Specific to Pennsylvania
Rates & Rate Structures
Current commercial electrical rates in Pennsylvania are generally less than the national averages, Effective costs for a "typical" PECO Energy customer are in the ballpark of 11 to 13 cents/kWh, while in the other five utility service areas, a more typical commercial customer rate may be 8 to 10 cents/kWh. All six of Pennsylvania's PUC regulated electrical utility companies have variable commercial rate structures wherein the actual cost per kWh of power is determined by several variables. Such variables typically include service voltage, peak demand, and power factor.
Pennsylvania's electric rates will increase dramatically as the rate caps which were part of the 1990s Pennsylvania Deregulation scheme expire. The Duquesne rate caps expires at the end of 2008. The PPL rate caps expires at the end of 2010. The rate cap expiration for the four remaining PUC regulated utilities occurs at the end of 2011 (PECO Energy, Penn Electric, Duquesne, West Penn Power, and Metropolitan Edison) PECO Energy has publicly stated they are anticipating a rate increase of 12 to 15%. PPL has publicly stated they are expecting a rate increase in excess 30%.
Solar Insolation & System Efficiency
The solar insolation rate in the southeastern part of Pennsylvania (in most of PECO Energy territory) is about as good as Houston or New Orleans. In most of the rest of the state, the solar insolation is typical for the MidAtlantic and New England states. In all parts of Pennsylvania, the solar insolation is sufficient for an economically viable PV system. Most parts of Pennsylvania have better insolation values than most parts of Germany which is, by far, the largest PV market in the world.
Array Area Availability
In Pennsylvania, each kW of system capacity may produce an average of about 1,100 kWh per year (highly variable depending upon exact location, tilt, shading, and efficiency – but 1,100 kWh per kW of capacity is in the "right ballpark" for Pennsylvania).
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Viability Variables The cost of electricity from the grid is increasing rapidly. In 2007, national average electrical rates for all users increased by 9%, as per the Energy Information Agency of the federal DoE. Electrical rates throughout the nation are likely to continue to increase rapidly, as the fossil fuel costs which power most of the nation's generation plants continue to rise. In 2006, 71% of US electricity was generated by coal, oil, or natural gas, as per EIA. In many states, deregulation and the related rate caps established in the 1990s will expire in the next five years. In the most extreme case of rate cap expiration price shocks, the largest electrical utility in Maryland sought and obtained a 72% rate increase (phased) when its rate caps expired in July 2006. A typical commercial consumer electric bill is comprised of two major parts -- charges based on the number of kWh consumed (units of power), and a separate charge based on the peak demand at any one time during the building period (kW). The charge for peak demand his typically referred to as the "demand charge". The demand charge structure complicates analysis of the value of the power produced by photovoltaic system because PV systems are generally thought to be ineffective in materially reducing demand charges. However, there is a growing body of field evidence (mostly based on California projects) to indicate that commercial photovoltaic systems actually can be effective in reducing demand charges. Commercial rate structures may also incorporate a time-of-use (TOU) element. The TOU element creates a graduated charge per kWh consumed, based on time of day. Electrical consumption during the peak demand from the grid is charged at a higher rate, with discounted rates applying at other times. This concept employs standard market mechanisms to reduce peak demand across the grid, and it also improves the economic viability of photovoltaic systems. TOU rate structures work well for photovoltaic systems because PV systems generally output their highest rate of power in the afternoon, when TOU rate structures are typically at the highest rate. Therefore, the PV system can off set power consumption during the period of time when power costs the most.
Solar Insolation & System Efficiency Most of the United States is rich in its solar resources. The amount of sunlight any specific geographic area receives is a function of its latitude and climate. Lower latitude areas with dry climates (Phoenix AZ, for example) are better locations for PV systems than higher altitude wet climates (Green Bay WI, for example). The amount of sunlight received is referred to as "solar insolation" and it is (for PV design purposes) measured in an annual average of number of hours per day of sunlight that a specific area will receive. The data set upon which the industry relies is published by the National Renewable Energy Laboratory (NREL), part of the US Department of Energy. The NREL data is based on actual measurements at locations throughout the nation over a 30 year time frame. How efficiently the PV system captures and converts the sunlight also impacts economic viability. Contemporary efficient PV cells will capture and convert about 15% of the available sunlight. The efficiency of the design, and the ancillary equipment such as the inverters which invert the DC power from the modules to AC then also impact total energy production.
Array Area Availability The amount of area necessary for a PV system is relatively small. Most commercial buildings have sufficient space for a system to offset a significant percent of the total electrical load, but few have the area necessary to offset more than about a quarter to half of the entire load. As gross "rule of thumb", a PV system requires approximately one square of roof area (100 SF) for each kW of system capacity. By way of example, if we assume a contemporary efficient office building consumes about 22 kWh per year per SF (equates to about $2.50/SF in electrical expense per year per SF at average PA commercial rates), a typical 50,000 SF office building may then have a 1,100,000 kWh load per year (equates to about $125,000 total electrical expense per year). To offset 20% of the electrical expense with a PV system, the building would need a PV system with a rated capacity of about 200 kW ((1,100,000 x 20%)/1100). A 200 kW system would require about 20,000 SF of free roof area. This would typically be available at a 50,000 SF building, provided the building was no more than two stories (and gross roof area was therefore at least 25,000 SF). This example would equate to about a $1.5 million capital investment prior to federal tax credits, state rebates, and cost reduction via SRECs. The target roof area must also be free of shading factors, or have only minor early morning or late afternoon shading. Even partially shaded PV modules produce far less power. Shading of only a section of a PV module can adversely impact output from the entire array. Therefore, low-rise buildings surrounded by taller buildings, or single story buildings surrounded by large trees are often not good candidates. Most commercial buildings, however, have site development features that inherently limit external shading factors (such as ringed parking attributes).
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