Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

[c1ue]

http://www.oregonlive.com/news/index...en.html#_login

Tax credits are then resold for cash to non-alternative energy firms including Wal-Mart, Standard Insurance, FLIR systems (defense), and US Bank (twice) - this is just solar 'manufacturers'

http://www.registerguard.com/csp/cms...5-41/story.csp

State officials deliberately underestimated the cost of Gov. Ted Kulongoski's plan to lure green energy companies to Oregon with big taxpayer subsidies, resulting in a program that cost 40 times more than unsuspecting lawmakers were told, an investigation by The Oregonian shows.

Records also show that the program, a favorite of Kulongoski's known as the Business Energy Tax Credit, has given millions of dollars to failed companies while voters are being asked to raise income taxes because the state budget doesn't have enough to pay for schools and other programs.

The incentives are now under intense scrutiny at the Oregon Department of Energy, which is scrambling to curb their skyrocketing costs.


What's the Business Energy Tax Credit?
A renewable energy company can receive a credit on its Oregon taxes worth half the cost of building a new facility, up to a limit of $10 million, or $20 million for solar manufacturers.

The credits are better than tax deductions -- $1 of tax credit means $1 less paid in taxes. If a company has little or no tax liability, the credits can be sold at a discount to another Oregon taxpayer.
Energy officials were worried about the impact on the state budget in 2006, when Kulongoski and his staff proposed a dramatic boost in tax breaks to woo wind and solar companies to Oregon -- upping the subsidies from a high of $3.5 million per project to as much as $20 million.

According to documents obtained under Oregon's public records law, agency officials estimated in a Nov. 16, 2006, spreadsheet that expanding the tax credits would cost taxpayers an additional $13 million in 2007-09. But after a series of scratch-outs and scribbled notes, a new spreadsheet pared the cost to $1.8 million. And when energy officials handed their final estimate to the Legislature in February 2007, they pegged the added cost at just $1.2 million for the first two years and $4.1 million for 2009-11.

The higher estimates were never shown to lawmakers. Current and former energy staffers acknowledged a clear attempt to minimize the cost of the subsidies.

"I remember that discussion. Everyone was saying, yes, this is going to be a huge (budget) hit," recalled Charles Stephens, a former analyst for the Energy Department who left in 2006. "The governor's office was saying, 'No, we need a smaller number.'"

Dave Barker, an analyst who is still with the agency, told The Oregonian that the initial cost estimates started high but got lower after he was told by his superiors to plug in smaller figures.

"What I would hear pretty consistently was, 'We want to keep it conservative,'" Barker said.

The official estimates turned out to be absurdly low. In 2007-09, the business tax credit cost the state $68 million, of which about $40 million can be attributed to the bigger subsidies. The latest estimate for 2009-11 puts the tab for subsidies at $167 million in lost revenue, which is projected to grow to $243 million for 2011-13 -- about what Oregon spends now from its general fund on the entire state police budget.

The land rush is not surprising. Oregon's tax incentives are now among the nation's richest for wind, solar, biomass and other renewable energy projects. In 2007 alone, the state granted $33 million in tax credits to Klondike Wind Power for three projects in Wasco County.

No other state program has been allowed to grow at such a pace. The runaway cost increases result in part from loose regulations that allow nearly every business that seeks the lucrative tax credit to get one. Since 1979, when the tax credits were voted into law, the state has approved 97 percent of the applications for subsidies.

Governor denies pressure

The program has become the centerpiece of Kulongoski's legacy-making effort to turn Oregon into a center for environmentally friendly industry.

Kulongoski staff members deny that the governor or anyone on his staff directed the Energy Department to lowball the costs and said the huge disparity between early cost projections and actual expenses was simply a bad guess. They say no one understood how popular the tax credit would become.

"I'm not aware of anybody having those kinds of conversations with the Energy Department," said Kulongoski spokeswoman Anna Richter Taylor. The governor didn't, she said, and his aides "wouldn't set him up that way."

Richter Taylor said Kulongoski considers the subsidies to be "wildly successful" in bringing new, clean companies to Oregon. He does, however, agree that rules should be tightened on who qualifies for the tax breaks.

Mike Grainey, who was Energy Department director before being ousted by Kulongoski last spring, denied efforts to downplay the potential costs of the higher subsidies.

"The number of projects that came in after those changes were made were far beyond our expectations," he said.

Grainey said he doesn't remember what his expectations were for luring new business.

Records show that his department came up with the $1.2 million in additional costs by figuring that only one large renewable energy project would take advantage of the tax breaks in the first two years.

Cost worried legislators

Rep. Phil Barnhart of Eugene, who was chairman of the House Revenue Committee in 2007, said he and his fellow Democrats were skeptical about handing out more tax breaks to businesses when other needs were going unmet. But they wanted to encourage what he calls the "green revolution" and Kulongoski's goal of providing jobs while boosting the state's energy independence.


