Time of Day Electric Pricing Made Me Choose Solar Over Wind

We’ve been debating whether to get alternative energy from solar panels or a windmill.  We’re already on the electric grid so the purpose is to reduce our fossil fuel use and to save on electricity.  Wind seems to make more sense in Vermont because you can almost always see or hear the wind blowing and solar seems to make less sense because the sun is low in the sky much of the year and covered by clouds a good part of the time as well.

Taking off peak pricing into consideration helped us make an economic decision for solar which otherwise would have gone to wind.

Around here electricity goes for around $.15/kilowatt-hour(kwh) as an anytime rate.  Some utilities also offer time of day (TOD) rates which more or less reflect their costs for power at different times.  Peak power generally costs much more than off peak since expensive standby equipment using relatively expensive fuel like natural gas must be fired up to meet peak loads.

The TOD rates which typically complement $.15/kwh anytime rates are $.10/kwh off peak and $.20/kwh on peak. Peak hours are when businesses are open.  In the summer, more power is used in the afternoon than the morning because of increased use of air conditioning.  Therefore weekdays eleven AM to four PM are often the peak periods for billing purposes.

So back to our wind turbine vs. photovoltiac solar cell decision.  Vermont like many states has a net metering law.  If you generate power, you can use it to run your electric meter backwards – in effect, sell it back to the utility.  In some states you can actually earn a check; here you can’t get money back but you can balance your electric bill over a twelve month period.  So each kilowatt-hour, unless you generate too many of them, is worth the same $.15 you would pay to buy it from the utility.

After various rebates and credits, equipment for residential solar costs about $7.00 for each watt of “faceplate” capacity you buy.  At this latitude if the equipment is well-mounted in a good to excellent location, you can expect to generate .9 kilowatt-hours for each watt of faceplate capacity installed.  These numbers mean that the return on your $7 investment is $.14/year (2% return would be easy to beat if you’re in it for the money alone).

Turns out with slightly different calculations and taking into account the fact that wind turbines need more maintenance than solar panels and have a shorter installed life, the return on wind is almost exactly the same at the wind speeds we expect to experience.

But now let’s take into account TOD pricing and assume that we can sell back to the utility at the same TOD rates they would sell to us.  Almost all solar is generated from 9AM through 3PM which is 10AM through 4PM during daylight savings time.  So five hours per week day of solar generation occur during peak rate hours or 25 hours per week out of the total of 42 total solar generating hours.  The average per minute paid for this power would be $.16 at TOD rates.

The wind blows pretty much when it feels like it.  So it isn’t any more likely to blow during the 25 peak hours than other hours of the week.  That means the average payment you’d get for a wind kilowatt-hour would be $.11; not nearly as good as the solar.  It becomes an easy economic decision that get a better return by installing solar than wind if you take peak metering into effect.

Note that this is all a highly theoretical discussion.  It’s not clear (although I’m trying to find out) whether TOD pricing even applies to net metering in Vermont and I certainly don’t know whether it does where you live.  The best ECONOMIC decision right now is just don’t install any alternative capacity.  Incentives may get larger; prices of at least photovoltaic cells are almost certain to come down; even when the price of electricity does get high enough to make this practical, you’ll have gained rather than lost by waiting.  Better to put money into energy efficiency in the meanwhile or even in the bank where you’ll get better than 2%.  Storage heat may make sense with TOD rates; I’ll post on that if and when I know enough to make a spreadsheet.

But, even when making an uneconomic investment decision for personal reasons, the economics of time of day pricing are interesting because they show which alternative gives you the most green for the buck.  When you feed power from a wind turbine into the grid off peak in Vermont, you’re displacing power from Hydro Quebec or Vermont Yankee nuclear;  the hydro power is imported but from our friends; the nuclear fuel is probably domestic; neither generate any greenhouse gasses.  When you generate solar power on peak, you’re helping to avoid spooling up a natural gas turbine.  The natural gas may come from Canada or the US but has a higher likelihood of coming from somewhere less friendly.  And natural gas is a fossil fuel.

Some day, probably not too far in the future, people will be installing alternative generating capacity for good economic reasons.  When they do TOD pricing will be important in helping them make decisions which are both rational for themselves and for the community and economy as a whole.  TOD pricing may be a bargain for you today without any investment, BTW, if you’re not home during the day or are willing to govern your use of electricity by the clock.  For some reason utilities don’t seem to advertise its availability so you may well want to ask.