There is a decision we have been pondering about for awhile now: Shall we make the investment into some form of renewable energy technology?
In principle, pairing the super energy efficient Passive House principles with renewable energy only makes sense, and it's being recognized in separate certification classes under the Passive House Institute system as well. It makes even more sense when you think about being eco-friendly, reducing the carbon footprint, climate change mitigation, rising energy prices, etc.
Practically, however, it comes down to the financials for us. Does the investment make sense over time? Is there even a reasonable return on investment?
One form of renewable energy we are contemplating are solar systems.
Solar systems
When we think of solar systems, we tend to think of the panels facing the sun on a building's roof. Of course, the panels need to be connected to the rest of mechanical systems of the house. But there is much more to such a system than what meets the eye from the outside of the house.
There are two basic types of solar systems:
Solar Photovoltaic (PV) Systems that convert the sun's radiation into electricity;
Solar Thermal Systems that are used to directly heat water or air used by the house.
Solar PV systems are the more common type in our area, because they are more efficient in the winter when there is less sunlight and can't freeze during cold spells. The electricity gained from these systems can also be used for different purposes around the house (essentially powering all your electrical needs) whereas solar thermal is only used for hot water generation. There are good reasons for choosing either system or even a combination of both, that's entirely dependent on your very own project. For our project, the solar PV option is the preferred candidate.
The solar PV system itself consists of many more components that need to be considered as part of the design, installation and cost:
First, there are the actual panels which come at different price points and capacities. The panels are mounted to a rack system that sits on top of the roof. If your roof is slanted and facing south, this may be a rather simple and flat racking structure. If you have an almost flat roof like ours you will need to angle the panels towards the sun with a more complex racking structure (static, fixed angle). Some racking systems are even designed to "track the sun" and tilt the panels throughout the day and the seasons, but this is rare for a residential home.
The roof, and in fact the whole house, need to be engineered to hold the additional weight of the panels, the racking system and any additional ice, snow and wind loads. The panels on the roof are connected via cables to an inverter that ties into your electrical system in your utility room. Depending on the system size and configuration, there may also be the need for power optimizers that balance the panels' output and optimize the system's overall efficiency. And if you plan on storing some of the unused energy produced during the day for use at night, you will need to have a battery bank too. Finally, the system needs to be designed, installed, permitted, inspected, and, most likely, connected to the municipality's electrical grid.
Quite a lot to consider, right?
As you can tell from this list, a solar PV system is much more than just the panels on the roof. This means proper planning is required and your budget will need to consider the overall system, from the parts to all the related services and connections.
System Capacity and Energy Consumption
The solar system capacity will largely depend on three main factors:
How much energy your household is consuming and how much energy you want to produce with the solar system. For us, this already proved a bit of a challenge because the final energy demand of the house has not been fully calculated yet. Some details are still in the design phase. But while the exact number may not be fully known, you can work with estimates or averages for similar type and size homes in your area. Ideally, this can be planned out in full detail, but one variable will always remain: How will your energy consumption develop in future? Are you planning to buy a hybrid or electric vehicle you want to charge in your garage or thinking about buying a hot tub down the road?
How much space you have on your roof to fit the panels on. All custom homes and properties are unique, and there is limited space to install solar panels on any roof with enough sun exposure. The number of panels you are able and willing to fit will ultimately dictate the system output as well.
Your budget. There are smaller DIY style starter kits to fully custom designed systems for your particular project needs with high end components from name brand manufacturers, so the price range is huge. A system that is designed to maximize the power output will cost you a significant up front investment. However, the system efficiency and output should play a major role in your decision.
There are professionals that design and install solar systems as their main business so it's best to have them draw up options for your house. And if possible, try to obtain competitive quotes from multiple suppliers or contractors.
Energy Storage, Net Metering or Feed-in Tariff?
The problem with most renewable energy systems is the difference in timing between supply and demand. When you want to watch TV at night and have the lights on, the solar PV system is not producing any electricity as there is no sunlight at night. So what are the options to address this problem?