An economist with the Legislative Revenue Office didn't trust the low estimates from the Energy Department and raised them to $1.9 million in 2007-09 and $12.6 million for 2009-11. The numbers were still small enough that the bill sailed through.

"This was not a difficult bill," Barnhart said. "It should have been a bit more difficult. Since then, I've learned it's not so straightforward."

Underestimating the cost of the subsidies was just the start. Records obtained by The Oregonian point to a program that hands out tax credits with little accountability. Some examples:

• A wind energy project received four separate $10 million tax credits even though it will generate less electricity than projects getting one-tenth the $40 million subsidy.

• A Clatskanie ethanol plant got $12 million in tax subsidies plus a $20 million state energy loan, then promptly went bankrupt and stopped operating. The plant, Cascade Grains, claims it's still owed $10 million in tax credits, and it may sue to try to get them.

• A Boardman tire recycling plant got $3.4 million even though, after more than two years, it has yet to recycle tires. Investors are suing founders of Reklaim Technologies, now known as McKinstry-Reklaim, alleging they were misled about the project's solvency.

• Thirty-five companies that had applied for smaller tax breaks under the old rules were granted the higher subsidies -- essentially giving them windfalls that cost taxpayers $2.1 million.

Sen. Ginny Burdick, who chairs the Senate Finance Committee, tried to put the brakes on what she viewed as an out-of-control subsidy program. Her bill to trim tax breaks for big wind farms was approved by the Senate and the House this year but vetoed by Kulongoski, a fellow Democrat.

"What I saw was a hemorrhage of money at a time when we really could not afford it," said Burdick, D-Portland. "The subsidy is far richer than it needs to be."

The case of Oregon Windfarms helps illustrate her point. The corporation, based in Piedmont, Calif., planned to build wind turbines in eastern Oregon. But instead of applying for a single tax credit, worth $10 million, the firm broke the project into nine smaller ones and demanded nine credits, worth $90 million.

Before the company got approval for any state tax credits, it broke ground on the project and began erecting turbines. Grainey, the former state energy director, balked at the multiple applications but eventually approved four credits worth $40 million -- less than half the $90 million the company originally sought.

Company officials expressed their outrage in a May 6 e-mail. "This would be a financial disaster," wrote Glenn Ikemoto, a principal of Oregon Windfarms. Yet, last month, according to Energy Department records, the company signed an agreement for the $40 million subsidy.

"The prospect of a protracted, costly fight was not attractive," said Len Bergstein, a prominent Portland lobbyist who represents Oregon Windfarms.

The project is on the books to generate 64.5 megawatts of power. Three years ago, a 100-megawatt wind project in Sherman County received a $3.5 million subsidy.

Department in disarray

This past spring, it was clear that the governor's office was frustrated with the way the Energy Department was managed. Kulongoski's staff haggled with Grainey over his handling of an employee the governor's office wanted fired. Tensions arose over Kulongoski's desire to use federal stimulus money to build a string of solar panels along Interstate 205, a project energy staffers argued didn't qualify under federal guidelines.

Only a few weeks after the dust-up with Oregon Windfarms, Kulongoski forced Grainey out of his 30-year career in the Energy Department. His replacement was Mark Long, who had been director of the state Building Codes Division.

Long's assignment was to tighten control over the agency and put limits on the energy tax credits. The change resulted in considerable turnover, as Long brought in new managers and longtime energy analysts quit, disheartened by what they saw as a radical change in direction.

"Me and the folks I brought in, we get it," Long said in an interview. "We get the (tax credit) needs sideboards."

Long is overseeing an extensive rewrite of rules that would give the department more authority to deny applications. The new rules also will try to rein in the practice of applying for multiple credits, and they may allow the state to retrieve money if the projects don't operate as billed.

Supporters of the tax credits say they have put Oregon on the map for renewable energy, making it one of the top states in the nation for green jobs. Renewable energy companies such as Solaicx and Iberdola employ scores of workers at good wages.

The results can be seen by anyone driving through the Columbia River Gorge into central and eastern Oregon. Once-empty plateaus now bristle with towering turbines, spinning out about 7 percent of the state's electricity production.

Critics of the program note that job gains are small and have made little difference in the state's stubbornly high unemployment rate. The typical wind project, once construction workers leave, hires only a handful of full-time people.

The huge sums of money at stake have changed the way the agency thinks about energy projects, said Christopher Dymond, a senior energy analyst who found new work after the regime change.

"Now, it's not based as much on technical merit," Dymond said. "It's based on politics."

