Is Residential Solar Energy Cost-Effective?

James R Coggins
October 20, 2019
Promising to upend entire sectors of the economy with no costs or other downsides has become so habitual on the political left that it has almost faded to political background noise. But the costs are real – in few areas more so than “alternative”, “green” or “sustainable” energy. The Green Party’s claim to conjure up millions of jobs by driving down emissions is an instalment in this fantasy genre. James Coggins systematically dissects one aspect of the Green program – its plan to plaster millions of Canadian rooftops with solar panels – and finds it wanting.

Is Residential Solar Energy Cost-Effective?

James R Coggins
October 20, 2019
Promising to upend entire sectors of the economy with no costs or other downsides has become so habitual on the political left that it has almost faded to political background noise. But the costs are real – in few areas more so than “alternative”, “green” or “sustainable” energy. The Green Party’s claim to conjure up millions of jobs by driving down emissions is an instalment in this fantasy genre. James Coggins systematically dissects one aspect of the Green program – its plan to plaster millions of Canadian rooftops with solar panels – and finds it wanting.
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Canadians are in favour of saving the environment – as long as it doesn’t cost them anything. This recent survey lends credence to that impression. Thirty-one per cent agreed that, “We need to do everything we can to fight climate change immediately, even if the economy slows as a result and jobs are lost.” But 46 per cent didn’t want to spend even a penny more of their own money to do it. Only 22 per cent were willing to pay $100 more, and only 5 per cent were willing to pay $1,000. Apparently, people are willing to see jobs lost, as long as it isn’t their job. They want to save the environment, but they want the government to pay for it, or big business, or people in other provinces, anyone as long as it isn’t them.

That sounds like a pretty common human attitude. We are in favour of a lot of good things, but would prefer to have them provided at no cost or inconvenience to ourselves. This may be one reason why environmental crusaders such as federal Green Party leader Elizabeth May cheerfully tell us that those good-paying oil industry jobs will be replaced by jobs in the “green economy.” Is this sheer demagogy? Utopian fantasy?

Utopian: Elizabeth May proposes to replace oil industry job with millions in the “green economy.”

In seeking answers, it might be helpful to consider how some of this works in practice. The Green Party’s election platform calls for “a massive energy efficiency retrofit of residential, commercial and institutional buildings.” The party optimistically states that this would “create over four million jobs.” It doesn’t explain who would pay all those workers, but that is another question. The platform also promises to “change the national building code to require new construction to meet net-zero emission standards by 2030.”

There are many complications and costs in changing building codes so drastically, but one mentioned by May is that all buildings should be fitted with solar panels to produce electricity.  It’s surprisingly hard, however, to nail down the cost to install solar panels on a typical house, in order to assess whether doing so would be cost-effective. The cost estimates range from a relatively paltry though hard-to-believe $2,000 up to $40,000. A lot depends on the house. What exactly is “typical”? Can there even be a single such type for a country as large and climatically variable as Canada? We are left with assuming a reasonable ballpark figure of about $20,000.That cost seems very expensive and, going by the survey cited above, is many times more than even 5 per cent of the population would be willing to pay.

One suggestion is that the government would pay for it. That is not really a solution, however, as homeowners wouldn’t want to see their taxes go up, nor would non-homeowners likely wish to subsidize the installation of other people’s solar panels through higher taxes. Governments could simply borrow the money, of course, but in an era of high deficits that would be irresponsible and impose at least some political cost. What we are left with, then, is that the cost of the installation would be borrowed and paid back over time by homeowners themselves.

The Green platform includes changing building codes and pushing massive retrofits like rooftop solar panels.

Having the cost of a new home and its accompanying mortgage go up by $20,000 is clearly an unappealing prospect, given that so many Canadians already have trouble affording a house. That amount would more likely be within reach of many existing homeowners, however, especially those who’ve largely paid off their homes, who are comfortably off and/or who have access to a home equity line of credit or other borrowing mechanisms. So we’ll assume that borrowing $20,000 for the purchase and installation of solar panels and the related wiring and control hardware is, at least theoretically, financially achievable for a significant number of homeowners. But would it make sense?

According to a 2017 study by the Fraser Institute, average household electricity bills ranged from $83 per month in Montreal to $201 per month in Toronto. Leaving aside the abnormally high electricity rates in Ontario (largely due to massive mismanagement too complex to discuss here), electricity bills for most Canadians are in the range of $100 per month. A solar power system that eliminated those electric bills would save the homeowner about $1,200 per year. That should be sufficient to repay the loan, including interest, over a 20-year period, and even leave a small profit or “return on investment.” That meshes nicely with what Canadians apparently want: to save the environment and save money, too.

Anyone going this route, though, had better hope cost-recovery indeed comes in 20 years or less, because the economic life expectancy of solar panels is only about 25 years. One problem is that solar panels gradually degrade over time, losing about 1 per cent of their electricity-generating performance per year. Even if they don’t corrode or otherwise break down over that period, after 20-25 years they’re producing far less than their rated power and their warranties have lapsed. Assuming the original installation was sized just right, the homeowner is now back to buying at least some of their power from the grid. That casts a new light on both the cost-effectiveness and the overall sustainability of the solar power option.

