Customer-Sited Photovoltaics
Focusing on Markets that Really Shine

 

A Study Highlighting The Best Markets In The
United States For Grid-Connected Photovoltaic Systems

 

Note: This document has been modified from its original (print) format.

 

PV Now!

 

Photovoltaics are cost-effective at today's prices of about $6 to $7 per watt.

Today, yes, today cost-effective markets exist for customer-sited photovoltaics (CSPV) that is, grid-connected PV applications located at residential and commercial customer sites.

You don't need to wait for the future to find markets for customer-sited photovoltaics that are cost effective. Such markets exist now, and we have identified many others that have near-term promise. Exploiting these economic markets will hasten the commercialization of PV power that is connected to the utility grid.

CSPV systems have many unique attributes and offer incentives to utility customers, who are the end users of electricity.

These attributes and incentives include:

 

The best niche markets are the locations that have the best combinations of these attributes and incentives.

 

Targeting the Markets

Following a two-step approach, we have identified target CSPV markets in the United States.

 

Step One: On a state-by-state basis, identify attributes such as PV electricity production, utility electric rates, and solar tax incentives. See our table of attributes for detailed information.

 

Step Two: On a state-by-state basis, conduct a financial cash-flow analysis based on data from Step One for a base-case CSPV application. This analysis determines the break-even PV system price, the price at which the net present value of cash flows goes to zero. The higher this price, the more economic the location is right now.

We defined the base case as a new residential development that incorporates 1-kilowatt rooftop PVsystems. Our assumptions are that the PV system is included in the homeowners mortgage (a 30-year, 90%-debt loan with a fixed interest rate of 8%).

 

And the Winners Are...

 

We ranked the states by break-even PV system price and identified three market tiers. Thebest markets are in the southwest and northeast, with the top 5 CSPV niche markets being Hawaii, California, Arizona, New York, and Massachusetts. Their break-even PV price was between $4.30 per watt and $7.50 per watt.

A 4% low-interest loan would boost this range by 40%to $6.20/W-$10.30/W. In either case, PV is cost-effective at todays prices of about $6-$7 per watt.

Utility rates and PV capacity factor are a good first-order screen for targeting markets. An added incentive, such as a tax credit, can catapult a market contender. As an example, compare North and South Carolina. Each state has almost identical utility rates and PV capacity factor, but North Carolina's solar tax credit moves its market ranking to 6, while South Carolina ranks 26.

 

 

 

Hawaii Ready for the PV Marketplace

Lets look at the proposed benefits to a homeowner who finances a$7500 ($7.50 per watt) PV system on the big island of Hawaii. The residential electric rates here are about 17 cents per kilowatt-hour. The chart below shows the year-by-year cash flow; --both positive and negative--together with the net cumulative cash flow. The customer has no out-of-pocket costs from the very first year forward--; that is, the net cash flow is immediately positive. This situation is a very compelling case for marketing PV systems in Hawaii.

 

And as the table below shows, the Big Island is not the only place where PV systems make sense. The listed electricity rates and break-even PV prices especially highlight Kauai as a prime candidate for marketing PV systems.

 

PV economics for residents inHawaii

Island

Electricity Rate
(¢/kWh)

Break-Even
PV Price ($/W)

Kauai

20.0

$9.70

Hawaii-
Big Island

17.0

$8.40

Maui

13.8

$7.00

Oahu

12.3

$6.40

 

 

 

Guiding U.S. Commercialization

Grid-connected PV applications are cost-effective today, especially in Hawaii. And our analytic approach has highlighted the best markets for grid-connected PV systems across the United States.

 

 

 

State-by-state attributes and incentives for grid-connected PV

 

Market
Ranking

Res.
Rate
(H/M/L)

Capacity
Factor
(H/M/L)

Res.
Tax
Incentive

Com.
Tax
Incentive

Net
Metering

Res.
Rate
(¢/kWh)

Com.
Rate
(¢/kWh)

Capacity
Factor
(%)

Com.
ELCC
(%)

Alabama

31

M

M

 

 

 

8.2

6.9

18.1

61

Alaska

45

H

L

 

 

 

10.1

8.5

11.4

N/A

Arizona

3

M

H

I

 

Yes

9.6

8.6

22.8

65

Arkansas

13

H

M

 

 

 

11.0

7.1

18.1

76

California

2

H

H

 

 

Yes

13.1

10.3

20.9

64

Colorado

22

L

H

 

 

 

7.6

5.8

21.9

51

Connecticut

7

H

M

 

 

Yes

12.5

9.9

17.1

46

Delaware

20

H

M

 

 

 

10.1

7.0

17.1

57

Florida

28

M

M

 

 

 

8.5

6.6

18.1

48

Georgia

35

L

M

 

 

 

7.9

7.5

17.8

68

Hawaii

1

H

H

2a

2b

Pending

15.2

12.0

22.5

50

Idaho

37

L

H

3

 