A generous state income tax credit for solar manufacturers has been a powerful lure in Oregon’s quest to transform itself into a clean-energy capital.
But the incentive needs reworking, say its critics and the state lawmakers tasked with streamlining it in the next few years.
The tax credits can be sold, enriching companies that have nothing to do with renewable energy, and the swelling program is a drain on state revenue, critics say.
“There isn’t any question in my mind that the system we’ve got now could stand for a tuneup,” said Rep. Phil Barnhart, House Revenue Committee chairman.
Under the Business Energy Tax Credit, or “Betsy” as it is called, a solar manufacturer may apply for a tax credit worth half of the cost of a project, such as upgrades to plant and equipment. Annual project costs cannot exceed $40 million, for a maximum tax credit of $20 million, which is taken over five years.
Most startups don’t have much income to offset, so if the solar manufacturer prefers cash upfront, it may resell its credit at two-thirds face value to another party.
So far, all three of the solar manufacturers that have received Business Energy Tax Credits have done exactly that.
For example, SolarWorld, the German company that has a huge solar cell manufacturing plant in Hillsboro, sold its first $11 million tax credit to Wal-Mart for $7.37 million. Under the program, Wal-Mart received $11 million in tax breaks over five years.
That rankles critics of the credits, such as Chuck Sheketoff, executive director of the Oregon Center for Public Policy, a budget and tax research group in Silverton.
When SolarWorld sold its credit to Wal-Mart, “(Wal-Mart) got a 49 percent return on their investment at the expense of Oregon taxpayers,” Sheketoff said.
“I think it should be a direct grant program instead of a tax credit program, so they can cap the cost of it,” he said.
Greg LeRoy, executive director of Good Jobs First, a national policy research center in Washington, D.C., has seen “saleable” tax credits play out throughout the nation, and he’s not impressed.
“Saleable credits is a recurring problem,” he said. “It’s not just in energy. We’re seeing it in digital media. We’re seeing it in film production.
“Where’s most of the tax benefit accruing? It’s not necessarily in the targeted industry, and for us, that’s a real economic development issue.”
Sen. Ginny Burdick, D-Portland, Barnhart’s counterpart in the Oregon Senate, said that’s the biggest downside of Oregon’s transferable Business Energy Tax Credits. In the SolarWorld example, “Wal-Mart gets full credit, but SolarWorld gets only 65 cents on the dollar,” she said.
That doesn’t sit well with some legislators.
“People in the revenue committee are not satisfied with the idea that a big chunk of the tax credit goes to a taxpayer that has nothing to do with the (renewable energy manufacturing) project,” Barnhart said.
Transferable tax credits also monkey with state revenue at a time when states can ill afford it, critics say.
“We know that compared with other forms of state revenue, corporate income tax revenues have been plunging,” LeRoy said. “If you layer on additional saleable credits, that is further reducing the amount that profitable companies do owe. You’re exaggerating that cyclicality (of income tax revenue) and making further problems for the state.”
Those problems are not lost on state lawmakers such as Barnhart and Burdick.
“Every penny we spend on the “Betsy” (Business Energy Tax Credit) is money we don’t have for schools right now, that we don’t have for health care, that we don’t have for public safety,” Barnhart said.
He and Burdick foresee some changes to the Business Energy Tax Credit in the special legislative session in February 2010 and in the regular 2011 session.
One piece of unfinished business in February is to carve out an exception for solar manufacturers from the comprehensive bill passed last session that sunsets — or terminates pending further legislative action — all tax credit programs, Burdick and Barnhart said. The Business Energy Tax Credit is slated to sunset in 2012.
“There was concern … that the sunset would interfere with recruitment efforts,” Burdick said. “So we’ve agreed with the governor’s office to extend the sunset for solar manufacturers (probably for at least two more years, to 2014).”
The tax credit for solar manufacturers “is arguably the best use of a taxpayer subsidy because it creates jobs, and Lord knows, we need those right now,” she said.
The subsidies for solar manufacturers are just a small slice of the Business Energy Tax Credit program, which also rewards companies that generate renewable energy, and individuals and organizations that conserve energy by, for example, providing their employees with bus passes, or installing efficient lighting.
Alarmed by a ballooning program with an estimated price tag of $167 million in 2009-11 — more than double the $68 million the state paid out for similar tax breaks in 2007-09 — the Legislature last year passed a bill to rein in the program, particularly for wind-power companies that were believed to no longer need the handout.
Gov. Ted Kulongoski, who has championed the Business Energy Tax Credit as a means to grow the state’s clean energy sector, vetoed the bill in August.
A companion bill, which became law, orders the Department of Energy to conduct a two-year study on the tax credit program and to report its findings to the 2011 session.
The program began as a modest tax credit to encourage conservation and energy efficiency.
Nonprofits, which don’t pay income taxes, were shut out, so the credits were made transferable, Barnhart said.
“That system seems to work pretty well,” he said. “No one is arguing that we shouldn’t allow a tax credit when a nonprofit improves a building.”
But two years ago, with the governor’s urging, the program morphed to include companies that generate renewable energy or that manufacture renewable energy products, such as solar cells and panels.
Some possibilities the Legislature may consider when it takes another hard look at the program are dropping the transferability of the credits, or having the program provide grants instead of tax credits, Barnhart said.

