Open PV Project Breakeven Analysis
The breakeven point describes the maximum PV system expenditure, per watt, required such that the upfront cost of the system is fully recovered by future electricity savings. The map below illustrates PV breakeven prices across the United States, given different scenarios, based on retail electricity prices current as of August 2014. The breakeven price is expressed in terms of US dollars per watt ($/W) of installed PV system capacity.

For more information on the methodology, click here.

Breakeven Analysis Methodology
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OVERVIEW
The breakeven price for photovoltaic (PV) technology is defined as the point where the cost of PV-generated electricity equals the cost of electricity purchased from the grid. This target has also been referred to as “grid parity” and may be expressed in $/W of an installed system.
METHOD
This analysis relies on the System Advisor Model (SAM), developed by NREL in collaboration with Sandia National Laboratories (SNL) and the U.S. Department of Energy (DOE). SAM is a performance and economic model designed to facilitate decision making and analysis for renewable energy projects. SAM uses meteorological data, a PV performance model, and user-defined assumptions to simulate hourly PV generation data. In this analysis, a reference system was modeled using the following assumptions to generate PV performance data:

PV System Characteristic Residential Value
System Size 5 kW
Tilt 25 degrees
Azimuth 180 degrees (south facing)
Derate Factor 80%
Annual Degradation 1%


We define the breakeven price of PV as the point at which the net present cost of the PV system equals the net present benefit realized to its owner. The following financial assumptions were used in the breakeven mapping tool:

                               Financial Assumption                                Residential Value
Debt Fraction 80% for loan scenarios
Loan Term 15 years
Analysis Period 30 years
Inflation Rate 3%
Federal Income Tax Rate 28%
Real Discount Rate 5%/year for cash scenario, equal to interest rate for loan scenarios
Real Rate Escalation 0.5% / year
Loan Interest Rate User defined
Interest and Taxes Interest is not tax deductible
Depreciation n/a
Annual O & M $32.8/kW-yr
Inverter Replacement $250/kW at year 10, $120/kW at year 20


This analysis indicates areas where the interaction of electricity rates, PV production and household electricity demand produce an economically favorable environment for PV. Actual economic viability must be considered on a case-by-case, evaluating, among others, roof constraints and variations in household electricity demand. Further, this analysis does not incorporate state, municipal or utility incentives, nor does it include revenue from Renewable Energy Credits (RECS). Finally, this analysis evaluates based on the assumption that current rates and net metering rules will persist over the assumed system lifetime. Large-scale adoption of distributed PV would results in reduced electricity demand, decreasing the marginal benefit of PV. Rate structures and net metering rules will be expected to be re-evaluated, and potentially altered to reflect shifting load patterns.

DATA SOURCES
Solar Data
The PV production data and building load data used in this mapping tool were simulated using the Typical Meteorological Year 3 (TMY3) dataset of the National Solar Radiation Database (Wilcox and Marion 2008). The TMY3 dataset is intended to represent a typical year’s weather and solar resource patterns, although the dataset does not consist of an actual single, representative year. Rather, TMY3 was created by combining data from multiple years. The meteorological dataset was used as an input for SAM, which simulated hourly PV production for use in the financial calculations. The TMY3 dataset was also used in Energy Plus to simulate hourly building load profiles.
Load Data
For the breakeven mapping tool, we generated a set of region-specific simulated hourly load residential profiles across all TMY3 locations in the United States. The residential building models were designed using the “Building America House Simulation Protocols” (Hendron et al, 2010). This reference house - also referred to as the B10 benchmark - represents a house built to the 2009 International Energy Conservation Code (IECC) with federal appliance standards in effect as of January 1, 2010, and finally lighting and miscellaneous electric loads (MELs) most common in 2010. The purpose of the B10 benchmark was to create climate specific construction buildings representative of Residential Energy Consumption Survey (RECS) data as reference for tracking progress towards whole building energy savings as established by Building America.
Rate Data
The breakeven price for PV was calculated for 3,143 utilities in the United States, which represents about 98% of the total electric load in the United States. In order to evaluate the value under actual utility rate structures, we collected 970 rate tariffs from 181 of the largest utilities in the United States, representing 70% of all residential electricity served. A detailed rate tariff may include:

  • Customer Charge: A fixed monthly charge that is independent of energy use. Customer charges typically range from $10 for homes to over $1,000 for large facilities.
  • Energy Charge: Rates based on energy consumption, usually in dollars per kWh or cents per kWh.
  • Flat rates: Fixed cost of electricity that does not vary except for fuel cost adjustments and other fees.
  • Seasonal rates: Rates that vary by season. A typical seasonal rate structure has a lower rate for winter months and a higher rate for summer months.
  • Time-of-use rates: TOU or time-of-day rate structures usually vary 2–4 times a day. A typical TOU rate has a lower cost at night, a higher cost during the late afternoon, and an intermediate cost during the mornings and evenings. The term “on-peak” or “peak” is generally used to describe hours with higher prices, while “off-peak” is used to describe hours with lower prices.
  • Tiered or block rates: Tiered rates increase with increasing electricity usage, while block rates typically refer to rates that decrease with increasing electricity usage. Block rates are most common in the form of energy charges; however, tiered demand charges are also used.
Often, a utility provides multiple rate options for a residential customer. Public utilities are required to report population on each rate; this analysis pulled the rate with the most customers. However, a homeowner would switch to a more favorable rate such as a Time-of-use rate, if available, after installing solar.

Detailed utility tariffs were not collected for all utilities. For the remaining utilities, an average energy charge is applied based on Energy Information Administration (EIA) utility data. Form EIA-861 data provide the total revenue and total energy sales for all utilities in the United States, by which an average energy charge can be applied. This will not account for fixed billing charges, time/seasonal-varying rates or tiered rates, which have significant impacts on optimal PV sizing and electricity cost offset.
Incentives
This analysis only includes the 30% federal investment tax credit (ITC). State, municipal and/or utility incentives will improve breakeven conditions. For a list of states and localities incentives, see DSIRE. No allowance is included for Renewable Energy Credits (RECs).
Taxes
This analysis assumes sales tax except in states where solar systems are exempted. We assume systems are exempt from property tax, which is also true for many but not all regions and states. For a list of states and localities that exempt PV systems from sales and property tax, see DSIRE.
Net Metering
Net metering assumes PV energy production is compensated at the retail electricity rate for all energy produced, up to 100% of the building’s annual electricity use. Net metering might not be available in all states or utilities. For a complete list of utilities participating in net-metering arrangements, see DSIRE.
REFERENCES
Henderson, R.; Engebrecht, C. (2010). “Building America House Simulation Protocols.” National Renewable Energy Laboratory, Golden, CO. NREL TP-550-49426

Wilcox, S.; Marion, W. (2008). Users Manual for TMY3 Data Sets. NREL/TP-581-43156. Golden, CO: National Renewable Energy Laboratory.

Ong, S.; Denholm, P.; Doris, E. (2010). “The Impacts of Commercial Electric Utility Rate Structure Elements on the Economics of Photovoltaic Systems.” NREL/TP-6A2-46782. Golden, CO: National Renewable Energy Laboratory.