May 1, 2005
I had a friend who treated himself to a brand new, $50,000 BMW. When I marveled at his extravagance, he replied, "Are you kidding? With the interest rates so low these days, how can you afford not to buy one?"
When we want something bad enough – a luxury car, for example – there is no end to our self-delusion. We will think anything to justify our purchase. The automakers understand that and work on the consumer's mind, with commercials featuring spectacular visuals — cars towing boats through the air, cars outracing avalanches — and messages such as "low 2.9 percent APR, lease for $196/month, only $2,652 due at signing, and best thing of all … $3,500 cash back!"
What you won't hear from the automaker is anything to help you make a rational decision. The automakers, for example, would never broach a concept like "payback," and that's because a luxury car does not save money. They don't pay back. They cost and cost a lot. Why would a car manufacturer say "And the truth is that including gas, maintenance, and depreciation, this car will set you back more than $12,000 a year!" The situation is different when it come to something we absolutely need. Take electricity, for example.
Mention renewable energy equipment – solar panels or a wind turbine – and within seconds someone will ask: "What's the payback on that?" In other words, "How long will you own this product before it returns its original purchase price through the savings it has generated?" The answer is more complicated than you might imagine. It may even make understanding the real cost of buying that car look simple. Interestingly, more people seem to be working through the issues and coming up with answers. Many have concluded that renewable energy systems makes more sense than ever, but to reach that conclusion they have also had to redefine the words "costs" and "payback."
Solar energy, for example, is an idea that almost everyone can embrace. Solar is free, natural, non-polluting, silent and inexhaustible. Our fossil fuel-based economy, on the other hand, is expensive (and getting more so), noxious, noisy and finite. A compelling case can be made that, instead of spending billions of dollars fighting wars in oil-rich nations on the other side of the globe, we might better invest in making ourselves energy independent. But that's another story.
But does it pay back, economically, to install solar if you live in a normal home, already connected to grid power? The answer is "no" from a strict dollars and cents standpoint. Your money might better be invested in treasury bills. But there are ethical and philosophical matters that might be considered in determining the payback.
These are costs that have only an indirect bearing on the consumer, nevertheless they are costs. It's a complex issue that shows no signs of abating. In Vermont, today, odd coalitions of residents are aligning themselves on either side of the energy fence to support or oppose solar, wind or hydro power. Here are a few stories about the Vermonters who have gone against the traditional consumer standards and made personal commitments to solar and other forms of renewable energy.
'I am the power company!'– Paul Kifner
The solar option was an easy choice for Paul Kifner when he bought land in Strafford more than 25 years ago. The power company wanted a mere $64,000 to bring in power. Instead, Kifner invested $10,000 in a system that has, with periodic upgrades, served his personal and professional needs ever since.
"Most people assume that because I live back in the woods I am an anti-technology Luddite, but the opposite is true," says Kifner, a professional woodworker whose shop runs on solar. "I enjoy the process of creating my own electricity and the knowledge that it is totally reliable. I am the power company."
As with many of the original back-to-the-landers, Kifner is now an established part of the community fabric. He earns his livelihood there and gives back to the culture as the bass player in the locally renowned Strafford Blues Band. Solar is an integral part of his overall self-image. "As a wood worker nothing compares to the feeling of running your shop equipment on the sun, and to create a stack of kitchen cabinets from sunshine."
Kifner's economic payback was instant. He can claim that he has operated his home and business for a quarter century and still not paid out what it would have cost him to bring in power lines. Perhaps even more important than the economic justification, however, is the psychological one. How many Vermonters can say, "I am the power company"?
The obsession becomes the profession– Paul Scheckel
Paul Scheckel knows all about energy. In his younger days he built electric cars. Then he moved to a remote location in Calais more than a mile from the nearest power line where he installed a 600-watt stand-alone system, backed by a 5-kilowatt biodiesel generator. Eventually his energy obsession became his profession, as he began performing home energy audits. Now, he was the expert advising homeowners on the steps to make their homes more energy efficient (not to mention comfortable).
Currently Scheckel is a senior project manager and energy efficiency specialist working for the Vermont Energy Investment Corporation, a nonprofit energy services organization whose mission is to help Vermont homeowners save money by saving energy.