http://wattsupwiththat.com/2009/11/0...ed/#more-12377

Peak Sun Silicon, of Millersburg, sold a $3.25 million tax credit to US Bank for $2.18 million.
Peak Sun also sold a $5.85 million tax credit to two companies: Nordstrom for $2.85 million and Standard Insurance for $2 million.
Solaicx, of Portland, sold a $9.04 million tax credit to US Bank for $6.05 million.
SolarWorld, of Hillsboro, sold an $11 million tax credit to Wal-Mart for $7.37 million.
SolarWorld also sold a $10.96 million tax credit to Flir Systems, of Portland, for $7.34 million.

[metalman]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

why do i get the feeling that the fire economy will turn anything that moves $$$ into a brand new racket?

[mooncliff]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

Yikes!

When the photovoltaics drop by more than 50%, they should just phase out all the subsidies and there will be none of this nonsense.

[MulaMan]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

and even worse Obama is planning to repeal $30 billion a year in oil & gas industry subsidies.

Oh no, promoting change and progress...how un-American.

"But what old Jack from the API does not realise is that for too long the industry has had things its way, with the Bush Administration handing tax and incentives like confetti at a wedding. Well those days are gone."

http://priceofoil.org/2009/02/27/oba...gas-subsidies/


Technology, innovation, and progress is a terrible thing.

and it is a much better idea to spend 1 trillion dollars of taxpayers money a year on millitary to go around the world invading oil producing countries and murdering people.

[mooncliff]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

and even worse Obama is planning to repeal $30 billion a year in oil & gas industry subsidies.

Oh no, promoting change and progress...how un-American.

http://priceofoil.org/2009/02/27/oba...gas-subsidies/


Technology, innovation, and progress is a terrible thing.

and it is a much better idea to spend 1 trillion dollars of taxpayers money a year on millitary to go around the world invading oil producing countries and murdering people.

Yep, makes no sense. Everything we could do at home would be CHEAPER and no one would get killed doing it. It is ridiculous to fight wars to pump oil to ship oil to burn oil to generate electricity to make hot water.

Of course, when the Empire of Japan expanded, it did not invade Indonesia for its oil and Manchuria for its minerals. Oh, no no. It did it to bring the benefits of the Greater East Asia Co-Prosperity Sphere to the inhabitants of those poor backward lands! Hmm, why does this sound familiar...

[govtraksam]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

There is only a very small insignificant amount of electricity generated by burning oil. Of course the very same thing can be said for wind and solar. Unless you want to see the rest of our manufacturing base exported, frequent electric outages, soaring electric bills for your home or business and surging food prices(Think refrigeration costs for food in warehouses and supermarkets) then you better contact your congressman and insist that we build more nuclear plants instead of intermittent, land intensive, low output and unreliable power from wind and solar.

[mooncliff]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

There is only a very small insignificant amount of electricity generated by burning oil. Of course the very same thing can be said for wind and solar. Unless you want to see the rest of our manufacturing base exported, frequent electric outages, soaring electric bills for your home or business and surging food prices(Think refrigeration costs for food in warehouses and supermarkets) then you better contact your congressman and insist that we build more nuclear plants instead of intermittent, land intensive, low output and unreliable power from wind and solar.

Ah, sorry, what I said about burning oil for electricity is in Hawaii... most of the electricity is from burning oil, and only a small amount from burning coal.

Yes, the wind and photovoltaics are unreliable, but Hawaii has had reliable geothermal for decades, just not enough of it. Solar thermal would solve this problem because instead of getting the heat out of the ground, you heat up something like salt and then store it underground and then draw off the power when you need it in the evenings and for periods of days even when cloudy. That takes care of the intermittent problem. Land area is not a problem as it would be tiny percentage of what is now abandoned sugar cane fields.

My total energy bill for a year in Hawaii is $600 for electricity at 25 cents per kilowatt-hour (we don't have municipal gas) because we have had a solar water heater for 30 years and I changed the most often used lights to compact fluorescents. The rate of return on that investment has been at minimum 30% per year every year for 30 years. Even without subsidy, a $10,000 investment in photovoltaics would make my energy bill exactly zero, but I want to get a bigger system since we are going to get a feed-in tariff. This is a normal suburban 2,000 square foot house with 4 bedrooms, two living rooms, and a large kitchen, 50 years old, a 20 minute drive from Honolulu.

