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How Does PV Work?

Solar electric or photovoltaic (PV) systems are a simple, relatively maintenance-free way to use the sun to generate renewable energy. Photovoltaic solar panels use the light energy of sunlight to generate electricity. They do not use the heat of the sun. There are no moving parts in most grid-tied (utility connected) PV system. Unless there is a need for backup when there is a utility outage, grid-tied PV systems do not use batteries. They typically last for 35 – 40 years and, during that time, they require very little attention by the system owner.

What Do They Look Like?

The typical system uses crystalline PV panels that consist of 60 or more small PV cells in a metal frame. The frame is covered in specially designed glass. Each panel is approximately 5.5 ft long by 3.3 ft wide. A small residential system will typically use at least 10 to 12 panels. But, PV systems can be installed in a variety of sizes to match a customer’s electric usage, available shade-free space on the roof or the property and/or the customer’s budget.

PV systems can be installed on rooftops or on pole mounted racks on the ground. Which type of system is installed depends on where there is available shade free space and which kind of system the customer prefers.

For rooftop systems, there are many mounting options depending on the slope of the roof and the type of roofing material. For sloped roofs, the racking or brackets holding the panels is fastened to the roof rafters or trusses. The roof penetrations are sealed to be watertight. For sloped standing seam metal roofs the panels can be clamped directly to the standing seams of the roof without penetrating the roof.

On flat roofs, typically on commercial buildings, the solar panels can be mounted in racks which are weighted down by masonry blocks. So, the entire system can be installed without penetrating the roof at all!

How much does the Utility Pay you for Your Solar Electricity?

Small to medium sized grid-tied PV systems are connected as net metered systems. The solar electricity goes directly into the electric panel in the building. If you can use it, it feeds electric loads in the house first. So, you avoid buying the power from the utility. If you have extra solar, it goes back to the utility and runs your meter backwards. When you need power and you don’t have enough solar, you buy power from the utility and run your meter forwards. In this setup, the utility acts as your battery bank. If your meter shows a credit at the end of the month (typically in the summer), the utility will hold this credit for you to use up over the next 12 months. So, you get full retail credit for all the solar you produce. In addition, all Vermont utilities are now required to pay you an additional amount for all the solar electricity you produce (solar adder) so that your total benefit from the utility is 20 cents per KwH in 2011. Keep in mind, that as the utility rate goes up each year, so does the benefit you get from the utility.

Incentives and Tax Credits

The Vermont state incentive is currently at $0.75 per watt of installed solar capacity for systems up to 10 KW (residential scale) and $0.60 per watt from 10 KW to 60 KW. There are higher incentive rates for non-profits and religious institutions, since they cannot take advantage of tax benefits.
For residential customers, the incentive is paid directly to the customer, typically 4 weeks after the system is completed. For all other customers, the incentive is paid to the installer who does not charge the customer for the incentive.

The energy bill which passed the legislature this past May provided for stable funding for this program. So, these incentive rates are now likely to remain stable for quite a while.
There is a federal tax credit of 30% available for both residential and commercial customers. This tax credit can be carried forward up to and including tax year 2016. So, for systems installed this year, you have six tax years to use up the 30% tax credit. For businesses who invest in a system by the end of this year, the 30% federal tax credit can be taken as a Treasury grant. Instead of having to take this tax credit off your business taxes, you can simply get a check from the US Treasury 30 – 60 days after the system is installed. You get your money back more quickly and you can save your tax liability for some of the other tax benefits available to businesses who own a solar PV system.
Businesses can depreciate the total cost of the PV system on their federal taxes in either one or five years, whichever works out best. So, if your business pays taxes at a rate of 20%, this benefit can reduce the system cost by 20%!

Businesses in Vermont can also take a 7.2% business solar tax credit. This tax credit, unlike the larger state tax credit that was available a year or two ago, does not require any kind of certification and is not at risk of losing funding.

The Economics of Solar PV

This year, 2011, is a very good time to invest in a solar PV system, for either your home or your business. The cost of solar materials has just taken another step down. This, combined with a stable state incentive program makes PV systems more affordable than ever!

Basic facts to think about:

By investing in a PV system you are, essentially, buying 35 – 40 years of electricity at a rate cheaper than what you are paying now for your electricity! At DC Energy, we call this the Secured Cost of Energy. See the graphs showing what the Secured Cost of Energy looks like for a typical residential and typical commercial system.

When we talk to potential customers, we like to present them with a conservative economic analysis which includes the Secured Cost of Energy for their system. This assumes that the system will only last for the 25 year solar panel warranty period and will only perform at the warrantied performance level. For residential systems, the secured cost of solar electricity, averaged over the 25 year period is typically in the 12 cent per KwH range. For businesses (who can take advantage of more tax incentives), this cost can be anywhere from 4 to 8 cents per KwH. Residential customers in Vermont will get 20 cents per KwH back from the utility for all their solar electricity. This 20 cents will increase every year as the utility rate increases. The cost of solar will not go up as it is based only on the initial investment in the system. Non-residential customers will typically get anywhere from 13 to 20 cents per KwH for their solar, depending on their electric rate structure. Again, the benefit from the utility will go up every year, while the cost of the solar will remain stable.


So, here is the economics of a sample residential system. This is a 5 KW roof mounted system with a minimal amount of shading which is estimated to produce 5,200 KwH per year in the first year.

Installed Cost =     $25,000
State Incentive =    – $3,750
Federal Tax Credit = – $7,500
Net System Cost =  $13,750
Cost of Solar Electricity = 11.7 cents per KwH
Net Benefit from the Utility = 20.0 cents per KwH
And here is the economics of a sample small business system. This is a 25 KW roof mounted system with a minimal amount of shading which is estimated to produce 26,500 KwH per year in the first year.








Installed Cost =         $105,000
State Incentive =        – $16,500
US Treasury Grant =     – $31,500
VT State Tax Credit =      – $7,560
Depreciation Tax Benefit = – $21,000 (assuming a 20% tax rate)
Net System Cost =       $28,440
Cost of Solar Electricity = 4.8 cents per KwH
Net Benefit from the Utility = 13 to 20 cents per KwH







As you can see, PV is a good long term investment for your home and a superb investment for your business! Remember, the above economics are meant to be conservative. But, each customer is different. If you are interested in producing your own power from the sun, we are happy to work with you to figure out how solar PV can work with you.
Ben Gordesky is the Renewable Energy Manager at DC Energy Innovations, Inc. DC Energy is an installer of solar PV and wind energy systems as well as a full scale electrical contracting company. If you have any questions about the content of this article, feel free to contact Ben at 802-363-1474 or by email at
Green Energy Times wants to thank DC Energy for their excellent efforts to gather this information that can help you in your decision to move into our future with clean, reliable, renewable energy!

By Ben Gordesky, DC Energy Innovations, LLC
GET Aug2011 page 9

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