French Broad Electric Membership Corporation (FBEMC) has a new policy regarding residential renewable energy generation. This post is an effort to clarify how it works, and to help members of FBEMC decide whether going solar is right for them.
(By the way, WNC energyCAP has energy grants for farmers and small businesses in the FBEMC territory which can improve the return on a solar system investment on FBEMC to be upwards of 17% [6 year payback], but systems which are connected in any way to residential energy use are disqualified from those grants. This article is simply an effort to clarify the utility’s new policy for its residential customers. If you are a farmer or small business interested in grant funding for solar or other energy-related farm improvements, please get in touch with us!)
But first…
A quick plug for energy efficiency, the Jan Brady of home energy investments:
Remember that having a more energy efficient home should be the first step to lower energy costs and lowering your carbon footprint. Insulation measures, air sealing, energy efficient appliances and behaviors make an immediate impact and pay themselves back much more quickly than a solar system. Plus, if you do decide to go solar, the system you’ll need will be much smaller and less expensive once your home is more energy efficient. Solar’s new and neat, but it shouldn’t always be Marsha, Marsha, Marsha.
FBEMC currently offers on-bill financing only for mini-split heat pumps, meaning FBEMC pays for the installation and the homeowner pays it back on their monthly bill (which is lower due to the energy savings). Other utilities in Appalachia have successfully added things like insulation and HVAC improvements to their on-bill financing programs. If you would like to see FBEMC offer similar programs, check out Appalachian Voices’ efforts to bring this energy savings solution to FBEMC.
Quick Basics of Solar PV
First, for some practice with throwing around watts and KWs (power units, kind of like water pressure) and kilowatt-hours (kWhs, energy units, like the gallons of water), let’s look at the numbers for a residential solar system that would produce the amount of energy consumed by the average U.S. household:
The average U.S. home uses ~11,000 kWh/year of electric energy (~$115/month on FBEMC)
In western North Carolina, it would take an 8 KW system to generate that number of kWhs over a year. (assuming an installation roughly south-facing and in full sun from 9AM-3PM.)
That system would consist of about 30 panels.
Keep in mind that your ideal grid-connected system (from an economic payback perspective) may not be one that generates 100% of your use. Just because you sized a system to match your full use doesn’t mean you’ll get all your energy for free from then on. You still have to think about how the utility pays and charges you for all the electrons flowing different ways. I will discuss that later, but for now, let’s think about that 8 KW system and how much it would cost to install.
How much does a solar system cost these days?
Still a big investment. But much cheaper than even a few years ago, and still falling. As of May 2017, $2.50-$3.00 per installed Watt is a competitive installation cost to expect from an installer in our area. (A list of area installers can be found on our installers page.) So for that 8 KW system mentioned above, the cost would be around $20,000-$24,000 (8 KW x 1,000 Watts/KW x $2.50-$3.00/Watt). Many residential installations opt for smaller systems that do not offset the home’s entire electricity use.
Financing: Contact Carolina Farm Credit or Self-Help Credit Union in Asheville to ask about Solar loans. Or call us about grant funding for farm/business systems that are not tied to a residence.
Aren’t there tax credits for solar, or are those gone?
The NC State tax credit expired in 2015. The Federal tax credit (30% of system cost) is available through 2019 (and then drops some percentage points each year for a few years after). So if you installed that 8 KW system for $20,000, you would be eligible for a $6,000 credit (not a deduction) toward your federal taxes owed. If you do not owe $6,000 in a single year of taxes, you can carry over the credit to future years.
So…what’s the return on my investment?
Yes, I’m getting there in more detail below, but for now, basically: 25-30 years (3-4%) without the tax credit, and 12-25 years (4-8%) with the tax credit.
Do I need to build a system that generates all of my electricity?
If you are going off-grid, yes. And if you want electricity at night or on cloudy days, batteries will be necessary if you are off-grid.
This article, though, is about the payback of having a system connected to the FBEMC grid without batteries, where FBEMC still sells you electricity during the times when your solar system isn’t carrying your full load. For that type of system, your payback depends a lot on how FBEMC pays you for the extra electricity you generate and put on their grid. There are three different rate structures offered by French Broad for such systems. Each has pros and cons, and your best payoff might be a system that’s smaller than your needs.