The goal is to use conservation and wind and solar to reduce Hawaii's energy use by 70% in 10 to 20 years. I could install the photovoltaics now and make the energy use of my house zero now, but I want the installers to get a little more experience, and am trying to decide the system design. At least half the houses in Hawaii could go to zero net energy use today with a $5,000 solar system and a $20,000 photovoltaic system (without subsidy), and that goes for most of the southern US too. But elsewhere, superinsulation (requiring smaller heating and cooling systems, saving a lot) and upgrading to the most energy efficient model when buying replacements, even though they cost a little more upfront, is the way to go. Tankless water heaters use half the energy, and the prices have come way down. Anyway, you pay more in the long run if you buy a cheaper, less energy-efficient model. Oddly, no one asks what the return on investment is on granite countertops.

By the way, if you have never cleaned the grill under your refrigerator, the refrigerator is working harder and wasting electricity because it cannot dissipate the heat. I cleaned the grill of my aunt's refrigerator, and her electric bill dropped $300 for the year, about $25 a month, and the refrigerator does not run all the time like it used to. One of my friends didn't clean his, and the dust caught fire!

Who knows how our investments will turn out. My goal is to get future expenses down as much as possible, preferably to zero.

[Roughneck]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

My total energy bill for a year in Hawaii is $600 for electricity at 25 cents per kilowatt-hour

So you are using 200kwh a month(if my math is right)? other than a solar hot water heater what else are you doing and do you have a/c?

[mooncliff]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

So you are using 200kwh a month(if my math is right)? other than a solar hot water heater what else are you doing and do you have a/c?

No, we don't have A/C. Although I live on the Leeward side of Oahu, where it is hot and sunny almost every afternoon 8 months out of the year, I realized years ago that it was uncomfortable INSIDE the house, but perfectly OK OUTSIDE the house in the shade. Therefore, the problem was that the house was heating up during the day. It was like living in a toaster oven. How to stop that? Google "cool roofs", and also try looking for terms like titanium oxide ceramic particle elastomeric (for example, see this for an example of installation.
http://leakmaster.com/hawaiian-sunguard-ceramic.html
I have no commercial interest in any such company or product). I had to reroof anyway, so I spent a lot of time reading test results on titanium oxide ceramic particle elastomeric roofs. The roof need not be white; it can be tinted various colors, but of course, the lighter the color the better. I was really happy to find that it would cost $12,000 to have it professionally installed instead of $24,000 for a conventional reroof on a 2,000 sq foot roof. (You could do it yourself for much less, but it took 2 people 3 full days, and the application of the reinforcing net was difficult, and of course, if you fall off the roof...) I did this 5 years ago and am totally happy with the results. No leaks even when we had pounding rain for 40 days straight. The house does not heat up at all during the day (nor does it get as cold at night in the winter when the temperature can drop to 52F when the sky is clear, because the elastomeric reflects infrared back in; the house is 3/4 tongue-in-groove redwood with no insulation). Why didn't we have this 50 years ago??? The shingles are glued down so they cannot come off in high winds.
Since the house stays at around 80F inside even when it is hot outside, we manage with fans, though of course there are a few hot humid weeks per year.
Keeping the house cool also means that the refrigerator uses less electricity.
I replaced the three lights we leave on all the time with $7 compact fluorescent spotlights. They are indistinguishable from incandescents in light quality and color. That cut electricity use by 80% for those lights. I plan on switching to LEDs eventually.
We have an electric dryer, but rarely use it. We usually hang the clothes up on lines in the carport.
The solar water heater is thermosiphon and has no pump, so it uses no electricity. We turn on the heater inside the tank only a few days a year when it is rainy for long periods.
So, the house is cool, the lighting is the same, and the hot water has been free for 30 years. Our electric bill is less than $50 a month at 20-30 cents per kilowatt-hour. We don't have municipal gas.
Right now, I could install a photovoltaic system (the white roof will also reflect more light on the panels) to cancel out the electric bill for say $10,000, but we are supposed to get a feed-in tariff (watch them screw it up) so in theory, if I were to install a $25,000 system (I expect that to drop to 15,000 in a few years), we would get about $300 a month from the electric company, which would be about enough to pay the water bill, insurance, and tax, essentially making the house more or less free in perpetuity. We are not living in the cold and the dark. Everything is quite normal, and what is different is more or less invisible.

I think the reason these types of improvements may at first glance seem expensive is because the accounting point of view is not wide enough.
Suppose you had to replace your central heating system and it was going to cost $30,000. It might be worthwhile considering spending $20,000 on superinsulating the house and then you would need only a $10,000 system that would use much less fuel over the years, and it would turn out to be much cheaper without any difference in the quality of living conditions.

In the case of my house, everything is actually better than free if you step back and take in the overall picture.
Everything below is adjusted for current dollars.
Costs indicated by minus signs, benefits indicated by plus signs.

