Units installed1 Performance (kWh/ peak W)9 Electricity bill ($)886 CO2 emission from electricity (ton)1.96 Total Social cost of electricity CO2 emission49 Per unit cost ($)35,400 Operations and Maintenance0 Benefits Reduction in electricity bill ($) 886 Reduction in social cost of electricity carbon emissions ($) 49 TOTAL BENEFITS 935 Costs Total cost per unit per household35,400 Total annual operating cost0 TOTAL COSTS 35,400 NET BENEFIT-34,465 Total net value over life time (undiscounted)-12,527 Discount rate7% TOTAL NET PRESENT VALUE ($) -23,414

Current Federal and State incentives completely cover the individuals 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