Donald
Perry
Kanak
Jr.The Economics
of
Solar
Technology
in
the
Carolinas
Editor'sNote: These articlesdiscuss the
economic
viabilityoftwo types ofsolarenergy technology using
cost
and
weather
data from Piedmont, NorthCarolina. In Single Family
Home
Solar Heatingand
Cooling, asimplesystemforthesolar
powered
spaceconditioningof a single unitresidenceis
compared
toconventional
methods
of space conditioning. Theconclusion that the solar alternative is lower in
lifetime costs isunderscored by theincreases in the
costs ofelectricity
and
fueloilwhich
have
occurredsince the cost data for thisarticle
were
gatheredin7975. In
The
Feasibility of a Multi-Residence TotalSolar Energy System, a solar
powered
electricalgeneration
and
spaceconditioningsystemforatwen-tyunitresidential
development
iscompared
withand
foundto
be
ofhigher costthan conventionalmethods
ofservicingsuch
a development.Solar heating
and
cooling for single family units iseconomicallyfeasible
Photo by Bruce Stiftel
Single
Family
Home
Solar
Heating
and
Cooling
Itis impossibleto
deny
we
arerapidlydepletingthe world'sconventionalenergysupplies.Inaddition,theuse of conventional energy results in billions of
dollars in pollution costs each year.1
Household
and
commercial requirements account for about
one-thirdofUnited Statesenergy use
and
overone
halfofelectricity
demand.
2 Over70
per cent of theenergy
consumed
inthese sectorsisforheating,cool-ing,
and
waterheating.3Allthreeoftheseusages can
be provided by existing solartechnology.
Implemen-tation of that technology in North Carolina
would
result in a
monetary
savings to the individualhomeowner
and
environmental savingstothepublic.Solar
Technology
Solarheating issimple.Itusuallyinvolvespumping
water or air overa solarheatcollector
and
thenstor-ing the heat in rocks or water for circulation
through thehouse.
A
designwhich
hasbeen utilized for over 18 years in three Washington,DC.
homes
involvespumping
watertothe rooftop,allow-ing ittoflow over a blacksheet metal roof heated by thesun
and
intothebasement
toastorage tankwhich
is surrounded byfist-size stones.
A
smallblowerac-tivated by a thermostat circulates air through the
stones
and
intothehouse.The
solarheated water onthe
way
tothe storage tankisusedtogive a pre-heat boostto the domestic hot water supply.4Solar housing technology involves only
conven-tional materials such as sheet metal, glass, tubing,
and rock. Construction includes steps
which
areun-usual (e.g. installing a
1500
gallon tank in a base-ment), but it involves no specialknowledgeor
equip-ment
not possessed bymost
builders.Although it is technologically feasible, solar air
conditioning probably will not be economical until after 1980. Until that time there exist
two
coolingmethods which
havebeen
associated with solarheating
and which
utilize less energy thanconven-tional air conditioning.
One
is rooftop coolingwhich
involves
pumping
water to the roof on cool nights,Donald
PerryKanak
Jr. is a firstyearstudentattheHarvard
Law
School.He
has
worked
fortheCouncil on Environmental Qualityand
the North CarolinaDepartment
ofNaturaland Economic
Resources.He
received a B.A. in
Economics
from the University ofallowing ittoflow over the roof,
and
storing "cold"inthe storagetank used in the heating process. Thisis
effective only in areaswith cool dry
summer
nights.The
secondmethod
involvestheuseofaconventionalcentral air conditioning unit
which
operatesatnight,drying
and
coolingoutsideairand
blowing itover thestones.
Inboth ofthese methods, during thedaythe
same
blower used during the winter heating cycle
cir-culates the household air through the stones
and
thus cools
and
dehumidifies the house. Since thecompressor
only runs at night,when
temperaturesare lower, it shouldoperate at higherefficiencythan
conventional central units.
Given this brief introduction to existing solar
technology,
we
shallproceedto lookat privatesectorfeasibility ofthesolarheating
and
coolingalternative.First
what
are the parametersof construction costs,alternative fuel costs, discount rates,
and
systemlifetime that will allow a solar system to "pay for
itself" in fuel savings? Second,
what
are theim-plications of increasing energycosts with respectto
solar desirability? Third,
how
adaptable is solartechnology to different locations, housing patterns
and design tastes?
