By Joe Pomerenke
Partner with ARCO/Murray National Construction Co.
Due to advances in technology and improved manufacturing, the cost of solar technology, specifically solar photovoltaic panels, has declined dramatically over the last few years. Coupled with available funding from federal, state and local utility company incentives, many industry experts believe we will see a growth in solar power for industrial buildings in the years ahead.
Could we be nearing the tipping point between the initial cost and long-term utility savings for different types of solar systems for buildings? The answer is found by investigating the return on investment that solar systems can provide. In all cases, the return on investment depends on material and installation costs, current utility rates, future utility rates, overall consumption, tax depreciation, and incentives. Historically, the time period required for solar power savings to offset initial material and installation costs could range anywhere from 10 to 20 years. Today, with the proper incentives, solar installations are proven to pay for themselves in six years or less. With this reduced payback timeframe, many owners are investigating the technology further and beginning to incorporate solar power into building projects.
In today’s market, there are four commonly available solar technologies for buildings: 1. solar photovoltaic; 2. solar thermal for hot water; 3. solar thermal for air heating; and 4. solar outdoor lighting. The most prevalent conversations to the viability of solar systems revolve around photovoltaic panels which have experienced the greatest change over the last five years. Solar photovoltaic, or “PV,” is a technology that uses solar panel modules or arrays (groups of modules) installed together to reach a specific design capacity. The solar array is mounted on the roof or ground nearby the building oriented due south. Power is generated by converting solar radiation into direct current (DC) electricity using semiconductors that are composed of a number of cells containing photovoltaic material. As the DC power is generated, an inverter is used to convert this power to alternating current (AC), which is compatible with the power we typically receive from the utility companies.
The AC power then travels from the inverter into the electrical service panel, which distributes to the electrical loads throughout the facility. The electrical service panel is also tied into the utility grid. If the solar system is generating enough power to meet the demand loads of the building, no power is utilized from the utility grid. If the solar power exceeds the demand of the building, the electricity flows out of the building into the utility grid. A special type of meter is used to measure the power delivered to the grid and energy credits are provided by the utility company to offset electrical charges. The energy credit process is made possible through an agreement between the utility company and the customer called Net Metering.
To assess the viability of a solar project, both environmental and structural factors for the building site must be evaluated. All of these factors influence the economics and functionality of a solar PV system. The first factor is the amount of energy available from the sun at the location of the building. Solar designers start by looking at the project site’s “Insolation” value. Not to be mistaken for insulation, “insolation” is the average amount of solar radiation available to a building which factors in historical climate and weather data. The insolation value is specific to the latitude and longitude coordinates of the building. It is also important to take into account any physical shading that might occur on the property. After the preliminary building design is complete, engineers are able to calculate the demand load of the building to determine the total power required to be produced by a solar array, which is measured in kilowatts (kW).
To understand the economics of a fully integrated building, we will look at a current project being designed by ARCO/Murray National Construction in the western suburbs of Chicago. The project consists of a 90,000-square-foot industrial warehouse building with 5,000 square feet of office. The majority of the continuous electrical load on the building is generated by the office as the warehouse is used for storage purposes with gas heat and minimal lighting. The office load is estimated to be 18 kWh/sf (kilowatt hours per square foot). The total annual energy usage is determined to be 100,650 kWh. To offset this demand, an array size of 85 kW composed of 340 standard size, 250 watt modules is required. The 85 kW array can be mounted on the roof and requires 10,500 square feet of roof area. The projected annual power generation of the solar array is 106,092 kWh. The total cost for this solar installation is $425,000.
To calculate the solar system’s return on investment it is necessary to take the installed cost and subtract the tax depreciation, utility, state and federal solar PV incentives. The result of this calculation, the “Net System Cost,” is then compared with the total utility savings that is achieved by the use of the solar system.
So why is solar power not more prevalent in similar type industrial buildings in and around Chicago? One reason may be that over the past decade, solar technologies have continued to evolve and the market is behind in its understanding of current technology and installation costs. It may be surprising to learn that many of the old myths about solar power have been overcome. Here are a few myths that solar supporters now believe to be untrue.
Myth 1 – PV solar panels only work in sunny areas, like Arizona.
Solar technology can work in any of the 50 states. According to PV Watts, a solar output calculator provided by the Department of Energy , 1 kilowatt of solar installed in Chicago will produce 1458 kwh versus 1995 kWh in Phoenix. By comparison, the same solar array installed in Illinois can obtain 73 percent of the production capability as that of Arizona.
Myth 2 – PV solar is too expensive for widespread usage.
While this may have once been the case, solar energy prices have dropped 50 percent since the beginning of 2011. Combined with financing options and current incentives, most businesses can find a return on their investment within a few years of the initial install.
Myth 3 – If PV solar power was a viable solution it wouldn’t need government support.
The United States government decided years ago to support energy resources because they have a direct impact on our economy. As a result of current policies, every major energy source and technology has benefited from federal government research and development support and incentives of various types. The same is true for the oil, natural gas, hydroelectric, nuclear, and biofuels industries, all of which like solar, continue to receive government support today.
Whatever the opinion is on solar power, the technology is available at a lower cost and moving toward the mainstream every day. In 2010, $ 6 billion worth of finished solar energy systems were installed in the United States. By the third quarter of 2011, this demand had grown by more than 140 percent. Many analysts project that the U.S. will become the largest solar market in the world over the next few years.
At the very least, it makes sense for building owners and commercial developers to revisit solar technology design and get current market pricing to evaluate the return on investment. It seems that control of a building’s energy costs will be increasingly important in an uncertain energy future. Solar technology may be a viable option to save on energy expenses moving forward.
This article was written in collaboration by Josh Frankeberger, vice president of operations at the Free Energy Company and Joe Pomerenke, who is a partner with ARCO/Murray National Construction Company.
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