1980 solar water heater -3,000 (with tax credit)
Replacement, if necessary, so far so good -3,000 (with tax credit)
Electricity saved over 50 years +50,000
Running total +44,000

Conventional reroof at least twice over 50 years, -50,000
elastomeric roof, first time -12,000, -2,000 touch up coat every decade, total -20,000 over 50 years, for a saving of +30,000
House is cool, so air conditioning need greatly reduced or unnecessary, say +1,000 per year for 50 years for a total of +50,000?
(When bifacial photovoltaics installed, white roof will reflect more light on panels, boosting output by 20%, so let's say conservatively a benefit of a few thousand dollars)
Running total +124,000

The photovoltaics are very difficult to even ballpark. We could easily see the cost drop by 50 to 75% in a few years due to economies of scale and better designs and improvements in light conversion efficiency (prototypes are now at 40%!).
Smaller photovoltaic system -10,000 (tax credit not included)
replacement after 25 years -5,000? (maybe tax credit phased out)
saving about 600 dollars per year over 50 years saving +30,000
Running total would be +139,000

Larger photovoltaic system -25,000 (tax credit not included)
replacement after 25 years -10,000? (maybe tax credit phased out)
saving/feed-in tariff +4,000 per year over 50 years +200,000
Running total would be +304,000

(There were other benefits from installing hurricane straps and Hurriquake nails, such as lower insurance premiums. Also installed great Toto low flush toilet, cutting water use per flush by 75%. Six neighbors and family members have seen the roof, solar water heater, hurricane straps/hurriquake nails, low flush toilet, etc., and are doing the same, so actually these projects will turn into several million dollars saved over the years.)

So, no matter how things play out, the savings is at minimum $130,000 for a comfortable house. Counterintuitively, doing these things actually does not cost money, but actually saves money, and money you save is better than money you earn or make on investments because there is no tax.

Depending on the scenario, the total cost of owning and operating the house goes from $6,000 per year to $3,000 per year, or even zero if the feed-in tariff actually works.

Oh, and by the way, Metalman, my roof is now annually reflecting back out into space about 500,000 kilowatts per year, slowing global warming... so people who live in cold places who want the planet to warm up, well, take that! I want it to cool down so the glaciers will build up and the ocean level will drop and there will be more land in Hawaii!

[c1ue]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

In general I don't disagree with the willing to invest up front in order to save overall.

But it is important to compare apples to apples.

1980 solar water heater -3,000 (with tax credit)
Replacement, if necessary, so far so good -3,000 (with tax credit)
Electricity saved over 50 years +50,000
Running total +44,000

I assume you refer to an average savings of $1000 a year? or perhaps the present equivalent dollars to the electricity saved over a 50 year span?

Because if the baseline is $1000 saved in one year - this year - then your assertion is that the water heater uses 333 Kwh/month or 4000 Kwh/year.

Electric water heaters are also the most expensive way to heat water - this exaggerates the relative savings vs. those who are able to use natural gas/heating oil - likely an artifact of Hawaii's energy infrastructure:

http://www.energyguide.com/library/E...ubjectID=10170

Water Heater Type	Avg. Cost	Expected Life	Annual Energy Cost	Cost Over 13 years
Gas Conventional Tank	$ 425	13	$165	$2,544
Gas High Efficiency Tank	$ 500	13	$145	$2,385
Gas Demand	$ 650	20	$140	$2,243
Oil Conventional Tank	$1100	8	$230	$4,777
Electric Conventional Tank	$ 425	13	$500	$6,925
Electric High efficiency Tank	$ 500	13	$480	$6,740
Electric Demand	$ 600	20	$510	$7,020
Heat Pump	$1200	20	$190	$3,670
Indirect with Boiler	$ 700	30	$150	$2,253
Solar with Electric Back-up	$2500	20	$140	$3,445

A second quibble is your admittedly likely offhand estimate of electricity costs over time. There is actually some historical data available, and using the BLS.gov inflation calculator to compensate it is possible to yield an approximate average of cost per Kwh for at least the last 20 years:

http://www.eia.doe.gov/cneaf/electri...es_revenue.xls

	Average Retail Price Residential (c/kWh)	Adjusted to 2009 equiv. Dollars bls.gov
1990	10.26	16.95
1991	10.53	16.70
1992	10.89	16.76
1993	12.28	18.35
1994	12.44	18.13
1995	13.33	18.89
1996	14.25	19.61
1997	14.81	19.93
1998	13.82	18.31
1999	14.28	18.51
2000	16.40	20.57
2001	16.34	19.93
2002	15.61	18.74
2003	16.74	19.65
2004	18.05	20.64
2005	20.66	22.85
2006	23.33	24.99
2007	24.08	25.08
2008	32.48	32.58
2009	22.90	22.90
Average		21.58

Of course it is impossible to speculate what the 1980 to 1989 prices are, but it does seem likely that the averages for those years is lower than the overall average hence would likely push the full 30 year average closer to 20 cents/Kwh in 2009 dollars.

