Net Metering and the Cost of Heat Pumps and Solar Panels in New Hampshire.

Q1. Sustainability of Net Metering

I asked a question about the longevity of the net metering program and Lori framed it as somewhat of a political question. I was trying to ask a question more about energy markets and energy storage. If enough people get solar, the supply of solar electricity at the time of production may exceed the demand. As far as I know, there is no cost effective way to store this excess energy on a large scale. Without storage, the excess energy becomes worthless and as you said, the financials of the net metering program will fall apart. 

Here’s a link to one article:
I suppose my questions would be: do you know of any data that suggest a time line for the decrease in value of solar energy? I guess most importantly would be whether the net metering program will change before the pay back period of the system (say 10 years for talking purposes). Or maybe there’s data that say even if there are solar panels on every roof, the production will still not exceed the daytime energy demand, in which case the net metering program can be considered more or less safe. 

A1: I think there are two questions here: the first is for how long is net metering (as currently practiced in MA) sustainable and the second is can excess solar power be cost-effectively stored at grid scale?

The economics of net metering are very unfavorable to the utility company. By law they are forced to buy solar electricity from homeowners at the full retail price (in MA about 23c/kWh) when they can buy it from a power station at about 8c/kWh. This is a subsidy from all ratepayers to those ratepayers who have solar panels. This can only work as long as the amount of solar power subject to net metering is small compared to the total amount of electricity being consumed. This is true today but is becoming less so as more solar power is installed on rooftops and more commercial-scale solar panel farms are being constructed to supply community-sourced solar power as an option to ratepayers. Eventually the utilities will seek to negotiate less favorable terms for net metering. This is a negotiation with the government and hence things will move slowly. I do not expect net-metering to go away, probably ever, but I do expect to see its generosity to the homeowner decrease over time. The net-metering credit rate is already cut back to 60% of the retail value for arrays over 10kW in size. It also already excludes some taxes and fees and  it excludes the monthly fixed charge of $7 per month. In other states net metering is already far less generous than it is in MA. Of all the subsides for solar panels in MA, the federal tax credit, the state SMART subsidy and the net-metering subsidy, net metering is the biggest of all three. 
On the second question about can excess solar electricity be cost-effectively stored at grid scale the answer is yes. Both California and Australia have installed very large batteries to store excess electricity. In MA, Eversource (our utility company) is doing something similar by paying homeowners to have access to their home-based back-up batteries during times of peak demand on the grid. The program is called Connected Solutions and it seems to be quite generous. I have recently placed orders for two new solar panel arrays each with batteries to replace broken propane back-up generators. When a battery is installed with fairly large solar panel arrays (over about 10kW) the combination now pays for itself in seven or eight years. 

Q2. Heat Pump Efficiency

I asked a question about estimating the required electricity to run heat pumps and your answer was to calculate the heat energy contained in the oil I burned this winter (in kWh) and divide by 2.5. This makes sense to me since a 2.5 COP corresponds to a heat pump HSPF of 8.5, which I believe is fairly standard. I’m a little confused by the section of your book where you talk about heat pumps having 400% efficiency, or COP=4. Is this a theoretical value that maybe does not account for the electricity required to run the fans? Or is this based on a very efficient heat pump with HSPF=13.6?

A: In the book I do refer to heat pumps being 400% or 4x as efficient as a furnace. This is true for a heat-pump hot-water heater and a heat pump for heating a swimming pool. When I wrote the book I thought it was also true for heat pumps for heating the air in a house. However, since writing the book, research has been published by well-regarded scientists that shows that the year-round average COP in New England is about 2.5. In the webinar I now use 2.5, not 4.0. When I measured the real, year-round COP on my two houses the one with the Bosch heat pumps has a COP of about 3.0 and the one with the Mitsubishi heat pumps has a COP of about 2.5. This is very similar to what was found by the academic researchers i.e., that ducted systems were more efficient than ductless systems and that Bosch was more efficient that Mitsubishi. These numbers include the electricity to run the fans as well as the compressor.

Q: Along the same lines, you talk about how it only makes sense to heat using heat pumps if you have cheap solar electricity. However, if utility electricity in MA is 23c/kWh, doesn’t that mean you’re making heat with heat pumps for 23/2.5=9.2c/kWh, making it only slightly more expensive than heating oil (6-7c/kWh)? 