A
Framework
for
Cost
Comparison
Inordertodeterminewith
some
precisionbothcon-struction costs
and
energy useofa solarheatingand
coolingsystem, it
was
necessarytodescribe thesize,design, location,
and
other details of a particularhypothetical house. Three builders
were
providedFigure 1
A
cutaway viewof the "typical"houseusingsolarheatingandpreheatingofhousehold hot water
with off-peak cooling.
Solar
\
Rays *
>7^
/V-
/
'W
/
w?r
DrawingbyDanFleishman
with an explanation oftheprinciplesofsolarheating
and
cooling,and
a plan similar toone
circulated byThomason,
5 including designspecifications from
"typical"
houses
used, by the North Carolina OilJobbers Associationforenergycostcomparisons,by
Duke Power
Company
for insulation standardsand
energy savings estimates,
and
by the U.S.En-vironmental Protection
Agency
forenergyconserva-tion studies.
The house
was
tobe awooden
framestructure fac-ing Northonaunshaded
lot,with 1500
squarefeetoffinishedspace,afullunfinishedbasement,
and
anat-tached enclosed unheated garage on slab.
A
sidecutaway
viewofthehouse
isshown
inFigure1 6The
back side is covered by a solar collector extending
fromthecrestoftherooftothe ground.
The
front roofis less slanted,
and
asshown,
may
be equipped forsummertime
rooftop cooling.About one
third ofthebasement
is reserved for the solar storage tankand
apparatus. All insulation standardswere
thosere-quiredfor
FHA
homes. The
house
was
tobe equippedwith central cooling.
Conventional heating capital costs vary with type
and locale.
An
oil,forced airsystemcosts upto2000
dollars installed with a usual price of about
1500
dollars.7
Ofthe 1
500
dollars,about650
dollarsisfur-nace cost,
and
850
dollars is the cost of ductwork.8Electricfurnaces installed runaboutthe
same
price.The
cheapest heatingsystemtoinstalliselectricceil-ing or baseboard heat
which
costsaround
500
dollars.9
The
differencesin capitalcostsdisappeartoagreat extentwhen
central cooling is used.Ductwork
must
be
added
tothe electric ceiling orbaseboard heatedhome.
Thisadds another850
dollarstocoolingcapitalcostsofabout
300
dollarsper ton of refrigeration.(1tonrefrigeration =
200
BTU/min).Thisraisesthetotalheating-cooling (3 ton load)
equipment
andinstalla-tion costs to at least
2300
dollars for our "typical"house.10
The
estimatedcostsofthesolarsystemvariedcon-siderably.
A
piedmontVirginia contractorgave anes-timate of about
6550
dollars for the solar heatingsystem with off-peak cooling
which
included anaux-iliary oil furnace.11
A
Chapel Hillindependentbuilder
gavethe lowest estimateatabout
4400
dollars.12This incorporated a lower costmethod
for auxiliaryheating.
The
third estimatewas 5450
dollars.If the cheaper booster idea is substituted for the
completeauxiliaryheating ineachestimate,aninitial
capital costreductionof
550
dollarsisrealized.Thus,theestimatesstandat
4400
dollars,4900
dollars,and
6000
dollars.A
costestimateof7300
dollars,propos-edby DoolittleofNorth Carolina State Universityfora
completed solar heated housing system with
aux-iliary for Raleigh, North Carolina
was
used for the high cost extreme.13Figures 2
and
3 depict fuel requirements of thesolar
house
and ensuing costs under1975
electricrates intheregion.This includes
Thomason's
findingthatthe off-peak cooling permits the
same amount
of electricityto produce45
percentmore
coolingdue
toFigure 2
Energy
Consumed
by the Solar System(KWH/yr= horsepowerx 746watts/hp x 1
KW/1000watts
x days used/yearx hours/dayx 1/e)Heating
Co
olingWarm
Air Water 3 Ton Cooling HotWater Misc.Variables Blower
Pump
Compressor Blower Heater Electricitypower .17 hp .25 hp 3 hp .5 hp Solar
elect. daily use 20 h/d 3 h/d 9 h/d 9 h/d
duration of use 120d/yr 120d/yr 150d/yr 150 d/yr
efficiency 75 .75 .85 .75
KWH/yr
406 90 3554 671 3400 9750increase compressor efficiency at lower nighttime temperatures.14This
isequivalenttogettingthe
same
coolingfrom about
68
percentoftheamount
ofelec-tricity required by conventional central cooling systems.
