Using avoided cost metrics to comminicate present value in PV systems

Costs and benefits of a photovoltaic (PV) system can vary from system to system depending the location and price of local electricity. For example, places with lower annual irradiation compared to the American Southwest can be found to be highly suitable for PV systems due to correspondingly higher electricity prices, thus avoiding higher fuel costs. In this paper, the avoided fuel cost metric, traditionally used in solar thermal economic assessment, is applied to assess potential for PV systems located in 50 cities across the USA. Fixed and variable electricity prices are considered, along with seasonal irradiation and the role of solar renewable energy certificates (SRECs). Additionally, payback times for five cities were analyzed based on alternative scenarios, testing the relative impact of installation cost, interest rates and SRECs. Using PV systems to avoid electricity costs can result in savings from $3.70 to $46.80 per year per PV panel (100 W). Given an average installed grid-tied system size of 4 kW, annual avoided costs per system in the USA would range from $148 to $1872. Also, avoided costs including SRECs are as much as 15% to 215% higher than without SRECs. In comparison, the metric of payback time can vary from 6 to 24 years, conveying a return far into the future that many clients have trouble integrating into an annual budget. Using these results, economic decisions regarding PV systems are more reliable and businesses have a metric to better communicate the value of PV systems in a given locale.