Solar Panels as a Financial Investment

Net-Zero, a house that produces all the energy that it uses

In 2012, we built the first certified Passive House in the state of CT.  Since a Passive House is an ultra energy efficient house that requires very little energy to heat and cool, we knew that through the purchase of a solar PV system, we'd have the opportunity to also be a net-zero house, i.e. one that produces all the energy it uses.  The idea of our home having a zero carbon footprint and zero energy bills was very appealing, but would the expense of the solar panels be worth it?

Solar panels are a financial investment

I spent much of my 22 year career in the financial services industry analyzing fixed income investments.  When you purchase a solar PV system you make an investment upfront to pay for the system and you receive investment returns over the next 25 years in the form of savings on your electricity bill.  The cashflows here are very similar to that of an annuity or long-term bond.  Furthermore, the savings are after tax savings, so it's comparable to a tax-free annuity or a long-term municipal bond.  It makes sense then to analyze the investment in a solar system the same way you would a financial investment, by discounting future cashflows and computing a yield on the investment.

One complication is that we don't know exactly what the future savings will be.  In order to estimate the future savings we need to make some assumptions.  Solar providers are pretty good at estimating the amount of  electricity a system will generate over its life.  Using the average annual generation provided is a reasonable place to start.  But, the future price of electricity is much more difficult to estimate.  The best we can do here is to look at history and analyze the yield of the investment using several different assumptions for the energy inflation.

When I bought my system in 2012 the net cost after state rebates and federal tax credits was about $3 per watt for our 10.78 kW system.  I created a spreadsheet (borrowed from somewhere on the internet) and figured out that the yield on my system was about 1.1% plus whatever I assumed for annual electricity inflation.  If I assumed electricity inflation was 4% the yield was 5.1%.  If assumed 6%, the yield was 7.1%.  If I assumed 1%, the yield was 2.1%.  Historically, I think that energy inflation has averaged around 5% per year for the last few decades.  Back in 2012 yields on long-dated municipal bonds were in the 2%-3% range.  The investment in solar PV seemed like it would return more even under very conservative assumptions for electricity inflation.  When I bought my system our utility charged $0.14 per kWh.  Now they charge $0.17, an increase of more than 23% over just 3 years.  Unless there is a persistent and significant decline in electricity prices going forward, this will have been an excellent financial investment.  It's a bet that I'm happy I made.

Prices have dropped dramitically and investment yields have gone up dramatically

Prices for solar PV panels have decreased dramatically over the last 3 years.  Additionally, our town is part of CT's Solarize program enabling residents to get bulk purchase discounts.  With the Solarize Harwinton pricing residents can get a solar PV system installed for less than $2.00 per watt.  Even if you have a partially shaded site and you assume zero electricity price inflation, a solar system through this program today yields 5.8% and again, that's an after tax return.  If you add in modest electricity price inflation of 4%, the yields are closer to 10%.  If you have a site without a severe shade problem with modest energy inflation you could see yields close to 12% and again, these are after tax yields.

In conclusion, solar PV panels seem like an amazing investment today.  Where else can you get after tax returns of 6%, 10% or 12% for 25 years?  Stocks?  Bonds?  I don't think so.  And, as a bonus you get to do something good for the environment.

I've attached the spreadsheet I used for the analysis if anyone's interested in playing around with it.

Energy Consumption for 2013 and 2014

Happy New Year everyone!  We've been living in Our Connecticut Passive House for a little more than two years now.  I began detailed electricity monitoring in January 2013.  Now we have complete information for all of 2013 and 2014.  In these two years, our 10.78kW solar panel system produced 24,113 kWh of electricity while we used 23,384 kWh.  So, we produced 729 kWh more than we used.  Yippee! The house is completely electric.  No oil, gas, wood or any other fuel is used. 

One of the great things about living in a net-zero house, i.e. one that produces all the energy it uses, is that our total energy bill consists of the CL&P (our electric utility company) fixed charge of $16 per month for being connected to the grid.  This is a pretty impressive result given that we have a decent size house (2800 sf of finished floor space) and live in a cold climate.  We're looking forward to reaping the benefits of our investment in energy efficiency and solar power for entire lifespan of the house.

The charts below show electricity production and usage for calendar years 2013 and 2014 respectively.  You can see that in 2013 we produced more than we used (by 1266kWh), while in 2014 we used more than we produced (by 537 kWh).