Assumptions
necessary to the prototype situationare as follows: domestic hot water -
80
gallons perday; miscellaneous electrical use -
750 kwh
permonth; annual heating
demand
-4380
degree days(at 65°F insidetemperature);annualcooling
demand
-
900
hours.The
lasttwo
estimates are based on a"typical"
house
studied by the N.C. Oil JobbersAssociation in 1972.15
1975
electric rates plus the fuel escalator bringcosts per kilowatt hour
(KWH)
to4.06 cents for thefirst
250
KWH
permonth and
2.42 cents from thenon.16Forthe
total 17,871
KWH
peryearestimatedforthe solar house, the average cost is 2.44 cents per
KWH.
Thisyields atotalannualcostof481.68
dollars.By updating the oil costs in the
1972
Oil Jobbersstudy to the
1975
rate of37
cents per gallon,operating costsfor the oil heated "typical"
home
are1115.18
dollars including electricity. Energyre-quirmentsfor theall electric
home comes
to60,044
KWH
per year or an annual energy cost of1274.72
dollars.17Using these annual energy cost calculations, the
solar alternative
shows
a yearly energy savings of589
dollars over oiland
793
dollarsover electricityThe
critical question to beanswered
iswhether
thetotal lifetime costs of the solar alternative
—
capitaland operational
—
will be competitive with electricityand oil.
Total
Lifetime
Cost
Analysis
Lifetime cost comparisons can be figured on the basis of the following total cost equation:
TC
=FC
+ pvacThe
total cost (TC) of the system equals the fixedinitial cost (FC) plusthe present valueoftheannual average costs (pvac) of operation over the system
lifetime.
TC
will vary depending on parameters formaterials
and
construction costs inFC
and with thecost of energy, discount rates, and system lifetime
used to establish pvac. To discover
how
the solaralternative
compares
with oil or electricity, asen-sitivity analysis
was
performed using differentparameters for initial construction costs,
conven-tional energy costs, and discount rates.
System
lifetime is estimated for conventional systems at
20
years. Since the solarsystem inquestion hasproven to be at least as durable, there is no
need
totest lifetime.
The
calculation for the present valueofthe annualcosts (pvac)canbe
made
using the following formula:pvac
annual cost in year i
i=,
d+r)
1
where
n =thenumber
ofyearsofthe project,and
r=therateofdiscount.
A
sample
calculationforthepvacoftheoilheatsystemover
20
yearsattenpercentis performed as follows:
TC
=FC
+ pvacTC
=$2300
+TC=
$11,789
$1115
(1.1)'
The
remaining calculation forchanges
in discountrate or costofenergyare performed using the
same
method.
Figure
4
compares
the full cost range ofthe solarestimatestotheoil and gasalternatives.Itappliesthe
total cost equation for lifetime costs given different
discount assumptions
and
constant energy prices.Calculations
show
the following. (1) At discountrates of six, eight,
and
ten percent, each solares-timate offers a lifetime savings over conventional
alternatives.(TCforsolarislessthan
TC
foroilor elec-Figure 3Annual Costsof the Solar System Operation
Component Power Used (KWH) Cost ($
Water
pump
90 2.44Blower (Heat) 406
1095
Compressor 3554 95.79 Blower (Cool) 671 18.09Water Heat 3400 91.64 Miscellaneous 9000 242.56
Aux. Heat 750 20.21
Total 17871 481.68
Figure 4
Sensitivity of Total Costs(TC) to Discount Rate
Discount
Low
Solar High Solar Doolittle Oil ElectricRate Estimate Estimate Solar House House
FC $4400 $6000 $7300 $2300 $2300
6%
Annual Cost 482 482 482 1115 1275pvac 5495 5495 5495 12713 14535
TC 9895 11495 12795 15013 16835
8%
pvac 47334733
4733 10949 12521TC 9133 10733 12033 13249 14821
10%
pvac 41024102
4102 9489 10850TC 8502 10102 11402 11789 13150
15%
pvac 3003 3003 3003 6946 7943TC
7403 9003 10303 9246 10243trie). (2) In only
one
case, the highest (Doolittle)es-timate figured at the highest (15 percent) discount
rate,
was
thesolaralternativemore
costlythan its oilor all-electric counterparts.
