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San Ramon Valley Unified School District installs 10k photovoltaic panels at five schools

In a move that is proving to be controversial with some, some California school districts are looking to a high-tech way to save money, even if the payback won't be achieved until well over a decade later. CNN is reporting that some California school districts are looking to low-interest federal loans to install solar panels on schools.

CNN singled out the San Ramon Valley Unified School District, which has installed roughly 10,000 photovoltaic panels at five of its 35 total schools at a cost of $23 million. Under the most optimistic projections, the photovoltaic panels would offset energy usage at the schools by 67 to 75 percent. 

According to spokesman Terry Koehne, the San Ramon Valley Unified School District will pay back the loans courtesy of the energy savings from using the solar installations. However, this won't be a quick payback for the school system -- it will take roughly 16 years to break even on the photovoltaic panels.

Koehne, however, points to the upside of embarking on this expensive venture; "It's pure profit after that. And following that, we're going to start realizing savings of $2 (million), $3 (million), $4 million a year."

Like many schools across the nation, California schools are facing a serious budget crunch. Less money means fewer teachers, fewer teaching assistants, and more students per classroom. By making this move now, the school district is hoping that the future payoff will allow it use its resources more wisely. 

Lower production costs, thanks to stiff competition from Chinese companies, is causing a surge in the adoption of solar panels. One of the causalities of the race to the bottom in panel costs was Silicon Valley-based Solyndra. The company received a rushed $535 million loan courtesy of the Obama industry during 2009 in order to bolster its operations.

However, the company two years later filed for bankruptcy and axed over 1,000 employees. Interestingly, an email that was sent out before final approval of the loan was granted rightly projected that the company would run out of money by September 2011. 



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RE: Bad economic analysis once more
By Brandon Hill (blog) on 9/18/2011 10:32:42 PM , Rating: 5
How do you figure an 8-year return? I'm assuming that the 16-year figure is already taking into account the rise in energy costs.

Afterall, why would the solar company/school district UNDERestimate the ROI in a case like this? If anything, the 16 year figure is probably an absolute best case scenario.


RE: Bad economic analysis once more
By MonkeyPaw on 9/18/2011 10:57:26 PM , Rating: 3
Here's hoping the panels last 16 years. Failure creeps up on things exposed to the elements. Though I guess CA doesn't get the hail storms or tornadoes like we do in the Midwest.


By Solandri on 9/19/2011 8:34:43 AM , Rating: 3
They typically last 25-30 years. Beyond that, degradation of PV efficiency frequently makes it more cost-effective to scrap and replace with newer panels. e.g. the 10% efficient panels from approx 30 years ago would have degraded to about 7% now. Contrast that with newer panels which are about 16% efficient, and there's a strong financial incentive (absent other power sources) to scrap the old panels even though they are still generating electricity.

For a homeowner who typically sells a house after 10-15 years and predominantly uses electricity during the evening*, solar frequently does not make sense. But for a commercial/government entity which is occupying the same building for decades if not centuries, and requires the most power during peak electricity prices, solar does actually make sense. Given California's budget problems, I'm not sure it makes sense to do it right now. But long-term they should come out ahead on this. Assuming they got the panels at a good price (I've seen kickback schemes where local governments award overpriced contracts to a local renewable energy company).

*(It will be interesting to see how electric cars being recharged during the evening/overnight will impact hourly electric rates.)


RE: Bad economic analysis once more
By tng on 9/19/2011 10:26:10 AM , Rating: 2
San Ramon is just East of the SF Bay area. As such it does not suffer from really cold temps in the Winter, but it does get over 100F frequently during the Summer.

The Summer season there will last typically from early April to late October and there is very little rain or even cloud cover in the Summer. Given those conditions this may be a wise use of money.


RE: Bad economic analysis once more
By rs2 on 9/18/2011 11:09:54 PM , Rating: 3
I don't know about the 8-year return, but you certainly seem to be making a number of logical errors and omissions in your analysis.

For one thing, it's not like the $23M that is spent on the solar panels instantly disappears with nothing left to show for it. It becomes $23M worth of solar panels. Or even if we assume an instant depreciation of 50%, then $11.5M worth of solar panels. This increases the property value of the school, because which would you rather purchase, a normal building, or an equivalent building that includes enough solar generation capacity that you never have to pay another utility bill?

So really this is better viewed as an investment rather than a simple expenditure. An investment that doubles in value after 16 years. Now that's not great (it's about a 5% annual return), but it's good enough to stay ahead of inflation and less risky than investing in stocks (and what business would a school have investing in stocks anyways?), and certainly better than what you would get with bonds or as interest from any major bank right now.

So in 16 years the school will have gotten all of their investment capital back, they will have a continuing revenue stream from the solar installation, and they will still have the asset of the solar installation itself, which increases the school's property value and/or can be sold off (though probably not for anywhere near the original purchase price) if desired.

In that light I find it hard to see what you don't like about this plan. Unless you just plain don't like solar energy. But that's just silly. Even ignoring all the "green" aspects of the solar installation there are still plenty of sound reasons for doing it. And there are certainly worse things that the school might do with the money.