His career has taken a new twist, as an author. His new book "The Home Energy Diet" is about to be published by New Society Publishing of Vancouver, B.C., one of the leading publishers on subjects of renewable energy and ecological building. The book, which is being published this month, gives the homeowner a full range of energy-saving options.
Scheckel estimates that the break-even distance from a power grid for solar to make economic sense is one-half mile. (This assumes an average system cost of $25,000 for a state-of-the-art solar system with a backup generator, and costs ranging from $7/foot (overhead, easy terrain) to $14 or even more to run lines underground.)
Scheckel states categorically that solar "makes absolutely no economic sense if you already have grid power." That doesn't mean that there aren't other motivating factors. He cites a commitment to the environment and concerns for the reliability of grid-provided electric service as two. He chuckles at the mention of "payback," and suggests trying to calculate the "payback" of a snowmobile. "It's not even part of the equation for a personal comfort or entertainment item."
The ultimate in payback, says Scheckel, is conservation. Don't use power and you save 100 percent of your power costs. Next to conservation comes increased efficiency. Perhaps no energy investment pays back as well as efficiency improvements to your home (insulation is one example, although a more efficient refrigerator can also provide a positive return on investment). An investment in efficiency usually carries a comfort dividend as well, but the efficiency argument is an uphill struggle in terms of consumer appeal.
Connoisseurs of light– The Kannenstines of Woodstock
Peggy Kannenstine and her husband, Lou, have no desire to be the power company. They live in a traditional house in Woodstock, connected to the power grid. The gambrel-roofed home, fronted by a pillared front porch with a brick floor, is flanked by a barn built in the mid-1800s. It does not appear a likely candidate for a solar electric system.
But they like light and the role it plays in the aesthetics of their lives. It was a natural step for them to generate electric power from the same source that gives aesthetic pleasure.
The Kannenstines have a "grid-intertie" system, meaning that the excess power they generate is fed back into the power grid, rather than into bulky storage batteries. These systems were resisted for many years by the electric utilities, but have opened new realms on solar horizons. The prospect of the rooftops of America becoming mini-power generating plants is now a reality.
Questions of payback were not important factors in the Kannenstines decision to mount a solar array on the barn and less obtrusive photovoltaic screens in the pans of their standing-seam roof. By using their rooftops to generate electricity from sunlight, they accomplish three important things: They secure back-up power in case of failure; they reduce electric bills by feeding excess power back into the grid, running their meter backwards; and they gain pleasure from the knowledge that their efficient harvest of sunlight is preventing the need for the additional consumption of fossil fuels elsewhere.
Their system still does not "pay back" on strictly financial terms, yet they couldn't be happier with their decision. Peggy Kannenstine even fantasizes about her solar panels some day generating electricity from moonlight.
Solar to the bone – The Wolfes of Strafford
To design and install their system, the Kannenstines turned to Global Resource Options, a firm founded by Jeff and Dori Wolfe in 1998. Jeff Wolfe combines the clean-cut demeanor of an engineer with the fervor of a solar evangelist. Tell him that solar makes more sense in Florida than Vermont, and he will politely point out that due to higher energy costs, the advantages of solar in Vermont is much greater than in many other states. Tell him that it's too cold and cloudy for solar in Vermont, and he will counter that the state has one of the highest per-capita solar installation ratios in the country – higher than Arizona or New Mexico.
Global Resource Options is one of a small but dedicated group of full-service solar providers, among them: Richard and Carol Gottleib (Sunnyside Solar) in Brattleboro, Leigh Seddon (Solar Works) in Montpelier and David Palumbo (Independent Power) in Hyde Park. Other solar specialists have sprung up in various Vermont towns, so Vermonters have more solar and installation providers than almost anywhere else in the country.
Wolfe and his wife, Dori, a professional engineer who also works full-time in the business, moved to Vermont to realize a solar dream. After years in the Chicago area, making buildings more efficient, Jeff Wolfe came home one day and announced he wanted to start doing buildings that don't just conserve energy, but produce it. Operating from a sun- and wind-powered home office in Strafford and a hulking warehouse in White River Junction, they are now squarely on the front lines of solar in the Northeast.
Their house in Strafford, though easily accessible to the power grid, screams renewable energy. Solar panels and a wind generator dominate the skyscape. A hybrid vehicle is parked alongside trucks bearing the company logo in the driveway.