Then there is that “typical” house question again. How many Canadian residences actually fit the type? Condominium owners would be out of luck. Rooftop solar panels do not produce enough electricity to operate multi-storey buildings. The roof area is too small and the electricity needs too great. So unless the landlord or strata council can find empty ground on which to build a small solar farm, this option is out for most multi-family residential developments.

As for single-family residences, solar panels work best on houses with a simple (and, relative to the number of occupants and electricity use, large) roof, like those older-model “ranchers”. The “sculpted” roofs that are widely preferred nowadays – multiple smaller pitches and variable angles – are not as amenable. The house’s exposure and orientation bear on the installation’s effectiveness. The homeowner would also be well-advised to chop down any trees shading their roof – itself not a very green idea.

Canadian home with solar panels installed. is solar energy renewable? is solar energy cost-effective?
Solar panels may work on generally older ranch-style homes, but today's sculpted roofs are another story. Is solar energy renewable? Is solar energy cost effective?
Solar panels may work on generally older ranch-style homes, but today's sculpted roofs are another story.

It should be obvious that solar panels work better nearer the equator, such as in the southern U.S., where daylight hours vary less from season to season and the overall sun angle is steeper. Solar panels are not very useful during Canada’s generally short winter days. Nor are they very efficient in rainy British Columbia or Newfoundland, or often cloudy and fog-bound Quebec.

The biggest problem, however, is that the financial calculations of the cost-effectiveness of residential solar power are based on “net metering.” Net metering attempts to work around two of solar power’s innate problems: that the sun doesn’t shine all the time and that we still lack a practical means of storing electricity. Solar power alone simply can’t fulfill a home’s electrical needs at the times and in the quantities electricity is needed.

Canada’s inclement weather and short winter days make for often poor solar performance.

Houses with solar panels can, however, be expected to produce surplus energy during the day, when the sun tends to shine, the weather is warmer and home electricity use is generally low. Under net metering, the surplus would be “sold” to the power companies and used to offset the electricity the homeowner would need to “buy” during darker hours. The “net” result shown by the house’s electricity meter would generate that period’s power bill. This is how the system works at present, when relatively few buildings are equipped with solar panels and net metering.

It’s not difficult to envision this system breaking down once many more buildings are so equipped. How would the utility company absorb all the energy being dumped onto the grid on a bright summer’s day? And where would it draw enough power for those same buildings once the sun went down or the daytime skies were grey? In fact, the answers are readily available – and they’re not pretty.

Wherever “alternative” energy has been imposed on a large scale – including in Spain, Germany, the UK and, now, parts of the U.S. – the electrical utilities are forced to maintain or construct “backup” power generation equivalent in capacity to all of the installed alternative energy capacity. Most of those backup generators need to be quick-starting gas-fired plants, since alternative energy sources tend to go offline unpredictably – during thunderstorms, say, or sudden calm periods in the case of wind power. Needless to say, the costs have been enormous. It’s hard to see Canada being any different.

Wherever alternative energy has been imposed on a large scale, massive amounts of backup generation are required, raising costs.

In addition, it is likely that power companies would soon stop paying as much for unwanted power from homeowners during the day. According to National Geographic, “A backlash has begun in the leading U.S. solar markets, with utilities seeking to scale back net metering or increase what they charge solar households.” If also implemented in Canada, this would upend the homeowner’s return on investment calculations. None of this seems either very renewable or very sustainable.

It is sometimes argued that a steep enough carbon tax on fossil fuels would make electrical power from alternative sources relatively more affordable. That is true. The key word is “relative”, for it would not make solar-generated electricity any cheaper. It would just make traditional low-cost power options more expensive. Either way, the homeowner would end up paying far more. This, too, has already occurred in countries that have imposed widespread alternative energy, so much so that the term “energy poverty” has had to be invented to describe the millions of lower- and middle-income ratepayers struggling under crushing power bills.

The materials and manufacture of solar panels are another significant issue. Essentially, they are made of silicon, refined in an electric arc furnace, which produces large amounts of carbon dioxide as a byproduct. This is the very greenhouse gas that solar energy is intended to avoid producing.

As for the vast numbers of used-up solar panels that will be generated over time, these can fortunately be recycled into new silicon. This too will require facilities to be constructed and energy to be consumed as the plastic components (plastic originally produced by the oil industry) needs to be burned away and toxic elements removed. The cost and energy consumption of recycling solar panels and safely disposing of the remains also need to be calculated and deducted from the expected energy savings derived by using solar panels. With each additional calculation, residential solar energy installations become less cost-effective, sustainable or environmentally friendly.

Where do all the used solar panels go?

Of course, this is all based on the current state of technology. History is full of examples of new technology that initially seems wildly impractical, costly, unreliable and/or unsafe, before maturing into universal usage that makes lives easier and advances civilization. Green energy advocates have been predicting the same process would occur with solar panels, and it has to some extent. Lately, however, evidence has emerged that the latest generation of solar panels is already pushing the efficiency limits imposed by physics. If the technology does not improve sufficiently, solar-powered houses will likely be a tough sell.

Unless residential rooftop solar panels are made a legal requirement by governments, the decisions are going to be made by average people using the information that is readily available. The idea that plastering millions of Canadian homes will be easy, low-risk and virtually cost-free – perhaps even outright profitable – is highly questionable. It’s a long shot at best.

Dr. James R. Coggins (www.coggins.ca) is a writer and editor living in Abbotsford, B.C.

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