Economics of household solar panel and wind turbine systems

Abstract

Small wind turbines and photovoltaic (PV) technologies are available for purchase and use to provide households with electricity. The objective of this research is to determine the economic consequences of installing microgeneration grid-tied wind turbine systems (6 kW; 10 kW) and solar panel systems (4 kW; 12 kW), given alternative pricing structures for households, at five locations with different wind speed and solar radiation resources. Twenty years of hourly wind speed, solar radiation, and temperature data, and hourly electricity use data for representative households, were obtained for each location. Weather data, electricity pricing rate schedules, and purchase prices and power output response functions for each wind turbine and solar panel system are used to address the objective. The estimated annual cost of $2,148 for the least costly household grid-tied 4 kW solar panel system with net metering is two-times greater than the annual cost of purchasing from the grid. If external consequences of electricity generation and distribution are ignored, given region specific rate structures and prices, household solar panel electricity generation systems are not economically competitive in the region studied. The economic consequences of grid-tied household wind turbine and solar panel systems differ substantially among locations.

Additionally, the consequences of a carbon tax, equal to an estimated social cost of carbon of $37.2/Mg, on household electricity cost is determined. Averaged across the five households, the carbon tax is expected to reduce annual consumption by 4.4% for traditional meter households and by 4.9% for households charged smart meter rates. The carbon tax increases electricity cost by 19%. For a household cost of $202/year the carbon tax is expected to reduce social costs by $11. Annual carbon tax collections of $234/household are expected. Adding the carbon tax was found to be insufficient to incentivize households to install either a solar panel or wind turbine system. Installation of a 4 kW solar system would increase the annual cost by $1,546 and decrease CO2 emissions by 38% valued at $94/household. The consequence of a carbon tax would depend largely on how the proceeds of the tax are used.