One option is to store the energy produced by the solar system on site. This requires batteries. While this adds more cost to your system up front (and maybe some maintenance and also environmental concerns), the advantage is that you can balance the supply and demand within your own system. Many off-the-grid properties are using this type of solution. Energy storage is a huge issue globally and while there are ever faster innovations in battery technology, we also need to be aware of the challenges that come along with batteries themselves, their raw materials, production and recycling.
The other two options are available when connected to the main power grid operated by the utility and will depend on what the utility itself is offering in your area. Feed-in-tariff or FIT means the utility pays you for any electricity that you feed back into the main grid when your own production is high during the day. The rate at which you sell is most likely less than what you would pay for electricity from your utility, unless there is a subsidized program (not available here unfortunately). The other option is a trade off between the utility and you of electricity units, meaning for every kWh you provide the utility, the utility provides you a kWh for free later. This is called Net Metering under the Toronto Hydro utility system in our area.
For us, the net metering would make the most sense because we would get credits from the utility in energy units as opposed to selling our power for cheaper than we buy. At the same time, we won't need to invest in or maintain a battery system in our house as the utility essentially becomes our battery bank.
Return on Investment
The question is simple: How soon can you offset the initial investment into a solar PV system by using your own energy instead of paying your utility provider?
The answer is not so simple...
What we can calculate today is the solar PV system output annually and how much we currently pay for energy. This puts us on a very long track for a return on investment, in our case 25+ years.
Then come the variables...
How long are you going to stay in your home? This can be a tricky discussion when you're just in the process of building your new dream home. Selling it may be the furthest thing on your mind right now. We have decided that any return on investment calculation should not exceed a period of 10 years maximum; the earlier the better of course.
Is the resale value of the home increasing by using a solar PV system? The answer is probably yes, but to what extent is very unclear. There aren't any real benchmarks or comparables to go by, but we believe it's fair to assume a slight increase in resale value, and probably one that increases as energy efficiency in homes becomes more and more prevalent in future.
How are energy prices going to develop? It's clear that energy in North America is still relatively cheap compared to Europe, for example. At the same time, it's clear that energy will become more expensive over time, but by how much? Should you calculate with the general rate of inflation or are there other indicators that would show a higher or lower price escalation? We have found articles about the projection of energy cost in Ontario over the next decade and have decided to base our calculation on a medium range between annual inflation and projected energy cost increase.
Is there any financing support? Unfortunately, most of the subsidized programs have been cancelled in Ontario since 2018 and the boom for wind and solar farms has come and gone. But there are some options still available that indirectly help with the investment by lowering some of the financing cost. In some cases, this may already be enough to tip the scale in favor of a positive decision for renewable energy.
Each project will have its own calculation and return on investment projection. With the current situation and projections figured in, our ROI is still beyond our own goal of 10 years. We also suspect this is still the case for many other residential customers --- in talking to friends, they have also not found a positive ROI. But this does not make it a clear decision! The difference in the investment here could be justified with increased resale value of the property down the road, more idealistic benefits about climate change, really embracing the energy efficiency and sustainability, and so on. One benefit this investment has over others, e.g. picking a fancy laundry room counter top, is that it keeps on giving over time.
And so here we are, pondering our decision...
Final Thoughts
There are clear positives for a solar PV system, in particular the very low maintenance needs and the ongoing payback of producing your own energy. At the same time, the manufacturers' and installers' warranties are really long. The panels itself have a standard warranty of either 20 or 25 years, so the technology is stable and mature that it will work for a very long time.
Political changes may offer new programs in future that can be taken advantage of. While the current programs leave a lot to be desired for residential customers like us, there may be more rewarding programs in future once politicians start pushing the energy efficiency agenda. This could further change the financials and improve the return on investment.
The power grid of the future will look very different from what it does today. Many of us have heard of such terms as "smart grid", "microgrids" or "prosumers". Eventually, the generation of power will become more and more distributed and utilities will need to find a way to integrate all those sources successfully and meaningfully into the grid and redistribute it to where it's needed when it's needed. This may also change the perspective of politicians, utilities and homeowners.
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