Understanding Renewable Energy Technology
For the past few years, as I visit with members throughout the service territory, I often get asked questions about renewable energy systems (solar and wind) that are installed on a member’s home or business. The conversations typically include questions like these;
- Does the co-op offer incentives for these systems?
- Will the co-op pay me if my system sends power to the grid?
- Do these systems have a good economic payback?
So let me attempt to answer these questions and provide some of my thoughts about renewable technologies and their possible impact on CTEC’s mission and business.
Point-1: CTEC does not have a mindset or any policies that could be construed as “anti-solar” or “anti-renewable energy”. On the contrary, we currently purchase approximately 10% of our wholesale power from renewable energy sources and our current policies related to member-installed renewable energy systems are considered “friendly” to these types of systems by those in the solar industry. (More on those “renewable-friendly policies later in this article).
Point-2: CTEC does not offer any rebates or other incentives for members that install small scale solar or wind energy systems. We do not believe that there is any economic benefit to the co-op that would justify providing these incentives. This economic evaluation is driven by the fact that CTEC does not own any power generation like some other utilities (e.g. Austin Energy, CPS Energy) and therefore cannot justify rebates or incentives based on deferring the need for new power generation facilities. Any incentive would essentially be paid from one type of member (that does not own renewable energy) to those that do. This would create a subsidy from one subset of members to another group of members.
Point-3: CTEC does have a “net metering” policy and does reimburse members that export energy (KWh) back to the CTEC distribution system. CTEC currently (at the time of this article) has 75 renewable energy systems connected to the CTEC system, 66 photo-voltaic (PV) systems and 9 small-scale wind turbine systems. If any of these systems produce excess energy at any point in time (energy sent back to the grid) this energy is “netted” or subtracted from the member’s monthly usage. If at the end of the year, there is a positive balance of energy on the account; members are reimbursed at the co-op’s annual power supply or Power Cost Recovery Factor (PCRF) rate. Very few of the 75 connected renewable energy systems ever produce more energy than is being consumed by the member’s home or business.
Point-4: The installed cost for residential-size solar photo-voltaic (PV) systems has dropped dramatically over the past several years—which improves the economics for owning these systems, but based on the information we have, the simple payback period for these systems is still approximately 20-years. Assuming the installation is done by a professional, licensed and experienced installer, the current cost per KW installed is several thousand dollars per KW of installed capacity. Each Kilowatt (KW) of system capacity produces roughly 1,500 KWh of energy per year. This means a 5-KW system (which is typical of what is installed on the CTEC system) would generate approximately 7,500 KWh per year, (if the system is installed at an optimum orientation and roof angle along with no shading of the solar panels). So this 5-KW system could cost in the range of $12,000 – $18,000 and produce a cost-savings of approximately $750 per year (in reduced CTEC charges). This would mean a simple payback of 16 – 24 years with an average payback of 20-years. This payback estimate includes the current federal tax credits that are available for qualified systems. Obviously, it is up to each of us to determine if we are willing to make an investment that has a likely payback of 20-years.
In closing, let me make a couple of observations:
- I personally believe that looking forward, America’s and Texas’ appetite for renewable energy will continue to increase. This will be driven by better economics both at the utility-scale renewable project level and the consumer / member (distributed generation) level. For CTEC this will likely mean that we will continue to purchase significant amounts of renewable energy from the wholesale market because of favorable economics (low prices) and we will see the slow but steady addition of grid-connected member-owned renewable systems.
- I believe that a possible trend of co-op members (and all utility end-users) that “disconnect from the grid” or receive the majority of their energy from consumer-owned renewable energy systems, will continue to dramatically accelerate in some regions of the county (for example--Southern California and Arizona), but not in the Central Texas region. Southern California and Arizona have a lot of sunny days and very high electricity prices. This means the payback period for solar energy systems is significantly shorter in these parts of the country.
- CTEC will continue to actively monitor all issues related to renewable energy and distributed solar and wind energy generation. We will certainly be ready to work with members to address the impacts of new technology as it develops. As a member-based business, I know that our membership and our Board of Directors will continue to be interested in this issue and together we will be able to chart a course that benefits all our members, and continues to provide the level of reliable and economically competitive service that we have provided for the past 75-plus years.