2.5. Incentives to Reduce Costs
Financial incentives are available from the Energy Commission, the CPUC, and several local utilities and
municipalities throughout California to reduce these system costs. The CEC buydowns are calculated by
multiplying $4.50 times the adjusted peak dc power from the system in Watts (up to a maximum of 50% of
the system cost). This buydown is available for all Pacific Gas & Electric (PG&E), Southern California Edison
(SCE), and San Diego Gas & Electric (SDG&E) customers. Some municipal utilities in cities such as
Sacramento, Los Angeles, Palo Alto, and Roseville provide the same or even higher incentives.
This level of rebate can reduce the cost of systems by 30 to 50 percent or more and result in much more
favorable economics for the owner. An owner can incorporate a basic 1 kW solar power system for as little
as $3,000-$5,000. If the system is included in the mortgage of the home, this small increment in house
payment may be offset by an equivalent reduction in the monthly utility bill.
2.6. Estimating Electrical Energy Savings
One of the key benefits of residential solar power systems is a lower electric utility bill resulting from the
energy that the solar system produces. The energy savings to a homeowner can be estimated by simply
multiplying the annual energy in kWh that a PV system might produce times the utility electric energy rate.
These rates vary by local utility, and are likely to increase from their current values. Estimated energy
savings from small and large PV systems in Southern California are presented below to illustrate the kinds of
savings that can be achieves.
Sample Annual Electric Utility Bill Savings
Solar Utility Electric Energy Rate
Array
(STC)
Estimated
Annual
Energy
$0.10 /kWh $0.15 /kWh $0.20 /kWh $0.25 /kWh
1.2 kW 1687 kWh $168.70 $224.93 $337.40 $421.75
4.0 kW 5624 kWh $562.40 $843.60 $1,124.80 $1406.00
2.7. Supplier and System Qualifications
When choosing a supplier and specifying a PV system, the following are a series of general guidelines to help
guide the decision-making process.
2.7.1. Pre-Engineered Systems
When a owner considers an HVAC system for a home, they do not buy a compressor from one manufacturer
and a cooling coil from another company, and a fan from a third company and then put these pieces together.
The equipment manufacturers have engineered a packaged system that is designed to work together. Each
model of a home may need a slightly different unit based on the size and layout, but those variations have been
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June 2001 Page 11
designed into the product. In the same way, the components of a PV system should be engineered to work
together as a unit accounting for variations in system size for different homes.
Since the PV industry is in the early stages of development, there is a wide range of competency levels among
PV system integrators. Unless the installer is familiar enough with the technology to recognize whether the
system integrator is competent, it is much safer to stay with a firm that provides pre-engineered systems. Preengineering
may not guarantee a flawless system, but the concerns over product compatibility and specification
of individual components have been addressed in the system design.
2.7.2. Warranties
There are several types of warranties that come with a system or can be purchased in addition to a standard
warranty. These include (1) product warranties covering defects in manufacture; (2) system warranties covering
proper operation of equipment for a specific time period (5 or 10 years); and, (3) annual energy performance
warranties covering the guaranteed output of the PV system. The installer, to guarantee proper system
installation, often covers the system and annual energy performance warranties.
Product warranties:
It is common these days to see warranties on PV modules of 20 or more years. Although this is impressive and
indicates the level of confidence manufacturers place in the longevity of their products, there are many other
components in these systems that may not have the same life expectancy. Inverters may have 10-year, fiveyear,
or even one-year warranties. This must be considered when reviewing the cost of inverters and other
system components.
System warranties:
It is equally important to look for entire system-level warranties of five years or more. This indicates that the
manufacturer has taken many other operational issues into account. Since these systems generate electrical
power, it is helpful to have system performance included as part of the warranty. For instance, a typical systemlevel
warranty might state that the system is guaranteed to produce two kilowatts (2 kW) of AC power at PVUSA
Test Conditions (PTC) (PTC is 1kW/m2 irradiance, 1 m/s wind speed, 20oC ambient temperature) in the fifth year
of operation. The equipment to perform this test is expensive, but the fact that a company would know enough
to specify this type of warranty is an indication that they are confident in their system design. Currently, the
California Energy Commission Buydown program requires installing contractor to provide these warranties. The
intent of this requirement is to improve customer acceptance of PV systems.
Annual energy performance warranties:
Although there are very few companies selling systems with this type of warranty, an energy performance
warranty guaranties that the system will perform consistently over a period of time. This is particularly helpful in
ensuring that the customer receives the bill savings that they expect. This type of warranty is more common with
energy efficiency retrofit projects for commercial and industrial clients. Adequate metering to verify the system
power output and energy generation is necessary to help the system owner understand whether the system is
operating properly, or has warranty-related performance issues. With an adequate meter, the customer can
readily identify when the system is malfunctioning.
2.7.3. Company Reputation (years in business, previous projects)
The reputation of the PV manufacturer is a critical piece of the decision-making process. The size of the
company, number of years in business, number of previous projects completed, are all important issues that
need to be reviewed before choosing a company’s products. Although price is often the strongest single
consideration in reviewing proposals, the other less tangible considerations often add up to a similar level of
importance with cost. Fortunately, there are several companies with very strong financial and historical records
in this field. It is recommended that you research the background and history of the prospective vendor
thoroughly.