Friday, March 20, 2009

A Waste of Taxpayer Dollars on Solar

In Southern California, where I live and work, the government agency in charge of the air quality is the South Coast Air Quality Management District.  We just call it the AQMD.   They regulate all sorts of things, such as refineries, dry cleaners, cement plants, basically anything that creates air emissions and does not have wheels.  Even then, the wheeled emitters can fall under their jurisdiction if the wheels do not roll for more than 12 months.  This includes things like portable (wheeled) generators, even portable concrete batch plants.  

AQMD tries to lead by example at times, by employing green technologies at their headquarters, for example, and using compressed natural gas (CNG) for its fleet of business vehicles.  They have lots of cars for their inspectors to drive around, inspecting things. 

From their website, they are installing still more solar panels on the roof of their very large headquarters building in Diamond Bar, just east of Los Angeles.   Their website crows about their saving $24,000 per year in not purchasing electric power, as the solar photo-voltaic (PV) system will generate power for them. 

What they are spending is $780,000, and what they are getting is 80 kilo-watts of generation.  These are special, new PV systems, that will generate power even in less-than-full sunshine.  Even at 8 hours per day, 365 days per year, and an avoided power cost of $0.10 per kwh, the system will barely reduce the electric bill by $24,000 per year.  At that rate, it will require 33 years to break even on the investment.  

But, AQMD claims that the system will break even in 15 years.  This is due to state rebate money paid to them, and likely due to higher power price instead of the $0.10 I used above.   At peak times of the day, their power price could be $0.20 per kwh, thus giving a 15 year break even time.   They also state that the time to break even could be much shorter, if power prices increase.   Well, here's the deal.  The power company only charges the very high rates during the summer season, not all year.  That is because cooler weather does not force the power company to run the high-cost peaker power plants, essentially just a gas turbine with a generator spinning on one end.  Those only are fired up on the hottest days of summer, when the air temperature soars to 90 F or more.  

Ah well.  It is money that has at least SOME return on investment. It could be spent in worse ways, I suppose.   But, if a business had to choose this investment, or putting the money in the Standard and Poor's 500 Index fund, they would do far better with the index fund.  It pays around 10 percent per year, over the long term.   The PV project pays 2.9 percent, even with the 15 year payout.   To achieve the same return as the stock market, the power price for power avoided by the PV project must be $0.35 per kwh.   And that is for the full 8 hours, every day, 365 days per year. 

Even in California, where the state mandated that 33 percent of all power sold by 2020 must be from renewables, that will take some doing.   For some perspective, the present cost of electric power for a residence is $0.11 per kwh, unless one consumes more than the allotted amount.  Then, the power price can reach $0.20 or even $0.30 per kwh, but only for the amount over the allotted.   For a commercial facility such as the AQMD headquarters, the power price is just over half what a homeowner pays. 

And to be fair, AQMD may have little choice in the matter.  The state of California has mandated that all government facilities spend tax money to cut their utility bills.  So, these sorts of 30-year payout projects are sprouting all over public buildings in California.   Mind you, these expenditures are in addition to all the other social services that are funded.  Meanwhile, the state budget deficit grows and grows.  It was $42 billion up until a few weeks ago, when it was miraculously reduced to zero by a combination of tax-increases, service cuts, and massive borrowing.  However, just this week the deficit reappeared in the amount of $8 billion.   Is there any connection between the massive spending on solar panels, and the huge deficits?  

Roger E. Sowell, Esq. 
Contact Mr. Sowell at his legal website

2 comments:

Xerife said...

Hey Roger:

Maybe if they had a more efficient building, they could operate with a surplus and sell back to the grid and get a faster ROI. The bottom line equation should cover a variety of energy generation and efficiency measures with the intent of reducing ROI as much as possible.

Best,

JJ

Roger E. Sowell said...

Hey JJ!

Glad to see you read this. No doubt they could sell excess back to the grid, but there is a different rate for that, currently being debated at the CPUC. Those discussions are quite interesting!

They could build a new building, but it must be net zero-energy under AB 32. That requires selling excess power in summer, and purchasing what is necessary in winter. But you knew that already, Counselor!