Payback on Toledo's Collins Park solar panels is ... 104 years!

I've been holding off on writing about the recent unveiling of a solar field to help power the City of Toledo's Collins Park Water Treatment Plant because I was awaiting information from the city.

Jen Sorgenfrei, the mayor's public information officer, is really good about getting back with people, but answers to my questions generated more questions.

Here's what I know so far: this solar field is going to take over 100 years to recoup our investment.

Here are the details:

On August 10th, the City of Toledo - and its partners - unveiled a five acre solar field on the grounds of its Collins Park Water Treatment Plant on the city’s east side.

Begun in 2010, the total cost of $5.2 million comes from the following sources:

* $2.2 million from the federal government passed through the city via an Energy Efficiency Community Block Grant from the U.S. Department of Energy;
* $1 million long-term bond funding from the Port Authority's Northwest Ohio Bond Fund - a loan that IPS Energy Ventures will repay;
* $1.9 million from IPS Energy Ventures which includes a federal grant and private equity (specific breakdown not provided).

According to the city, the plant is 337,000 sq feet and annually consumes an average of 22M kilowatt hours at a cost of approximately $1.2M.

The city's press release states:

The solar field will provide in excess of one million kilowatt hours annually...

So, for the sake of arithmetic, the solar field will provide 1M kilowatt hours of the 22M kilowatt hours the plant uses every year. That's 4.5%.

If the plant uses the projected amount of kilowatt hours and the solar field produces the expected kilowatt hours, the city should realize a yearly savings of 4.5% of their $1.2 million costs - or $54,000 per year.

But ... (there's always a 'but')

In order to make this deal work, the city joined with IPS Energy Ventures LLC. For the next 10 years, IPS will operate and manage the solar field and sell the power generated back to the city at a cost less than what they'd normally pay for the purchase of energy from their energy provider FirstEnergy. The city told me that the expected savings for 2012 and 2013 is about $12,000.

Oh - and that $54,000 per year savings? It really won't be that much because after the 10-year contract with IPS is up, the city will have maintenance and other costs it will have to cover for the solar field, reducing the actual 'savings' expected.

Now, energy costs will rise in the future so some of the numbers may be different over time, but for the sake of this post, I'm going to talk in the static numbers already mentioned.

The question I have on the project is this: What is the ROI - return on investment? How long will it take us to recoup what we've spent via the savings we can expect?

And the answer to that question is - too long. You and I will probably be dead before that happens.

Here's how it works:

Total cost of $5.2 million - the majority of that in public tax dollars.

Total savings the first 10 years: roughly $120,000.

Subtract the first 10-year savings from the total cost and you get $5,080,000 of cost to go.

Divide that $5,080,000 by the $54,000 yearly savings after the city gets possession of the solar fields (a generous estimate since the maintenance/operational costs are not subtracted from this figure) and you get 94 years.

Total time to recoup the investment: 104 years.

While these panels have a 25-year warranty, absolutely no one expects them to last anywhere near the 104 years needed to recoup the investment. (Who knows what other options we may have over the next century!) And, their efficiency decreases over time. From Solar Panel Direct:

Just as any other electrical appliance, photovoltaic solar panels will inevitably decrease in performance, efficiency, and solar electrical output over time. Your solar panels will be exposed to the elements, carry an electrical charge, and will age accordingly. The solar radiation which produces solar electricity carries heat with it that will cause the components of your photovoltaic solar panel to become altered and less able to capture sunlight effectively. Less commonly, delamination can occur over time where the plastic layers that shield the photovoltaic cells from the elements will lose attachment.

Solar panel manufacturers provide a 25 year warranty that your solar products will be producing solar power at 80% efficiency from there initial tested solar electrical output rating. This is based on the notion that modern crystalline photovoltaic solar panels will lose function at a rate of about 0.7% per year. This is a major reason why thin film solar panel technology is not ready for mass production. Solar powered thin film silicon technologies degrade at a rate of 5% during their first few months in exposed sunlight. After this initial degradation they level off to a rate of 1% a year.

My financial calculations do not take into account the degradation and loss of efficiency, nor the maintenance costs, so the 104-year ROI is actually longer.

And the life of solar panels? Maybe 40 years at the most, though most estimates are around 30.

So... we've spent $5.2 million dollars to get maybe $1.74 million in savings.

What a bargain!