By Solandri on 9/19/2011 8:45:28 AM , Rating: 2
Just a minor quibble. I pretty much agree with your analysis. But...
quote:
So really this is better viewed as an investment rather than a simple expenditure. An investment that doubles in value after 16 years. Now that's not great (it's about a 5% annual return), but it's good enough to stay ahead of inflation and less risky than investing in stocks (and what business would a school have investing in stocks anyways?), and certainly better than what you would get with bonds or as interest from any major bank right now.

You have to bear in mind that schools are funded by the government, so any money they spend is money extracted from the private sector via taxes. So the correct comparison here isn't vs. a school investing that money in stocks. It's vs. taxing the citizens and companies a little less so that money stays in their hands and helps the economy grow.


RE: Bad economic analysis once more
By Keeir on 9/19/2011 11:49:24 AM , Rating: 2
Errr... a second minor quibble.

School Buildings are rarely (though somethimes) turned over to private industry to be used as is. In my area in the past decade, 7 schools properties have been auctioned off... in each of the 7 cases, the schools were torn down after several years of enviromental studies on thier replacement structures.

Removing the panels and selling them may also not be easy. Knowing the government, they will hire a firm to remove them and hire another firm to sell them. I doubt even if they removed them 2 years after installing them, they would get 20 cents/dollar.

quote:
In that light I find it hard to see what you don't like about this plan. Unless you just plain don't like solar energy.


Ummm... I think some people just don't trust small local government to run a large investment of this type or to have done the economic studies throughly enough to have confidence in the 16 year period.

When I hear a Government project has a 16 year projected payback period, my brain processes 25-30 year payback period after construction overruns, bad contracts, upgraded wiring, a fancy control system that isn't needed, and poor placement of the panels on the roof.


RE: Bad economic analysis once more
By Spuke on 9/19/2011 12:10:40 PM , Rating: 3
At the size of the typical solar arrays for commercial or even residential buildings, "fancy control systems" are about all you can get. Besides, if they're going to be spending 10s of thousands of dollars on panels with my tax money, I want the fancy control system, expensive efficient panels and whatever else to get the most from the money spent. All of the local school districts have solar panels. Instead of putting them on the buildings where roof space is somewhat limited and shadows could be an issue, they put them over the parking lots. So not only do they gain MUCH more sq ft and no shading issues, they also keep cars out of direct sunlight. We're in the desert (CA) and I've been in one of those parking lots in the summer before the panels, I really appreciate the shade now. It's MUCH cooler.

I have no issues at all with these projects. Quite frankly, I'm shocked that they would do anything at all to try and save us some money. This IS California you know.


RE: Bad economic analysis once more
By Keeir on 9/19/2011 12:42:51 PM , Rating: 2
Errr... its nice they are shading the cars.... I thought that perhaps it would be better to shade the building and reduce air conditioning costs.... but I admit to having never seen the numbers.

quote:
Quite frankly, I'm shocked that they would do anything at all to try and save us some money. This IS California you know.


Yep. But keep in mind, this a local government offical in California claiming the project will save you money...


By Cerin218 on 9/21/2011 3:35:01 PM , Rating: 2
Have we spent ourselves into prosperity yet? CA is a state that is somewhere around 24 BILLION in debt. So where is the logic in spending yourself deeper into debt for a possible reduction of future cost? You only save money if you aren't in debt to begin with. Like when I replaced the windows in my house. it cost me 11K. I save roughly 75 dollars a month in my energy bill. so over the course of the year I might save 1,000 dollars. If I had paid for the windows on credit, it would take 10 YEARS to break even on the investment. So I wouldn't be "saving" money. Because I paid cash, that 1K is my savings per year. That is money I don't have to spend right now, and can spend on other things. THAT'S savings. Buying on credit then pretending you are saving money is the why this country is 14 TRILLION in debt and getting worse. And the morons running this country that believe we can spend ourselves into prosperity make me want to puke. So when all you morons squeal tax the rich, it's because you want to take money from them to waste on stupidity like this school district is doing. The problem isn't that the government doesn't take enough, it's that it wastes money that it does take on stupidity like this. It's called sustainability, and debt spending isn't sustainable.

So I don't see what you DO like about this plan. Unless you aren't happy that the government only takes 33% of your income to waste on stupidity. But people like you are exactly why California and this country in general are failing. Pay for the things you need in cash, THAT is investment. Don't steal from everyone else to pay for what only a few people will benefit from. How will a school in CA benefit me by using my tax money to subsidize their solar experiment?


RE: Bad economic analysis once more
By sleepeeg3 on 9/19/2011 2:19:40 AM , Rating: 1
You are right, Brandon. The nameplate capacity of the panels for the San Ramon district is 3MW. At $25M for 3MW nameplate capacity @ 20% efficiency, costs work out to be $4.75/kWh*. This compares to California's commercial utility rate of ~$0.12kWh. On top of this, these panels will only provide 2/3 of the power of the schools. They are also paying interest on the loans. Finally the panels lose efficiency and have to be replaced every 25 years.

They will never break even. This is being subsidized by stimulus money.

http://us.sunpowercorp.com/about/newsroom/press-re...
http://sanramon.patch.com/articles/local-schools-g...