This would in turn lead to 2009 to date savings of 4000 Kwh * $0.20 * 30 = $24,000.

Assuming a similar trend in electricity cost growth using purchasing power equivalent dollars for the next 20 years, your estimate of $50000 savings by using solar seems reasonable give or take 20%.

Lastly I'd note that $3000 in 1980 is not equivalent to $3000 in today's dollars. Using BLS' inflation calculator - the 2008 equivalent to that $3000 is $7862.95 in 2009 dollars. I am also curious as to the amount of the rebate in 1980 - while it was not spent by you certainly it was spent by someone! As water heaters are supposed to last an average of 13 years, it seems likely that actual replacement costs over 50 years will run more in the $10K range.

Certainly a good investment for Hawaii; switching to mainland usage patterns reduces the net benefit considerably.

Conventional reroof at least twice over 50 years, -50,000
elastomeric roof, first time -12,000, -2,000 touch up coat every decade, total -20,000 over 50 years, for a saving of +30,000
House is cool, so air conditioning need greatly reduced or unnecessary, say +1,000 per year for 50 years for a total of +50,000?
(When bifacial photovoltaics installed, white roof will reflect more light on panels, boosting output by 20%, so let's say conservatively a benefit of a few thousand dollars)
Running total +124,000

The photovoltaics are very difficult to even ballpark. We could easily see the cost drop by 50 to 75% in a few years due to economies of scale and better designs and improvements in light conversion efficiency (prototypes are now at 40%!).
Smaller photovoltaic system -10,000 (tax credit not included)
replacement after 25 years -5,000? (maybe tax credit phased out)
saving about 600 dollars per year over 50 years saving +30,000
Running total would be +139,000

Larger photovoltaic system -25,000 (tax credit not included)
replacement after 25 years -10,000? (maybe tax credit phased out)
saving/feed-in tariff +4,000 per year over 50 years +200,000
Running total would be +304,000

Again, the initial outlays need to be adjusted. After all, that same amount of money put into a 30 year Treasury bond in 1980 would have yielded a considerable amount.

As for the cost reductions - the cost per Kwh is likely to go down some over time but I am not sure clear that the actual out of pocket cost will change all that much.

The solar industry today reaps significant benefits from the economies of scale of the semiconductor industry.

The semiconductor industry is going through major secular changes implying significant reductions in said economies of scale.

The equipment being used furthermore has generally a lifetime of 20 years given the most heroic efforts (this from someone in the industry).

This means that in 5 to 10 years, the bulk of the highest volume, lowest cost, and fully depreciated semi equipment will simply fall apart. Replacement of this equipment is nontrivial - the capital budgets of all the major semiconductor companies as well as fabs for the past 15 years were previously devoted to this goal. These machines aren't like making tractors; each one is literally a Ferrari Fxx series equivalent in craftmanship and cost.

[mooncliff]

Re: Alternative Energy: Building a New Future or Reaping Taxpayer subsidies?

In general I don't disagree with the willing to invest up front in order to save overall.

But it is important to compare apples to apples.



I assume you refer to an average savings of $1000 a year?
Mooncliff: Yes. Our electric bill is $50 whereas neighbors' are $150 plus if they do not have a solar water heater. $300 to 400 is not uncommon if you have a conventional roof and the house is hot so you use the air conditioner a lot. So I mean a savings of about $100 a month, which I think is conservative.
or perhaps the present equivalent dollars to the electricity saved over a 50 year span?

Because if the baseline is $1000 saved in one year - this year - then your assertion is that the water heater uses 333 Kwh/month or 4000 Kwh/year.
Mooncliff: Yes, I think that is quite typical. Also, since the elastomeric roof prevents the house from heating up, we don't need air conditioning, or would use it much less.

Electric water heaters are also the most expensive way to heat water - this exaggerates the relative savings vs. those who are able to use natural gas/heating oil - likely an artifact of Hawaii's energy infrastructure:
Mooncliff: Yes, we do not have municipal gas, so the only choices are solar water heater or electric. If you have natural gas, it is much cheaper. My tankless gas heater in Japan is consuming less than $20 per month of municipal gas.

http://www.energyguide.com/library/E...ubjectID=10170



A second quibble is your admittedly likely offhand estimate of electricity costs over time. There is actually some historical data available, and using the BLS.gov inflation calculator to compensate it is possible to yield an approximate average of cost per Kwh for at least the last 20 years:

http://www.eia.doe.gov/cneaf/electri...es_revenue.xls



Of course it is impossible to speculate what the 1980 to 1989 prices are, but it does seem likely that the averages for those years is lower than the overall average hence would likely push the full 30 year average closer to 20 cents/Kwh in 2009 dollars.
Mooncliff: Yes, I assumed something like 20 cents. It spiked to 30 cents per kilowatt-hour last year. On some of the outer islands, it was 50 cents per kilowatt-hour. I do not know what will happen to energy costs in the future, but I am assuming that since the cheap oil is gone, all fossil fuels will rise. One of my friends in Pennsylvania said that coal had become so precious that they were remining slag heaps because the coal they could get there was better and lower sulfur than what could be easily mined. When I lived in New York, there was a pile of coal in the basement from a century ago that had no sulfur and was of excellent quality that everyone there said could no longer be bought. I took this to mean that cheap high quality coal is also becoming rare.

