Can solar be economical?
Published: March 27,2011
A 75 percent MDA grant and 30 percent federal tax credit helps solar can pay for itself quickly
Solar is expensive. But a few homeowners and businesses in Mississippi have found a way to use solar and make money or break even over time with the energy savings their panels provide.
As Ludlow poultry farmer Andy Stone found, when crunching the numbers on solar, two major factors are: (1) available grants or tax credits; and, (2) where the customer lives (within the service areas of TVA, Entergy Mississippi or Mississippi Power Company).
Stone has seven chicken houses, one of which now has a beautiful solar array and is under a 10-year contract with federal power producer TVA.
The array of 280 solar panels cost $430,000 and will pay for itself within five years, due to a 75 percent grant Stone obtained through the Mississippi Development Authority (MDA) and a 30 percent federal tax credit. Stone’s co-op, Central Electric, required him to conduct an impact study that cost him $2,800.
“To me it was a no-brainer,” Stone said, and he would install more panels in more grant money became available.
The $40 million in federal stimulus money awarded to the state for energy programs has all been allocated, MDA said. Many beneficiaries were manufacturers who used funds for energy efficient lighting and other measures.
Connecting to a utility’s grid
Unless your own your own expensive battery system to store your energy in, solar panels must be hooked up to an electric utility’s transmissions system, or grid. Battery systems are costly, require frequent maintenance and must be changed out every few years.
Energy from the panels is measured with a special metering box and flows into the utility’s transmissions system. The power made by an individual’s solar panels doesn’t directly power that person’s home. Instead, it can be used by anybody who receives power from the utility’s grid.
For those tied in to federal power producer TVA, for example, the utility settles up with the customer at the end of the fiscal year.
TVA pays 12 cents in addition to retail rate for every kilowatt hour of electricity generated. So, if the retail rate for electricity is 10 cents per kilowatt-hour, TVA pays self-generating customers a total of 22 cents per kilowatt hour of power they produce.
TVA benefits from buying power from self-generating customers by owning the rights to RECs, or Renewable Energy Certificates, that the solar power creates. A REC is a measurement of renewable energy, which can be traded for cash. One REC represents one megawatt hour (MWh) of electricity.
TVA spokesperson Mike Bradley said the utility’s Generation Partners program, where customers can tie into the grid, “has exploded in the last year from less than five megawatts to more than 65 or so. It provides renewable (energy) for TVA.”
Mississippi’s shareholder-owned utilities, Entergy and Mississippi Power Company, also pay self-generating customers for their electricity. Prices vary depending on the time of day (peak or off-peak) and year.
Entergy Mississippi pays between 2.6 cents and 4.1 cents per kilowatt-hour, and Mississippi Power pays from 4.03 cents to 6.19 cents.
Entergy Mississippi spokesperson Joey Lee explained that, “The price represents the cost per kilowatt-hour that Entergy Mississippi “avoids” by receiving the electricity from the QF customer. Entergy Mississippi charges customers about 9.3 cents per kWh for electricity going to the customer. The difference in what we charge and what we pay to (self-generating customers) is the cost of maintaining the electrical infrastructure (such as) transformers, lines, facilities, etc. necessary to deliver power to the customer.
“When a customer generates their own electricity and uses it to power their own home or business, the customer avoids paying us 9.3 cents they would normally pay per kWh. And if they produce more than they use, then what they sell back to us receives the lower rate.”
Currently, very few solar users are connected to regulated utility grids in Mississippi. Entergy has six self-generating customers. Mississippi Power currently has one self-generating customer.
By law, self-generating customers can’t connect to a power grid on their own. They also must obtain “qualified facility” status and adhere to local electrical codes to ensure safety.
Mississippi Power said that most residential solar applications are served by the utility at no additional charge beyond those associated with the appropriate rate schedule.
Solar installers: State not solar-friendly
Will Hegman, owner of Mississippi Solar, the state’s first solar installer, makes a point of saying he’s “not a tree hugger.” He’s just passionate about solar energy and wishes Mississippi would be more solar-friendly.
A longtime pilot and traveler, Hegman has out-of-state residences as well as a small home near Carthage, which is power by “carport-sized” solar panels that formerly powered his sailboat in the Caribbean in the 1980s. He gets a check of about $240 from TVA at the end of each fiscal year.
Hegman views solar energy as an economic win for both homeowners and power companies. RECs could give power suppliers “the ability to keep their coal plants running while we can come up with alternative energy sources,” he said. Many in the energy industry have already been seeking RECs and carbon credits in anticipation of federal environmental penalties.
Mississippi Solar installed Andy Stone’s array, and Hegman believes that about 10 percent of Mississippi homes could be powered by energy from the sun if the thousands of chicken houses in Mississippi installed solar panels.
Additionally, as utilities transition to Time of Use models, Hegman believes solar arrays will be economically beneficial by providing electricity at peak times of the day when electricity is the most expensive.
Another solar installer, Norman Griffin, also believes Mississippi is not solar-friendly. Griffin owns Colorado company Blue Spectra Solar, but also owns Mississippi Dixie Energy Alternative, LLC, which markets solar to businesses. In Colorado, business is booming, but not so in Mississippi.
“I haven’t sold (one solar panel in Mississippi). I’ve got solar panels in stock, but I think I’m going to have to take them back to Colorado. I tried to market primarily to businesses and schools,” said Griffin, a Mississippi native who moved back to be near family.
Griffin said solar panel prices have dropped dramatically in the past year and believes changes in state laws could boost the industry here.
“If we had net-metering laws and local option property tax exemptions for renewable energy, along with the 30 percent federal investment tax credit, I could install some solar panels on schools and in cities. Then we could justify the return on investment. With net-metering, we need to get paid full-price for what we put into the grid,” he said.
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