The
discount rateschosen
represent the range generally used in thistype of calculation.
Sensitivity of
the
Findings
to
Rising
Energy
Costs
As
expected, the solar alternativesbecome
evenmore
desirable tohomeowners
if energycosts rise.Figure 5, also derived by present valuecalculations,
shows
that a five percent rise in energy costs everyfive years will causethe lifetime costs(TC)ofthe oil
and
electric alternatives to rise four percent. Solarlifetime costs, however, rise by only 1.7 to 2.3
per-cent. This results in a present value savings of 651
dollars,
and
2073
dollars,infavorofeventhe highestsolar estimateversusthe oil
and
all electricsystemsrespectively.
A
rise of 10 percent in conventional energy costs every five years results in present value lifetimesavings of 921 dollars for the high cost solar
es-timatesversusoil and 2415dollarsversuselectricity.
If energy costs rise
20
percent every five years,thesolar savings
grow
to1513
dollarsand
3148
dollarsFigu
respectively.Energyprice risesintherangeof
50
per-cent every five years are not unlikely given recent
trends. In such an event, savings to solar systems
would
be at least3660
dollars versus oil and5844
dollarsversus electricity. Again it
must
beemphasiz-edthatthesesavings areforthehighestcost solar
es-timate.
The
lower estimatesand mass-produced
es-timates offer even larger savings; as
much
as8744
dollars for the lowest solar estimate versus
all-electric
when
electricratesrise50
percent everyfiveyears.
Cost
Comparison
from
the
Homebuyers'
Perspective
Another
way
tocompare
the costsofsolarhousingwith conventional types isto calculate lifetimecosts
for both systems and
compare
average total annualcosts for each. In other words, on the average,
how
much
willitcosttheconsumer
eachyear,inmortgage
payments and
energycoststoheathiswaterand
heatand
cool hishome,
byeachmethod?The
originalbasecost for constructing the four identical
homes
in thesame
location should be the same, excluding thecosts for heating
and
cooling equipment. Ifhomebuyer
O
relieson
oil heat,homebuyer
E onre 5
Sensitivityof Total Coststo Rising Energy Costs at
10%
Discount RateLow
SolarEstimate
High Solar Doolittle
Estimate Solar
Oil
House
Electric
House
Present Value of
Doolittle Solar over
FC $4400
$6000
$7300 $2300$2300
Oil Elect.Change
inEnergy Cost
in 5 Years
5%
pvacTC
4299 8699
4299
4299
10299 11599
9950
12250
11372
13672 651 2073
10%
pvacTC
4508
8908
4508
4508
10508 11808
10429 12729
11923
14223 921 2415
20%
pvacTC
4956 9356
4956
495610956 12256
11469 13769
13104
15404 1513 3148
50%
pvacTC
6589 10989
6589 6589
12589 13889
15249 17549
17433
19733 3660 5844
electricity, and
homebuyers
S1and S2
, on solar
heating, cooling, and water heating,
how
will theiryearly outlaysdiffer over thetwentyyears ofsystem
lifetime?
The mortgage sought by and Ewill include
2300
dollars over base cost tocoverconventional heating
and cooling equipment. Using a discount rate of 10
percent to represent interest, insurance
and
other finance cost, and E will each pay a total of5330
dollarsoveratwentyyearmortgage.
S
1willpay
9200
dollars on a solar investment of
4400
dollars over20
years. S2will paya total of 16,910dollarson
his original solarinvestmentof
7300
dollars.The
an-nual cost of these mortgages will usually be
one
twentieth of the total cost. By adding the annual mortgagepayments
totheannua
Icostof electricityor fuel under eachoption, Figure 6 illustratesthatevenwith a high 10 percent interest rate (which is less
favorable tothe solar alternatives than lower rates),
the average annual costs will be lower for
S
1by
390
dollars
compared
toO.and
549 compared
to E eachyear. Even solar
homebuyer
S2,
who
paid7300
dollarsforhis initialsolar
equipment
willbebetteroffeach yearthan
and
E by54
dollarsand
21 3dollarsrespectively. If lower interest rates or a rising costof electricity
and
fueloil are used, thesolarhomebuyers
would
fare better still.Limitations
of
Solar
Housing
The
probableeconomic
advantage of singlefamilysolar housing is notapanacea.
