“What’s the Most Efficient?” Geo VS Solar Thermal VS Solar PV

 I’m doing some sales consulting work in NYC, and there’s one question I’m getting a lot from property owners: “What is the most efficient renewable energy technology?”

In the city, they are mainly speaking of solar PV vs solar thermal, because generally there’s not enough room for geothermal in the city. However, for fun, I’ll expand it and include geothermal.

The answer is, of course, it depends on how you’re defining efficient.

1.  Which technology produces the most energy in the least amount of area
2. Which technology produces the most valuable energy
3. Which technology has the best financial return. Again, however you’re defining return.

1.  Efficiency of the technology (is this a good design for this specific application)
2. Efficiency of cash, which takes into consideration the site characteristics and policy (is this a good investment?)

As always, it’s easiest to see this when we look at a few examples, being clear to highlight when and where the examples might be different in the real world and how said sensitivity might impact our results.

1. Technology Efficiency. Right now, let’s just look at GROSS INSTALLED Costs and raw energy production. 

Here’s what I’m going to calculate: Gross Installed cost / Net energy produced in year 1 (energy produced / energy used)

Again, I’ll keep it in residential for simplicity. And I’ll focus on Boston because I’m most familiar with the solar resource available and the average heating degree days needed when understanding geothermal production.

Our example home will be:

• 1500 square feet
• Average home shell construction.
• South Facing roof, no shading, 10 pitch, that is 60 feet by 12 feet.

Solar PV: $25,000 /  6,843 kWH produced per year = 3.65, which means that you must invest 3.65 dollars in year 1 to get 1 kWh of production

• 5kw DC Installed @ $5.00/watt  = $25,000
• Avg Insolution = 5 hours of full sunlight per day.
• We’ll derate from DC to AC is .75, which is extremely conservative.
• AC Production = 3.75 AC output
• 3.75 X 5 hours per day = 18.75 kWh production per day on average.
• 18.75 X 365 = 6,843 kWH produced per year

$25,000 /  6,843 kWH produced per year = 3.65, which means that you must invest 3.65 dollars in year 1 to get 1 kWh of production

Solar Thermal: $8,000 / 4,982kWh = 1.6. For every $1.6 dollars invested you get 1kWh of production.

• 3 to 4 family home
• Gross Installed Costs for a simple drawback system by a well trained crew is ~$8k
• Each Module will likely produce around 85 therms per year, totally 170 therms per year
• 170 therms is 17,000,000 BTUs / 3,412 = 4,982 kWH equivalent.
• $8,000 / 4,982kWh = 1.6
• For every $1.6 dollars invested you get 1kWh of production.

Note: For solar thermal, unlike solar PV, production of solar energy and usage of that energy doesn’t necessarily match. For this example, I’ll assume it does.

Geothermal: $27,000 / 13,478 kWh equivalent = 2. You must invest $2 in year 1 to get 1kWh of energy production.

• We’ll assume the heat pump is only heating, to make the calculation more simple and keeping in mind that our ratio of dollars invested to energy produced will be a little larger, if we considered cooling.
• 63 MBTU average heating load
• Avg COP of 3.75 (this is important, because lower efficiency will increase the tonnage needed for the same btu’s delivered, all else equal)
• 3 Ton system
• 9k ton X 3 tons = 27k
• Energy Produced = 63 M BTU –> Let’s convert BTU to kWh equivalant
• 63 M BTU = 18,463 kWH (Remember that 1kWh = 3,412 BTUs. Thus long calc is 63MBTU = 630 Therms (10 therms = 1MMBTU) 630 therms = 63,000,000 BTUS divide by 3,412 = 18,464)
• Many will point out that geothermal uses energy (in pumps and fans) to produce more energy, which is true. However, we want to find out what EXTRA energy that was created by the system, this is the renewable part. With an average COP of 3.75 it means that 3.75 units of energy was created for every equivalivent energy put into the system.
• 3.75 means we need to reduce the energy produced by 26.66% (1 / 3.75) to find the amount that was produced by the system.
• 18,464 X 73% = 13,478 kWh equivalent produced
• 27k installed costs gross / 13,478 kWh = 2 in equivalent energy produced. Which means, that for you must invest $2 in year 1 to get 1kWh of energy

A few things to note about the sample examples

• PV: $5 a watt is average and there are much higher installed costs.
• Thermal – Production of modules and usage don’t necessarily match. Also, assumptions around water usage are not accurate. ~8k is also for a great site and a well trained crew. It’s common to see $10k+ projects.
• Geothermal – Only assumed it was heating. Assuming 72 set point and 62MMBTU needed to heat the home. 3.75 COP also impact the energy produced from that invested cash. Higher COP = greater output, all else equal, per dollar invested.
• As we’ll discuss in section 3, site characteristics can change the analysis of any one of these by making some technologies, cheaper or non-available in certain areas.