If you’d like to avoid an explanation of the mechanics of these rates and just want some basic advice on making the decision, skip to the “Three payback profiles” section.
French Broad EMC’s three renewable generation rates
Sell Excess Generation Rate
(NEW in April 2017)
p. 10-11 of FBEMC Ratebook
$425 setup fee.
$23 per month basic charge ($6 more than your current residential basic charge)
Free kWhs from your system while the sun is shining
Buy extra energy from FBEMC 11¢/kWh
Sell excess solar generation to FBEMC for 5.5¢/kWh
How it works: Your solar system generates electricity (kWhs) while the sun is shining. The system is connected to your home’s electric meter. You can use those generated kWhs in your home for free during the exact times that they are being generated by the solar system. If you generate more than you are using during those sun hours, FBEMC buys those excess kWhs from you for 5.5¢/kwh. You buy the rest of your electricity (your use outside of sunshine hours and any use that exceeds your solar generation during sunshine hours) at 11¢/kWh. Not to be confused with “net metering” (described below).
Best for: All homeowners wanting to offset more than ~50% of the home’s fossil fuel energy use with their solar generation. Below that point, the Detent Meter Rate usually makes more sense from a strictly financial perspective. Sell Excess is also best for very small energy users ($700/year and less) who want to build a system that’s even larger than their annual energy needs. (This is my own situation, and the best return on investment for me would be to build a system sized at 200% of my home’s usage! The improvement by going from 100% to 200% is pretty marginal, though.)
Detent Meter Generation Rate
p. 12-13 of FBEMC Ratebook
$25 setup fee
$17 per month basic charge (same as current residential rate)
Free kWhs from your system while the sun is shining
Buy extra energy from FBEMC 11¢/kWh
Give excess solar generation to FBEMC for 0¢/kWh
How it works: Your solar system generates electricity (kWhs) while the sun is shining. The system is connected to your home’s electric meter. You can use those generated kWhs in your home for free during the exact times that they are being generated by the solar system. If you generate more than you are using, you give those extra kWhs to French Broad for free. You get nothing for them. You buy the rest of your electricity (your use outside of sunshine hours and any use that exceeds your solar generation during sunshine hours) at 11¢/kWh. The advantage to this system compared to Sell Excess is a lower monthly charge, and a lower setup fee.
Best for: Larger energy users ($1,500/year or more) concerned mostly (or only) with financial return, building a system sized to address only 25-50% of the home’s annual energy use. This basically lets your kWh generation match your daytime energy use, and minimizes the kWhs being given to FBEMC for free, (in the graph above, this smaller system would shrink the yellow curve to be mostly underneath the blue line). This is not a viable strategy at smaller scales of home energy use as smaller systems cost more per installed capacity (efficiencies of scale).
Residential Generation Rate (“Sell All”)
p. 7-8 of FBEMC Ratebook
$25 setup fee
$13.00 basic facility charge for additional non-residential meter
Sell all kWhs to FBEMC for 5.5¢/kWh
Nothing changes about how you currently buy energy from FBEMC
How it works: This system is not connected to your home’s electric meter. Think of it as building your own little separate power station that just feeds electricity one-way to FBEMC’s grid. The monthly charge for this system is $13.00 per month (your home would still pay its own basic monthly charge), and FBEMC buys all the electricity your system produces for 5.5¢/kWh. Uniquely, this rate structure generates revenue for you (as opposed to generating credits or avoiding charges), which means it can be taxed as income.
Best for: Situations where the best site for the solar system is too far away to reasonably connect your residence for a Sell Excess metering structure.
But what about “net metering”? Doesn’t FBEMC do net metering?
FBEMC no longer offers “net metering.” This is a rate structure where the utility buys your excess generation at the same rate that it charges customers for electricity. Full retail rate both directions. As far as the economics of this setup goes, this is like having the utility act as free battery storage. It allows for much faster return on investment (7% or 14-year simple payback with federal tax credit). Offering net metering is legally required for investor-owned utilities (like Duke) as part of their regulation under the NC Utilities Commission. FBEMC is not required to offer net metering because it is a member-owned utility.