I agree with you that the cost of heating the house is 23c/2.5 = 9.2c/kWh of heat in the house. Heating with heating oil (which contains about 40kWh of heat per gallon) at $2.59 a gallon (what I am currently paying) with an 85% efficient furnace (better than my dinosaur furnace) means that heat in the house costs about 8c/kWh. So paying 9.2c/kWh of heat in the house by using heat pump on utility electricity is about 15% more expensive than heating with oil. If you can achieve a COP of 3.0 (as I do with my Bosch ducted heat pumps) then the cost of heating the house is almost exactly the same as heating with heating oil. For me it was actually a saving because my dinosaur furnace is only about 75% efficient. However, even if the running cost is the same, you have to buy a new heat pump whereas you already have an existing furnace. This is why I recommend you install heat pumps when your AC units fail not when your furnace fails. Replacing a broken AC unit with a heat pump is about 40% more expensive than replacing it with a new AC unit. But now you get heating and cooling. However, leave the old furnace in place so you have a back-up heating system should the heat pump not be able to heat the house in very cold weather and so you have a heating system during grid outages. Note that you will still need either a back-up generator or a battery so that you can run the pumps and fans on electricity during the grid outage. If you don’t do this you will have a hot furnace and a cold house. 

3. Solar Financial Feasibility
I am having some trouble getting the financials of solar to make sense. I am using the numbers you  provided in your book as a general measuring stick (ie the array should produce at under 10c/kWh, and you have seen quotes down around 5c/kWh). I am in NH, and it seems one of the huge differences between MA and NH is in how SRECs are handled. I spoke with an installer today who said the current value of an SREC is NH is $5. Over 25 years, this adds up to about $1200, which stands in stark contrast to the $29000 in your book. (I have read a few articles about how the program is broken in NH because utilities are allowed to collect unclaimed SRECs for free, which depresses their value). Without this benefit, it looks impossible to me to get the solar electricity cost down to 1/3 of the utility cost, which is around what you quoted in the book. 

The value of an SREC in MA is currently about $250/MWh so it is very different to NH!

Q: Here are some numbers, which are roughly accurate. I just received a quote for a 11.1kW system for $27000 (after the federal income tax credit). Production over 25 years is around 238,000 kWh, which works out to be 11c/kWh. 

Current utility rates from NHEC are around 15c/kWh and the net meter rate is around 10c/kWh. Assuming the system produces enough power that there are always net meter credits to work with, the cost of power when the system is overproducing is just the system cost (11c/kWh) and the cost of power in the winter when the system is underproducing is the system cost plus the difference between the utility rate and the net meter rate (11+(15-10) = 16c/kWh). When using heat pumps, a large % of annual power consumption happens in the winter. As far as I understand it, this power actually costs 1c/kWh more than the standard utility rate. But maybe this really doesn’t matter since, as discussed above, if I’m using a heat pump with COP=2.5, then the cost of heat is 16/2.5=6.4c/kWh, which is basically the same as oil. One of the points you make in the book is that the cost of solar electricity is fixed. However, if you are using a lot of electricity through the net metering process, you still have to buy this electricity at the utility rate. 

A: NH has much lower utility rates than MA. This is in part driven by all the subsidy schemes like full-retail-price net metering, SMART and Connected Solutions which drive up the price of electricity for all the MA ratepayers who are not taking advantage of the subsidies. So you are getting a net-metering credit of 10c/kWh on the excess solar electricity you produce in summer but are paying 15c/kWh in winter when the heat pumps are used the most. This suggests a slightly different version of the Fab Four recipe for you. I would invest much more in lowering the energy use of your house such as great insulation, air-sealing and upgrading you windows. Then, when your AC units fail, replace them with heat pumps and add solar panels if it is cost-effective, which it may not be. With such cheap electricity, you may be better off financially using a heat pump (after insulation and air sealing) and replacing your gasoline vehicles with EVs rather than getting solar panels.

Q: My conclusion here is that without significant SREC value in NH, there is no way for me to push the cost of solar low enough to be a great investment when compared to other investment opportunities (granted, I haven’t done a detailed financial evaluation yet). On the plus side, I don’t think I will lose money here, and it obviously still makes tremendous sense in terms of cutting carbon. Would you agree with this conclusion? Or would you consider cheaper solar panels (ie not LG, Sunpower, or Panasonic) here to try to improve the economics (I have received a quote using REC panels that is closer to 8c/kWh)?

A: REC makes a great panel – I almost bought it until my installer decided to quit installing batteries, since I wanted a battery I had to get a new installer. The new installer gave me a better deal on Solaria panels at about 6c/kWh including a battery. At 8c/kWh and COP 3.0 you would be heating the house at 2.7c/kWh of heat in the house which is 1/3 of the cost of heating with heating oil and about half the cost of heating with natural gas. This is roughly the situation at my house. I heat with a heat pump, cook on induction, run a heat-pump hot-water tank and drive my Tesla, all charged with the cheap electricity from my solar panels. All with a zero carbon footprint.