2. What is the most “cash efficient” investment? By cash efficient, I mean best investment. 

When we start looking at the return on cash, we need to take into account policy, state incentives, and local energy prices into the equation,  which will impact the gross installed costs and the value of a kWh or BTU produced.

For this example, we’ll stay in Massachusetts, but your local region will be similar in that policy will either impact 1) gross to net installed costs or 2) operating revenue, the value per unit of energy produced.

To review, here is the numbers we’ll manipulating, again we’re going to assume this is residential because it’s easier to calculate:

• Solar PV: $25,000 /  6,843 kWH
• Solar Thermal: 8,000k / 4,982 kWh
• Geothermal: 27k installed costs gross / 13,478 kWh

We’re looking to address to questions:

How does policy change 1) the net installed costs and 2) the revenue from energy production?

How does energy cost impact the value of the energy that a renewable energy system produces?

Solar PV: $2308 / $15,5000  = 14.89% simple return in year 1

• 30 ITC% = 25,000 X .30 = $7,500
• Comm Solar II: $.40/watt = $2,000
• Net Installed Costs = $25,500 – 7,500 – 2,000 = $15,500
• SREC Value. $1,282 We’ll assume min. value $285 / MWh. Also, this is income that will be taxed. Let’s assume the homeowner has a 25% tax rate. $285 is now equal to $213.75 per MWh. The system should produce 6.8 MWh in the first year. Again, to be conservative, I’ll use 6. 6 X 213.75 = $1,282
• Electric Prices. Assuming $.15kWh, the power will be worth $1,026 in reduced energy costs.
• Now, how do the numbers look?
• With Incentives, net Installed Costs: $15,500
• With incentives, the value of energy production in year 1 equals: $2308
• $2308 / $15,5000  = 14.89% simple return in year 1

Solar Thermal

• 30% X $8,000 = $2400
• Comm Solar Rebate. $25 X 22 (SRCC cloudy module rating) X 2 modules = $1100
• State Tax Credit: $1000
• Net Installed Costs = $3,500
• Value of Energy Produced. From our base example, we’ll assume the system produces 170 therms, but we need to calculate the value of those therms depending on the fuel source that they are offsetting.
• Oil : $3.50 gallon, 80% efficient boiler, 140,000 BTUs per gallon. We’d need calculate gallons of oil offset. 170 therms / 1.4 therms per gallon of oil = 121 gallons at 100% efficient use / 80% efficient boiler = 152 gallons of oil offset * $3.5 = $531
• NG:  $1.20 per therm, 95% efficient boiler. To calculate = 170 therms / .95 = 179 therms offset X 1.20 per therm = $214 value of production
• Electric. COP of 1. Cost of kWh is $.15. 170 therms is 4982kWh = $747

Solar Thermal Simple Return in year 1 with incentives

• Oil: $531 / $3500 = 15%
• NG: $214 / 3500 = 6%
• Electric: $747 / 3500 = 21%

As you can see, SHW is heavily dependent on the value of the fuel it is replacing.

Geothermal: The base case is geothermal: 27k installed costs gross / 13,478 kWh

• 30% ITC X $27,000 = $8,100
• Net Installed Costs = 18,900

Value of Geothermal – Cost to heat 63 MBTU with another source?

• Oil: 63MBtu / 140,000 = 450 Gallons / .80 efficient boiler = $562 gallons needed X $3.50 per gallon = $1,928
• NG: 63MBtu / 100,000 = 630 therms / 90% efficient boiler = 700 therms needed X $1.20 per therm = $840

Cost of a geothermal BTU

• Total system produced 18,464kWh. 13,478 came from the ground loop, and 4,986 came from electric consumption.
• 4,986 X $.15kWh = $747.90

Simple Return In year 1 with incentives

• Oil: $1,181 / $18,900 = 6% simple return in year 1.

• NG: $92.10 / $18,900 = .4% simple return in year 1. Yes .4%, less then 1%.

3. Implications for finding the best customers and policy

• The answer to the ‘what is most efficient question’ lies in both the site specific characteristics of the home and the policy and energy markets of that site.
• Siting will have a large impact, all of my scenarios assumed that the site was pretty much perfect for each technology which kept installation costs low. This is rarely going to the case, there might be a site that is perfect for geothermal, but doesn’t have the roof space for solar or visa versa.
• From a policy perspective, it makes us wonder why so much money is being put into solar PV if the “gross installed / energy produced” is so much lower then the rest. I think the solar PV crowd would argue that that is exactly why it needs to have more help.
• I think the best policy would be able to incentive each technology based on METERED ENERGY OUTPUT and it would be equal for every technology
• Solar thermal and geothermal a have benefit in the energy debate because they have the ability to directly replace oil, while solar PV does not.
• From a marketing and sales efficiency perspective, it also shows us that the returns for various technology, and which technology is “the best” for a specific customer will largely depend on that customer thus, it’s critical to have a well thought out qualification process when dealing with new leads.