This would in turn lead to 2009 to date savings of 4000 Kwh * $0.20 * 30 = $24,000.

Assuming a similar trend in electricity cost growth using purchasing power equivalent dollars for the next 20 years, your estimate of $50000 savings by using solar seems reasonable give or take 20%.
Mooncliff: I expect electricity to go up over the next decade and then decline as more wind and solar feed into the system, so it may turn out to be less.

Lastly I'd note that $3000 in 1980 is not equivalent to $3000 in today's dollars. Using BLS' inflation calculator - the 2008 equivalent to that $3000 is $7862.95 in 2009 dollars. I am also curious as to the amount of the rebate in 1980 - while it was not spent by you certainly it was spent by someone! As water heaters are supposed to last an average of 13 years, it seems likely that actual replacement costs over 50 years will run more in the $10K range.
Mooncliff: The nominal cost in 1980 was 3,000 dollars. After tax credits, it was 1,500 dollars, so I rounded off to 3,000 dollars in current dollars. The original solar water heater from 30 years ago is still working fine, but I am assuming I will have to replace it at some point.

Certainly a good investment for Hawaii; switching to mainland usage patterns reduces the net benefit considerably.
Mooncliff: Yes, the benefits go to where it is sunny first and where energy is expensive first and then work their way northward. But certainly a lot of this applies to the southern US, and as I expect fossil fuel cost to rise, Hawaii is an example of simple things that can be done to cancel that. If I could get a house to zero net energy use for a reasonable cost, say currently 5,000 for a solar water heater (evacuated tube models have solved the freezing problem) and say 15,000 for photovoltaics, you would at least have very low utility bills for 20 years at minimum. I just wanted to suggest things that might be useful to know. The evacuated tube water heaters actually sell for around $1,000 in China, and photovoltaic systems could drop to $5,000, so that would drastically change what is practical even in New England.

I know Hawaii has energy resources not available in many places (we used to think it was a curse because it was so damn hot, but it may turn out to be a blessing), but as the costs drop (and photovoltaic panels have dropped by about half in one year), we might find that trying to get your house to zero net energy use pays for itself relatively quickly.



Again, the initial outlays need to be adjusted. After all, that same amount of money put into a 30 year Treasury bond in 1980 would have yielded a considerable amount.
Mooncliff: Yes, that is true, but I have always been interested not in making money, but in getting resources such as hot water. What I want is hot water, electricity, a cool house, an intact roof that does not leak, low insurance rate, etc. If I can invest and get resources for free, I will take it because it is a sure bet. On the other hand, you are right... if I had bought 10,000 in Berkshire Hathaway, that would now be 30 million plus?

As for the cost reductions - the cost per Kwh is likely to go down some over time but I am not sure clear that the actual out of pocket cost will change all that much.
Mooncliff: Yes, with wind and solar, I expect rates to go down somewhat and then really fall after 2020.

The solar industry today reaps significant benefits from the economies of scale of the semiconductor industry.

The semiconductor industry is going through major secular changes implying significant reductions in said economies of scale.

The equipment being used furthermore has generally a lifetime of 20 years given the most heroic efforts (this from someone in the industry).
Mooncliff: Yes, but I am guessing that some kind of thin silicon or thin film will supplant this within 5 years.

This means that in 5 to 10 years, the bulk of the highest volume, lowest cost, and fully depreciated semi equipment will simply fall apart. Replacement of this equipment is nontrivial - the capital budgets of all the major semiconductor companies as well as fabs for the past 15 years were previously devoted to this goal. These machines aren't like making tractors; each one is literally a Ferrari Fxx series equivalent in craftmanship and cost.

Mooncliff: Yes, the photovoltaics may not drop as much as wished. For large scale plants, I think solar thermal will be the most practical. On the bright side, we are at the really obvious exponential part part of the progress curve, so once things get going, they can improve 10 times in just a few years. I expect conservation, such as replacement of most lighting with LEDs, to play a huge part in keeping energy costs down. I just looked at some new LEDs tonight, and the lumen output jumped by 50% in just one month.

What I hope is that everyone will step way back and look at the technical solutions and then watch the technologies as the prices drop and grab them as they start to make economic sense. This requires some preparation and a lot of poking around.