Our usage in 2013 was 11,136 kWh.  Usage increased by 1112 kWh to 12,248 kWh in 2014.  This entire increase can be explained by the increased heat pump and HRV consumption in the very cold months of January and February 2014.  The average temperature during Jan and Feb 2013 was 27 F while in 2014 it dropped 4 degrees to 23 F.  Another factor influencing the additional consumption was turning up the indoor thermostat from 68 F to 70 F during 2014.  There also may have been a decrease in sunshine heating the house indicated  by the less impressive performance of the solar hot water heater in Jan 2014 compared with 2013.  Solar PV performance was also weaker in 2014 during Jan, but it's difficult to say how much of the performance difference is due to snow covering the panels on the roof.  The solar hot water panel is on the ground, so it's easy to clear the snow off it.

Electricity production was down 692 kWh in 2014 compared to 2013.  In 2013 we produced 12,403 kWh and in 2014 we produced 11,711 kWh.  Most of this difference is probably due to a snow covered roof in January and February 2014.

So, two years into the journey, it looks like a Passive House's energy efficiency combined with solar energy generation can produce a house with a zero net carbon footprint that costs almost nothing to operate.  It's not just hype.

Radon and a Passive House

Let me start out by stating that I am neither a radon expert, Passive House expert or a builder.  That said, I do have experience with radon gas in a Passive House that I'd like to share.

According to The Passive House Institute US FAQ, Passive Houses are by design, well-protected from radon.  They attribute the radon-preventing attributes of a Passive House to its rigorous air tightness metrics and balanced ventilation.  Our home is a certified Passive House that had a radon problem until a conventional radon mitigation system was installed.  I don't believe that achieving the Passive House standard did much to reduce the likelihood of our having a radon problem.

According to the EPA's A Citizens Guide to Radon, radon occurs naturally in soil and rocks in which home foundations are placed.  Radon can be found all over the country.  In our area, northwest CT, there is approximately a 40% chance of radon existing on the site of your home according to a local expert.

Radon gas enters a home through gaps in the structure (typically a foundation) that separates the below grade interior of a home from the earth that surrounds it.  The local expert we saw explained that even a tiny gap the size of a dime can lead to elevated levels of radon in a home.  The atmospheric pressure in the ground tends to be higher than the atmospheric pressure in a house's interior.  As a result, a basement can act as a sort of vacuum cleaner motor that sucks in radon in soil air through any of these small gaps.  Radon gas can then accumulate to levels that according to the EPA can lead to increased risks of lung cancer.

In houses without balanced ventilation this vacuum cleaner effect can be exacerbated by exhaust fans, dryer vents and mechanical heating and cooling systems.  As air is forced out of a house unconditioned air enters through gaps in the lower portions of the house.  Although a Passive House has a balanced ventilation system, the pressure in the soil around the foundation still tends to have higher pressure than the house's interior. I conclude this based on the fact that my house has a balanced ventilation system as well as a radon problem isolated in the basement.

A Passive House's balanced ventilation can also reduce the level of radon in a house by exhausting the air with elevated levels of radon from a basement and supplying fresh air with lower levels of radon found in outdoor air.  Doubling the rate of ventilation cuts the radon level in half.  In our house, I saw short term (7 day) radon levels range over the course of a year from 3 pCi/liter up to 12 pCi/liter using a Safety Siren Radon Gas Detector.  We would have had to quadruple the rate of ventilation in order to reduce the highest detected levels below 4 pCi/liter as recommended by the EPA.  This was not possible they way our ventilation system was designed.  So, while our continuous exhaust of basement air reduces the amount of radon in our basement, it doesn't reduce it nearly enough to mitigate our moderate radon problem.

A Passive House's balanced ventilation has two seemingly positive characteristics with respect to radon infiltration and exhaust which, at least in my case, fell short of preventing elevated indoor radon levels.  So, the question now is why don't the air-tightness requirements of a Passive House prevent enough soil air containing high levels of radon from entering the building?  Our house beat the Passive House standard by more than 35%.  It had an air-tightness measure of 0.38 ACH50 (air change per hour at 50 pascals) with a corresponding reading on the blower door test of about 180 cfm.  This means that under normal unpressurized conditions air leaks into our house at a rate of about 300 liters/minute.  I'll assume that the air entering our house through the balanced ventilation system has radon levels of 0.5 pCi.  Soil air in the US typically has radon levels of 200 to 2000 pCi.  I'll assume that our soil has a radon level of 750 pCi which is considered in the middle of  an average risk area (270-1350 pCi, according to A Living Radon Reference Manual) for radon.  If the source of air in our basement were a mixture of 99.5% 0.5 pCi air from the ventilation system and 0.5% 750 pCi soil air, then we'd see radon levels of 4 pCi in the basement.  Our basement contains about 300,000 liters of air.  0.5% of this is approximately 1500 liters.  If all the air leakage in our house occurred below grade with soil air, it would take about 5 minutes to leak 1500 liters of 750 pCi soil air.  If only1% of the leakage in our house occurred below grade it would take 8 hours.  The entire volume of air in my basement is exhausted out by the ventilation system every 16 hours, so 1500 liters leakage in 8 hours should be enough maintain radon levels at 4 pCi in the basement.  I don't know the actual soil air radon levels (although our well water tested at 2500 pCi and 5000 pCi, so 750 for the soil seems reasonable to me) or the percentage of our house's leakage occurring below grade, but nonetheless, I'm not at all comforted that the Passive House air-tightness requirements have any meaningful effect on preventing radon infiltration.  In fact, our house exceeded the Passive House standard on the initial blower door test under conditions that were ideal for radon infiltration, with a gravel basement floor prior to the concrete slab being installed. 