Figuring out your return on investment
The phrase can’t be avoided—“It depends.” Accurately estimating the return on your solar PV system can be tricky with the FBEMC’s rate structures because
a household’s energy fluctuates throughout the hours of a day, while
the sun shines only some of the hours in a day, at varying intensities, and
FBEMC pays you at one rate and charges you at another for kWhs passing to and fro in the system.
Knowing your average hourly electricity use is then necessary (as opposed to knowing just your daily/monthly/annual average) for an accurate estimate of your return on investment, and any quote from an installer that does not consider the importance of your hourly use as a FBEMC customer should be subject to some prodding and follow-up questions. As a general rule for typical homes, if you built a system designed to generate the same amount of electricity that you use in a year, only about 40% of your solar generation will be consumed in your house during the hours that the sun is shining and therefore be essentially “cost-free” (“used solar generation” in the graph above). The other 60% will be bought (Sell Excess Rate @ 5.5¢/kWh) or freely taken (Detent Meter Rate @ 0¢/kWh) by FBEMC and resold to you (@11¢/kWh) as if it were just regular grid electricity.
It could help to ask FBEMC for that data directly, and then ask us to run a calculation with that data, or you could get a gut sense for your situation by following one of the three residential energy use profiles below. They were developed with calculations that used OpenEI hourly housing load data models matched against WNC hourly solar generation data from NREL. Ask your installer how they are matching their system’s hourly generation with an hourly household energy use model if you feel like your solar quote may be treating you like a cut-and-paste Duke customer.
Three payback profiles
Assumptions in these models:
You will take advantage of the 30% federal tax credit (if you don’t or can’t, ignore the numbers below and expect your best payback period to be 25-30 years)
No inflation, no increasing cost of fossil fuel energy
No interest from loans
System costs $2.50/W to install
Low Energy User (~$1,000/year)
Typical house profile:
Single story
1200 sq. ft
insulated
efficient appliances
A 4.6 KW would generate the amount of electricity you use annually, should cost $8,500 after tax credits, and give a 21-year return (5%) under the Sell Excess Rate ($400 annual savings). Your return on investment improves as you reduce system size, and once the system is sized as low as 40-50% of your usage (2.3 KW, $4,200 after credits), your payback is closer to 16 years and a Detent Meter Rate becomes the more favorable rate structure. But the smaller that detent system, the higher price per installed capacity.
Medium Energy User (~$1,500/year)
Typical house profile:
one or two stories
2,000+ sq. ft
partly insulated
numerous appliances
An 8.5 KW would generate the amount of electricity you use annually, should cost $15,000 after tax credits, and give a 19-year return (5%) under the Sell Excess Rate ($815 annual savings). Your return on investment improves as you reduce system size, and once the system is sized as low as 30-40% of your usage (3.4 KW, $6,000 after credits), your payback is closer to 15 years and a Detent Meter Rate becomes the more favorable rate structure.
High Energy User ($2,100/year + )
Typical house profile:
2 stories
2,500+ sq. ft
3-4 bedrooms
lots of appliances on
few energy-saving measures in place
An 12.3 KW would generate the amount of electricity you use annually, should cost $22,000 after tax credits, and give an 18-year return (6%) under the Sell Excess Rate ($1,225 annual savings). Your return on investment improves as you reduce system size, and once the system is sized as low as 25-40% of your usage (3.0 KW, $5,600 after credits), your payback is closer to 13 years and a Detent Meter Rate becomes the more favorable rate structure.
If you’d rather think only about your annual savings in any of the scenarios above, calculate:
Annual Savings = System cost / Payback years
First steps toward solar PV
To talk to French Broad EMC about their requirements to go solar, contact Sam Hutchins at 828-649-2051 (or email).
For a list of solar installers to connect with, visit our installers page.
To connect with us about grant funding for farms and small businesses, email us or call 828-649-5115.
I hope this was helpful. Good luck!