Much
construction isnotsingle unitdwellings. Further,
many
singlefamilyhomes may
notbe abletobe builtfacingNorthonun-shaded
lots. In addition, designersand
consumers
may
doubt the aesthetic advantage of a buildingwhich
has an odd slopeto itsroofand onesidemade
of glass-covered sheet metal.
Homebuyers
may
notbe willing to take the risk that adjoining property
owners
might put up tall buildings, cutting offsunlight. Given these limitations and peculiaritiesof
solar housing, are there
ways
to alterthetechnologyor toadapt the surroundings to
make
the solaralternatives
more
attractive?Overcoming
the constraint of theneed
for properorientation ofthe solar collectorwhile maintaininga
regardfor aestheticsis a principal challenge tosolar
designers.Since sunlightisaverylowdensityenergy
source, its margin of effectiveness is small. Slight
Figure 7
Rooftop Reflector System for Increasing Collector Efficiency
Summer
Winter
i
Solar Heat Collector (^- "" /;
Attic
S
Living Quarters
Basement
^•"7*Rooftop
/
Reflector/
Porch
/
Pool
DrawingbyDanFleishman
variationsin directionofcollectororientation orslope
can
undermine
a solar system's effectiveness.18A
homeowner
or buildermust answer
thequestionof
whether
on agiven lottherecan bea southernex-posurefor
one
sideofthehouse
without 1) interrup-ting thesymmetry
of the property by placing thehouse
at askewed
angle to the frontage; 2)prominentlydisplaying the collectortowardthe
fron-tage; 3) obstructing an important southerly view; or
4) being
shaded
by desirable treesorotherexistingorpotential structures?
The
orientation ofhouses
withrespectto road frontage is purelya matteroftaste. If
consumers
reject alternativesto direct parallel roadorientation
and
wish to hide the collector, only lotswith North frontage willbesuitableforsolarhousing.
Recent designs in solar collectors are
aimed
atovercoming this limitation as well as to improving
other aesthetic aspects of the system. In a recent
Thomason
solarhouse.theroofoftheenclosedpool isa sun porch of light colored material
which
acts to reflect sunlight onto the collector, thereby boostingcollectorefficiency
and
eliminating theneed
formak-ingthe entiresouth walla collectorsurface.19Figure
7
shows
how
the roof reflector system works.Figure 6
Homebuyers
Total Annual Cost(at
10%
mortgage and constantenergy prices)O
EInitialCapital Cost
Interest Cost (20 Years)
Total Capital Cost
Average Annual Capital Cost*
Average Annual Operating Cost**
Average Annual Total Cost
2300 $2300 $4400 $7300
3030 3030 5800 9610
5330 5330 10200 16910
267 267 510 846
1115 1274 482 482
1382 1541 992 1328
* the partof yearly mortgage payment which goes for heating and cooling
The
threatthatnew
constructionon adjoining landmightblock sunlightisarealisticone, especiallyin
ur-ban areas. There has
been
a longstanding legaldebateovera "right to light
and
air"which
American
courts, unlike their Britishcounterparts,haverefused
to recognize.20Recently therehasbeentalkof
grant-ingsucha rightby zoningorbylegislation.21There
isa fear
among some
policymakers
thatthe courtsmight view such action as an unconstitutional taking ofpropertywithout compensation. There is alsoa con-tention that a "right to light"
would
discouragecon-struction
and
thereby sloweconomic
growth.The
concurrenceoftheenvironmental and energy
dilem-mas,
and
the prospects for Zero PopulationGrowth
andlower
economic growth,may
inthe future provetobeconvincingreasonsfora"right tolight".Ofcourse,
even without this right, residential housing patterns
make
a considerableamount
ofsolarhome
construc-tion possible.
Most
of the limitations of the solar system boildown
to conflicts of savingsversus aestheticsorin-convenience. It is likely that
many
of the aestheticdrawbacks
will be ameliorated as themainstream
ofthe design
community
beginstowork
on solarhous-ing.