To prevent radon from infiltrating a house through air-tightness requires close to 100% effectiveness below grade.  Our house was designed and built with an elaborate air and vapor barrier surrounding the foundation (although based on our initial blower door test this barrier was not at all necessary to achieve the Passive House air-tightness standard).  I suspect that others who build Passive Houses have similar below grade air and vapor barriers.  The barrier was designed to be continuous with both penetrations (well and septic) sealed with spray foam.  My expectation was that this air and vapor barrier would keep all soil air with its high radon concentrations out of the house.  Unfortunately, it seems to have at least one dime sized gap as evidenced by the elevated radon levels in the basement.  Here is a photo album with pictures of the foundation and barrier for anyone interested.

Fortunately, we were able to prevent radon from entering through the small gaps in our air and vapor barrier through  a conventional radon mitigation system.  The conventional system was built by drilling an 8" diameter whole through are basement slab and removing about 5 gallons of the gravel found there.  A 4" PVC pipe was inserted into the hole and the hole was sealed back up.  The pipe travels out of the basement and into the adjoining garage and then out the garage wall.  A 20 watt fan was placed in the pipe and run continuously to create negative pressure underneath the slab.  Because the pressure under the slab is now less than the pressure indoors in the basement, there is no longer a vacuum effect and soil air is not sucked into the basement through existing gaps.  Fortunately, we were able to achieve the desired result with a small fan drawing only 20 watts to keep electricity usage to a minimum.

4" PVC pipe penetration through basement slab for conventional radon mitigation system

So, while a Passive House's balanced ventilation and air-tightness sound like they'd be helpful preventing elevated levels of indoor radon, they don't do enough to make a difference.  In particular, air leakage permitted by the Passive House standard can allow substantial amounts of radon to infiltrate a home.  I don't believe, unfortunately, that achieving the Passive House standard significantly reduces the risk of having a radon issue in your house.  On the positive side, if you have a Passive House with a radon issue, it can be addressed with a conventional radon mitigation system.

A year in Our Connecticut Passive House

  

Autumn through the screen porch

We moved into OCPH in October of 2012. It's hard to believe that a year has already passed. We had a wild weather autumn and winter with several major storms followed by a wet spring with some late frost, then a humid but beautiful summer. It's autumn again and the cool nights and gorgeous New England foliage make this one of my favorite times of the year. I know I have mentioned this before but living in a Passive House makes you feel more connected to the weather conditions as they dictate how you "drive" your house. The heat exchange ventilation system, the lungs of the house, allowed us to keep the windows closed on the hot humid days of summer. We had the thermostat set to 76 degrees and even in daily 80+ degree weather, Due to great insulation and shading, the AC only kicked in occasionally. The engineered overhangs on the south side of the house shaded the windows beautifully to prevent unintended solar heat gains while keeping the windows unobstructed by curtains maintaining a bright open living space.

Now the sun's angle is becoming lower in the sky and the sunlight is once again streaming into the house in the cooling weather. The night temperatures have been in the 40s and the house stays comfortably in the 70s with the heat pump turned off.

Diane's Fire Pit

Energy wise, we are still on track to be Net Positive for the year. Paul the graph master will post some data on this soon.

On October 5th OCPH will be participating in the NESEA Green Buildings Open House tour organized by the Northeast Sustainable Energy Association. This is the 14th year of the event and there are 373 participant sights throughout the northeast. We are proud to join the tour and share what we have learned and lived.

Running the house on Prius Power

 

On Sunday morning June 30th, we experienced our first prolonged power outage since moving in.  A tree came down on one of the power lines around the corner and power was out for about 6 hours. It was time to see the inverter that we bought from Converdant Vehicles to turn our Prius into a backup generator in action.

The inverter works by taking energy from the big hybrid battery in the Prius and converting it to a pure sine wave 240/120 AC current, no different from what we typically get from the power grid.  We parked the car in front of the garage and connected it to the inverter with a cable we had professionally installed into the hybrid battery. We then turned on the car, turned on the inverter and flipped the switch on the generator sub-panel we had installed in the mechanical room that contains our critical circuits. Instantly, our well pump and ventilation system were back up running.