Yes

5.3

4.3

20.0

32

Illinois

17

H

M

 

 

 

10.3

8.1

17.5

68

Indiana

36

M

L

 

 

 

8.5

6.0

16.2

57

Iowa

42

L

M

 

 

Yes

6.9

6.4

17.5

69

Kansas

21

M

H

 

 

 

8.5

6.7

20.0

78

Kentucky

49

L

L

 

 

 

6.1

5.3

16.2

41

Louisiana

38

L

M

 

 

 

7.2

7.2

18.5

71

Maine

16

H

L

 

 

Yes

12.2

9.3

15.2

24

Maryland

23

M

M

 

 

 

9.6

7.1

17.1

54

Massachusetts

5

H

M

4a

4b

Yes

12.6

9.3

17.3

49

Michigan

41

M

L

 

 

 

8.5

8.3

14.7

67

Minnesota

44

L

L

 

 

Yes

7.4

6.1

16.2

56

Mississippi

25

M

M

 

 

 

9.0

7.3

18.2

50

Missouri

30

M

M

 

 

 

8.4

6.4

18.1

71

Montana

46

L

M

 

 

 

6.3

5.2

18.1

54

Nebraska

40

L

M

 

 

 

6.8

5.6

19.0

77

Nevada

19

M

H

 

 

 

8.0

6.3

22.3

71

New Hampshire

10

H

L

 

 

Yes

13.6

10.4

15.2

30

New Jersey

9

H

M

 

 

 

12.2

9.3

17.1

75

New Mexico

8

M

H

 

 

 

9.2

8.3

23.0

45

New York

4

H

M

 

 

Pending

14.5

11.2

17.1

60

N. Carolina

6

M

M

5a

5b

 

8.6

6.6

17.6

52

N. Dakota

32

L

M

6a

6b

Yes

7.5

6.5

17.6

49

Ohio

33

M

L

 

 

 

9.8

7.6

14.7

53

Oklahoma

12

L

H

7a

7b

Yes

7.8

6.1

20.0

74

Oregon

34

L

M

8a

8b

 

5.5

4.9

17.1

16

Pennsylvania

18

H

L

 

 

Yes

12.0

8.5

15.0

44

Rhode Island

11

H

M

 

 

Yes

12.1

10.1

17.1

59

S. Carolina

26

M

M

 

 

 

8.8

6.2

17.8

43

S. Dakota

29

M

M

 

 

 

8.5

6.8

18.1

43

Tennessee

48

L

M

 

 

 

6.1

6.5

17.1

30

Texas

14

M

H

 

9

Yes

9.1

6.7

20.9

68

Utah

27

L

H

 

 

 

7.0

6.0

22.3

27

Vermont

15

H

L

 

 

Yes

12.5

9.2

15.0

32

Virginia

24

M

M

 

 

 

9.6

6.2

17.1

47

Washington

50

L

L

 

 

 

5.5

4.3

14.3

8

W. Virginia

39

M

L

 

 

 

8.1

5.6

16.2

45

Wisconsin

47

L

L

 

 

Yes

7.5

5.9

15.2

59

Wyoming

43

L

H

 

 

 

6.0

5.2

20.0

22

 

Furthermore, policy instruments, such as buy-downs of loan interest and capital cost, are effective mechanisms for reaching cost-effectiveness in the top U.S. markets. An example is the TEAM-UP (Technology Experience to Accelerate Markets in Utility Photovoltaics) project, funded in part by the U.S. Department of Energy.

The results shown in this brochure are good approximations for commercial customers. The added commercial benefits of a 10% federal tax credit and depreciation are somewhat offset by typically shorter loan terms that are less leveraged by debt and by more stringent rate-of-return and payback requirements.

The bottom line is that this analysis of the best niche markets for grid-connected PV systems should help guide commercialization efforts.

 

For More Information, Contact:

 

Christy Herig
National Renewable Energy Laboratory
National Center for Photovoltaics
(303) 384-6546
(303) 384-6490 (fax)
e-mail: herigc@tcplink.nrel.gov

Source: Howard Wenger (PacificEnergy Group); Christy Herig, Roger Taylor, Patrina Eiffert-Taylor(NREL); and Richard Perez (SUNY): "Niche Markets for Grid-Connected Photovoltaics," May 1996.

 

Produced for the U.S. Department of Energy
1000 Independence Ave., S.W.
Washington, D.C. 20585

 

by the National Renewable Energy Laboratory, a DOE national laboratory.

DOE/GO-10097-371
DE97000220
March 1997

Special thanks to JamesRannels, DOE's
Office of PV and Wind Technologies, for
supporting this work.

PIX Photographs appearing throughout this brochure: Cover PIX04470/Lordhouse (Maine); PIX04478/Ell Student Center, (Massachusetts).

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