As
more
solarhomes
arebuilt,new
homebuyers
will find their appearances less peculiar,
and
asenergycostsrise, itisgoingto
become
more and more
expensive not to
make
the decision to go solar.Conclusion
Publicbenefitsof solar housing in termsofenergy
conservation
and
environmental protection havebeen
recognized forsome
time. Claims that solarhousing is not competitive at its current state of
development
with oiland
electricity have biasedmany
homebuyers.
Thisstudyindicates thatat 1975
energy costs, using any reasonableinterest rate,
ex-isting solar heating
and
cooling is not onlycom-petitive, but is significantly cheaper over its lifetime
than conventional alternatives.
As
energycosts con-tinue to rise, solar systems willcompare
evenmore
favorably.
The
barriers to solar housing implementation arebasically institutional.22
They
include the reluctanceof lenders to finance "peculiar"
homes,
thedecen-tralization oftheconstruction industry,theinabilityof
the
30,000
U.S. building codejurisdictions to stan-dardize building requirements,and
themisappropria-tion of
government
research effortsforthedevelop-ment
ofnew
solarmethods
rather than the fullex-ploitation of existing solartechnology.
Perhapsasthe
savingstosolarhousing
becomes more
apparent, thepublic sector will be
encouraged
to deal with theremaining obstaclesto solar development.
2. Seidel, Plotkin, and Reck, Energy Conservation Strategies, U.S. Environmental ProtectionAgency, May1973, pp 12-40.
3. Ibid.
4. ThisiscalledtheSolarissystem. Further explanation can be
found in Harry E. Thomason, SolarHouse Plans, Edmund
Scientific Corp., Barrington, N.J., and Harry E. Thomason,
SolarHouses andSolar House Models, Edmund Scientific Corp., Barrington,N.J.
5. Thomason,SolarHousePlans.
6. Thomason,SolarHouses andSolarModels, p9.
7. Holcomb Brothers Heating Co., Elkin, N.C., interview
February, 1975.
8. Alan McGinigle, private contractor, Chapel Hill, North Carolina, interview,March 1975.
9. Ibid.
10. JamesD. Kanak,privatecontractor.PrinceGeorge,Virginia, interview, January, 1975.
11. Ibid.
12. McGinigle, interview.
13. J.S. Doolittle, Our Future Energy Resources: Part I Solar
Energy, NCSU Energy Information Program, Raleigh, North Carolina, June 1974,p 10.
14. Thomason, SolarHouses andSolarHouseModels, p 13. 15. North CarolinaOilJobbersAssoc,GeraldP. Mathews,study
results, December6, 1972.
16. University ofNorth Carolina ServicePlants,ChapelHill
Carlina, March 1975.
North
17. Ibid.
18. For adiscussionofthedesigncriteriaessentialfor utilization
of solar thermal energy see generally Farrington Daniels, DirectUse oftheSun'sEnergy, Yale University Press, New
Haven, 1964.
19. Thomason,SolarHouses andSolarHouseModels, p14-15. 20.
A
landmarkdecisionto this effectisParkerandEdgartonv.Foote, 19Wend. 309, N.Y.Sup. Ct. 1838.
21. SeeH.R.11677, 94thCongress,2d. Sess..introduced by Rep.
Joe Moakley(D-Mass.)whichstipulated thatnostate orlocal
zoning or other actions could permit construction "which would obstruct or otherwise interfere with sunlight" necessaryforthe operationofexisting solarstructures. 22. For ageneral discussion regarding theinstitutionalbarriersto
solarhousingsee ErnestAmbler,"ADiscussionofaResearch Program", Solar EnergyResearch: A Multidisciplinary
Ap-proach, Staff of the House Committee on Science and
Astronautics, 92nd Congress, December 1972, series2 pp 64-84.
Footnotes
Estimates of the costs of pollution in the U.S. vary, but generallyrange fromten totwenty-fivebilliondollars
annual-ly. See Thomas E. Waddell, TheEconomicDamagesofAir Pollution, U.S. Environmental Protection Agency,
Washington, D.C., May 1974 and Gerald Garvey, Energy, Ecology,Economy, NewYork, Norton, 1974.