Like Scheckel, Jeff Wolfe cocks an eyebrow when the issue of "payback" is mentioned. The payback issue, says Wolfe, is more "nuanced" now than, for instance, in the early days of woodstoves, when homeowners simply had to divide the cost of the stove by the difference in fuel costs between wood and oil (or gas or electricity). In the days of cheap wood, skyrocketing oil, and impending shortages, the payback was clear and dramatic.
Unfortunately, figures lie and liars figure, so inevitably the calculation of payback can be the province of people with vested interests. In the early 1980s there were government subsidies for solar hot water heaters that made the payback irresistible, so irresistible, in fact, that unscrupulous contractors jumped on the bandwagon to install shoddy units. The result was a lot of defective installations that became dysfunctional liabilities for homeowners. People had to figure how to get the dysfunctional units off their roofs, giving "solar" a black eye that took years to heal.
The role of government subsidies can still play havoc with the question of payback. Vermont had an incentive program in which $600,000 was earmarked for a program to motivate homeowners to install solar electric, small wind turbines and solar thermal hot water systems. These funds have now been depleted, but for several years contractors and installers had a hard time keeping up with the demand for new systems. When the funds dried up in August 2004, the impact on demand was immediate and dampening.
Currently, in the East, New York, New Jersey, Massachusetts, Connecticut and Rhode Island have programs to encourage installation of renewable-energy systems. As a result, a company like Global Resource Options, which distributes solar panels throughout the Northeast, has been on a sharp growth curve. A "ma and pa" business only a few years ago, the company grew to over $5 million dollars in sales in 2004 and was cited by Vermont Business Magazine as the 11th largest technology company in the state. Wolfe's company is projecting triple digit growth again for 2005.
Incentives, says Wolfe, have the same appeal as "cash back" for the car companies in that they prompt the consumers to make decisions to take advantage of a short-term opportunity for a "deal." Wolfe maintains that if consumers could step back and make a fully informed decision that factors in the costs of environmental degradation from fossil fuels, the hidden costs of maintaining access to Middle East oil and the costs of disposing of nuclear waste, the advantages of renewable energy, especially solar, would be obvious.
"Think of it," says Wolfe. "The panels we install on their roof will still be generating electricity in 50 years. What will the cost of fuel be then? What will the environmental situation be then? What seemed like a luxury in 2005 might seem like the bargain of the century by 2055."
Wolfe says the meaning of payback should be broadened to factor in the impact of acid rain, global warming and what will happen to fuel costs as the Third World countries like China and India start competing for dwindling supplies of fossil fuel?
Citizens of the world – Niko and Donna
Niko and Donna Horster live with their two small children in a home in a home defies description in traditional Yankee building terms. They are not typical Vermonters. Niko was born in Germany, speaks half a dozen languages and has lived all over the world. Donna is the all-American girl. They met in Colorado, married, then researched extensively where they wanted to put down roots. They considered the Southwest, Colorado, Europe and a host of other locations before choosing the Upper Valley town of Thetford.
When it came to designing their house they decided that aesthetic choices would not be governed by regional traditions. As a result, their house looks like it would be more likely be featured in Sunset Magazine or Arizona Highways than Vermont Life.
Built primarily of straw bales covered with masonry stucco, the living space is focused around a large central atrium that is home to several varieties of banana trees. (Author's note: this is not a typo.) The effect is spacious and airy, breathtaking and the polar opposite of hardscrabble Yankee. The home's energy system features 1.5 kilowatt of grid-intertied photovoltaics, matched with solar thermal heating and solar thermal domestic hot water. Originally, the house was off grid even though power lines were nearby. With the growing power needs of the young family, however, the Horsters opted to tie-in to the power lines rather than to rely on a back-up generator. This decision was made much easier when their local utility offered a green power option in which a consumer is charged slightly higher rates in exchange for the utility increasing its output from renewable fuels (in this case methane).
Horster, like Paul Scheckel, has made the jump from enthusiastic homeowner to professional. He is now a building contractor who specializes in the use of "green" building materials and renewable energy systems. He estimates the payback period for his photovoltaic system to be 25 years and 6 to 10 years for his solar thermal investments. He says "independence" as one of his strongest motivators.
Not only is he "the power company," but he may also be the only banana plantation owner in the Green Mountains.
published in Montpelier Times Argus on 1 May 2005
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