*Math: ($25,000,000 / ((365.25 days * 24 hours/1000W) * 3,000,000 nameplate capacity * 0.2 efficiency)


RE: Bad economic analysis once more
By Solandri on 9/19/2011 8:56:28 AM , Rating: 3
quote:
*Math: ($25,000,000 / ((365.25 days * 24 hours/1000W) * 3,000,000 nameplate capacity * 0.2 efficiency)

You left off the number of years the $25M investment will be in use.

$25,000,000 / ((30 years * 365.25 days * 24 hours/1000W) * 3,000,000 W peak * 0.2 capacity factor)
= $0.158 / kWh

Which may actually be competitive with peak electric rates during the hours schools are in session.

Also, it sounds like the money for this is coming from a federal loan, so from California's perspective it's borrowing someone else's money to shift some of their current budget expenses into the future. Even if it lost them money overall, it may be deemed a necessary step to survive their current budget shortfall (from the Calif. government's perspective of course).


RE: Bad economic analysis once more
By casteve on 9/19/2011 11:04:25 AM , Rating: 3
Two additional factors may come into play. PG&E has a tiered rate structure (use more/pay more per kW-H) and the school district can move to time-of-day metering.

On the residential side, if you are a low usage customer, your rates are in the $0.12-0.14/kW-H range. Use more, and it quickly goes to $0.25/kW-H and up. The primary benefit/payback for solar here is to reduce your demand down to the lower tier levels - not to get to 100% coverage.

Time-of-day metering changes the rate based on demand. Higher during the day, lower at night. Peak demand occurs between 3pm and 7pm. Combine this with a school's solar installation. School's power use is greatly diminished after 3pm. They'll be selling power back to the utility during this period and the weekend.

So, the 16 year payback is practical. Seems in line with all of the other estimates I've seen locally.


RE: Bad economic analysis once more
By Keeir on 9/19/2011 12:36:34 PM , Rating: 2
That's a little best case senario.

Currently, the US struggles to get .2+ capacity factor in the best of locations. I am not sure what type of cell/installation they are using, but its unlikely they are using tracking concentrators. Most likely is flat plat roof top, hopefully pointed south and tilted at a good angle. In this situation 0.15 is a better capacity measurement and still optomistic over a 25+ year time frame. I also think your being optomistic about 30 years. It is very unlikely the cells have a proven track record extending that long.... unless they are using much older cells.

Assuming a low 4.0 interest rate and a 25 year term, Loan Costs --> ~121,400 per month + 8,600 additional maintaince = ~ 130,000 per month to generate ~325,000 kWh... this is roughly 0.40 cents per kWh. Which over 25 years will start to be a bargin in California.

But the point is for the forseable future (next 5 years), this is not going to lower the schools outlet. It is likely to -raise- the energy costs associated with the schools in question.

Now if the school has a 0 percent loan or a number of years before first payment, incurs no significant maintaince costs, is paying peak residental rates, got better capacity factor than custom designed large installations, and got full price for electricity sold back to the grid during days in the summer when building might be under utilized. A second option is they are getting a large payment in excess of the actual costs. I certainly hope this is not the case.

Then I agree, it may be school will lower thier energy costs this year. I just doubt that all those conditions are met.


By Solandri on 9/19/2011 2:44:59 PM , Rating: 2
quote:
Currently, the US struggles to get .2+ capacity factor in the best of locations. I am not sure what type of cell/installation they are using, but its unlikely they are using tracking concentrators. Most likely is flat plat roof top, hopefully pointed south and tilted at a good angle. In this situation 0.15 is a better capacity measurement and still optomistic over a 25+ year time frame.

A 0.15 capacity factor is a good average for the U.S. overall. 0.18-0.19 capacity factor is typical in the California/Nevada/Arizona area. 0.2 was close enough to that, I wasn't going to argue with it.


RE: Bad economic analysis once more
By sleepeeg3 on 9/19/2011 8:11:26 PM , Rating: 1
So I post actual numbers from the quoted specs and costs and people make up your own. Not sure how that works...

Panel lifetime is 25 years, according to SunPower. Cost works out to be $0.19 / kWh. Then when you factor in these are only powering 2/3 of the electric power for the school, actual costs is $0.285kWh. That's not even including efficiency loss and interest payments! These will never break even with current technology and are over 2.4x more expensive.

As I said in an earlier post, California is not paying for them. You are right about that. All of America is paying for this waste.


By sleepeeg3 on 9/19/2011 8:22:01 PM , Rating: 2
My bad to those that were agreeing. Yes, capacity factor is optimistic, but adding that into the cost effectiveness equation is like beating a dead horse - solar power advocates are not winning the argument anyway. They can have there 20% efficiency claim, because it really does not change the situation - solar power is expensive.


RE: Bad economic analysis once more
By Calin on 9/19/2011 3:04:18 AM , Rating: 2
"I'm assuming that the 16-year figure is already taking into account the rise in energy costs."
They are a part of the government. Did the government anounced an increase in energy prices? How much?
You're right, as the energy is provided by non-government companies, the government can't say wheter the energy price will rise, fall or stay the same.


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