When I turned on the car, I noticed that it was almost out of gas, down to the last bar on the display.  Fortunately, this setup is very efficient. The inverter takes as input the DC current from the hybrid battery. As the hybrid battery loses it's charge, the Prius' gas engine turns on to recharge the hybrid battery. If there is only a small appliance load on the inverter, the gas engine turns on infrequently.  We only had a few hundred watts of power being drawn, so we used little gasoline.

Another cool thing is that the only noise this set up makes is the sound of the Prius idling. We could hear our neighbors' loud gas generators from hundreds of feet away, but most of the time we were pulling electricity from the Prius in silence because there was plenty of charge in the hybrid battery without the car even idling.

Perhaps the most impressive aspect of this setup is that the inverter generates 240/120 split phase pure sine wave AC power. With it, we can operate both 240 volt appliances (well pump, HRV) and 120 volt appliances (fridge, lights, computers). Because it's pure sine wave power, we don't have to worry about the generator frying our computers, TVs, etc. I was able to watch recorded TV on an LED flat panel using a signal from our Windows Media Center PC we use as a DVR while the family took hot showers (complements of the sunny day prior to the outage). All this while the Prius either sat silently or idled in the driveway.

Energy Consumption at Mid-Year

We've made it through half of our first calendar year in the house and have some additional energy usage information to share.  First off, on May 6th, we became net producers of electricity for the calendar year.  From January 1st to June 30th, we produced 6580 kWh of electricity and consumed 5220 kWh, a net surplus of 1360 kWh, which at $0.14/kWh is worth $190.  Our HERS rater estimated that we'd produce about $400 surplus of electricity for the year.  We seem to be on track to realizing that.  The chart below illustrates our experience.

In the beginning of the year we consumed more electricity than we produced.  There were two drivers of this.  One, fewer daytime hours means less electricity produced by the PV panels on the roof.  And two, colder outdoor temperatures means that we need to consume more electricity running the heat pumps.  You can see in the chart above that this trend was reversed in March as evidenced by the orange "Net" line in the chart above starting to slope upwards.

In April, May and June we produced significantly more electricity than we consumed.  We see the same two drivers at work again.  One, more daylight hours means more electricity produced by the PV panels on the roof and two, warmer outdoor temperatures means we consume less electricity because we need to run the heat pumps less frequently.

It'll be interesting to see how often we need to run the heat pumps for cooling in July and August.  We have seen the house heat up pretty quickly to 83 or 84 degrees when it's 95 outside.  Fortunately, there have only been a couple of days like that and as a result, we've hardly used the heat pumps for cooling.  They seem to use 10 to 15 kWh per day or $1.40 to $2.10 at $0.14/kWh.  We've had them on the last couple of days more for dehumidifying than cooling.  It's been so wet and humid around here lately that turning on the heat pumps has been a better option than opening the windows at night for cooling the house.


It'll also be interesting to see how our PV panels perform the rest of the year.  So far they are performing very close to the estimates we received from the company we bought them from, Aegis Solar.  You can see from the chart below that we produced more electricity in April than in June.  This probably has something to do with the 34 degree angle to the horizon of the panels on our roof being better suited to the sun being somewhat lower in the sky.

Stay tuned to see what our stats will be in July and August, the hottest months of the year.

Outside

Recently we have turned our attention and efforts in a big way to our landscaping. We have hydrosseded (a spray on combo of grass seed, fertilizer, fiber mulch and water) over an acre of property and are in the process of putting in foundation plantings and a large garden bed in the front of the house. Paul and I built and installed raised beds for my vegetable garden and we have put in some fruit trees and a blueberry bush patch. With all of this new growth at once we find ourselves spending lots of time digging holes and watering. We have developed a complicated relationship with the weather, wanting a balance of energy generating sun and well water relieving rain. Connecticut is still in a bit of a drought so I'm sure no one will mind that I am doing a rain dance.

A hydroseeded slope in "surreal green"

My raised bed veggie garden labyrinth.

We have also been communing with the rocks on our property of which we have tons. We have put them to good use creating old style pile rock walls and in the dry stream bed which directs rain water away from the foundation. Paul and I have worn out several pairs of work gloves hauling rocks. What a workout.

Pile rock wall. The grass is starting to grow

Dry stream bed in progress

Right now I am sitting in a lounge chair on the back patio. I'm blogging while I rest my barking dogs and aching back from garden/yard work for 5 hours this morning. What a luxury to sit in such a beautiful and peaceful location. I'm inspired to get up and do a little vegetable seed planting.

A misty morning with young fruit trees in the distance