Bang for Your Buck: Solar Subsidies

New Mexico's Public Service Co. has just announced that they will buy electricity from small solar electricity operators (less than 10 kW) at a rate of $0.19 / kWh. Compared to German subsidies of about $0.45 / kWh (US funds), this seems fairly small.

But is it?

Let's bring RETScreen to the party, and compare identical installations in Stuttgart, Germany to Albuquerque, New Mexico. Both locations are pretty close to optimal at an installed slope of 30^o -- i.e. a roof. The Albuquerque PV installation will receive 2290 kWh/ m²year while Stuttgart only gets 1300 kWh/m²year of insolation.

Looking at commercial solar panels, I'll pick the Kyocera KC-120 because it's in RETScreen's database and the list price of $4.05 / W_peak is one of the lowest available. I'll buy sixteen panels total, to keep my costs around $10,000. That means I need a 1800 W inverter, which goes for about $1700. I'll assume that it's a Do It Yourself installation, and that wiring and mounts cost $50 / m². My total capital cost then comes out to $10,214.

This installation will deliver 3566 kWh/year in Albuquerque, worth $680 / year. This compares to 2092 kWh/year in Stuttgart, worth $942 / year (depending on the exchange rate). So we can see it's still a no brainer to build in Germany and suck off the hind tit of the taxpayers there. The Stuttgart installation will actually make $13,336 over 25 years of operation. The New Mexico investor only makes about half that, $6,786. In both cases, I'm assuming stable cough electricity prices and subsidies. The rates of return in both cases are excellent if you can get a fixed-rate low interest loan.

I also want to know what the marginal cost of CO2 is for either location, through offsetting coal fired electricity production. The cost of the subsidy in New Mexico is $0.11/kWh versus something like $0.30/kWh in Germany. (Aside: electricity prices to consumers in Germany include extra taxes which pay for the subsidies. This makes it difficult to figure out the real price. I figure it's about 0.12 Euros/kWh.)

The general rule of thumb for coal is one kilogram of CO2 per kilowatt-hour. Our New Mexico solar panels then are offsetting 3.6 tons of CO2 annually versus only 2.1 tons in Germany. Hence PNM is paying a marginal cost of $115 / ton of CO2 versus $315 / ton by the German government. Since carbon credits are currently trading for only $35 / ton this doesn't represent a good investment by either government on that count. Still, for New Mexico, it compares with the marginal price of wind in Ireland, from one study I've seen.