ENMAX solar power – a different definition of affordable

Today, I received a nice offer in my mailbox from utility company ENMAX.  These offers often make me angry because I find that they prey on people’s lack of information regarding electricity units and pricing. Today was no exception.

It seems that, “more and more Albertans are tapping into easy home solar power,” and ENMAX will look after everything for me and, “make it affordable thanks to three pricing options.” The three pricing options (on 15 year terms) are:

  • $0 down, $59.99/mth;
  • $1500 down, 39.99/mth; or
  • $3500 down, 16.99/mth

But, that’s not all.  In the fine print, I am also informed that this does not include other charges with may apply such as permits, wiring, conduit, a new electrical panel, etc. Otherwise, if I have a standard roof, ENMAX will take care of the rest, and at the end of the term, they’ll charge me $950 to take the panels away, or $350 to buy them.

What ENMAX did not see as important to provide in this offer was information such as, say, the capacity of the solar panels, or what I might expect the capacity factor to be – in other words, they are offering me the chance to buy a solar power system for easy monthly payments without giving me the least bit of information on how much power that system will generate.

So, after checking in on the ENMAX site, I found out a few more relevant details:

How much energy will a 1.3kW solar photovoltaic system produce annually?

In Alberta, a 1.3kW solar photovoltaic system will typically produce between 1000 and 1400 kWh per year.

Wow, 1000-1400 kWh per year!  That might sound like a lot, but it actually isn’t. A quick check over to my ENMAX bill shows that I use, on average, 700kWh per month of electricity, so my new solar system would typically offset between 12 and 16% of my monthly electricity usage.

ENMAX tells me that I might want to do this to reduce greenhouse gases, to lead the way into the future, to get a portion of the energy I use from the sun, or just because it feels good.  Well, let’s run some numbers on these and see how much I’ll be paying to lead the way into the future, shall we…

On my electricity bill, I pay for a lot of things other than the energy itself, and some of those charges would also be reduced by my solar system.  On average, I paid just over 13c/kWh for delivered power (including energy, distribution, and transmission) over the last year. Based on these values, I should expect my system to save me, on average, about $15.17 per month in electricity bills.

Let’s assume that I can get the system permitted and install all the ancillary components for $1000, and that I choose the lowest implied interest rate (option 3) on my panels, and that I generate 1400 kWh per year (I’m picking the top of the range to make this look good).  With $3500 down, and $16.99 per month, the net present value of the cost of my solar power system is $6304.33 assuming a 10% annual discount rate.  If I assume that the price of electricity increases at 5% per year, then the net present value of my electricity savings are $1970.59 over the same time period.  The net present value loss from my solar system would be $4333.74.*

But, that’s not the only benefit, as I also get the GHG offset value.  Based on Alberta average grid emissions from Environment Canada, I can offset 880 grams of CO2e GHG emissions for every kWh of solar power I generate.  Again assuming generation of 1400 kWh/year, I would offset 19.71 tonnes of CO2e over the life of my contract with ENMAX.  Now, there are plenty of other ways that I could offset GHG emissions, including buying top-tier certified offsets.  Let’s use a benchmark of $30/t for the value of GHG offset, which leaves me a net present value of $301.11, reducing the net cost of my solar system to $4032.63. You might say that I’d have to value GHG emissions at an average of $235/t to make the system pay off on GHGs alone, but you’d be wrong – even if that were the case, you could take your $235 and buy and retire about 20t of EU ETS permits right now and get a much bigger bang for your buck.

So, if you happen to value leading the way into the future and feeling good at about 18c/kWh, I’d say you should give ENMAX a call. Otherwise, make sure you know what you’re buying for as little as $0 down and 180 easy payments of 59.99/mth.

 

* The nominal values, with no discounting, are costs of $8458 and savings of 4305, for a net loss of $4153.

NOTE: A reply to this blog post from ENMAX is available here: http://andrewleach.ca/climate-change/enmax-has-a-different-definition-of-affordable-than-i-do/#comment-3081

 

38 responses to “ENMAX solar power – a different definition of affordable”

  1. John Johnston

    I faced a similar shortage of information from another solar energy provider in Alberta. At least I got told the size of the possible installation in terms of power but not how much energy I could expect to produce. It felt like being sold a car on the basis of how great it would be to own a car, not on the ability to go places. Once they came back with their expected production in kW/h I could finally make an informed decision.

  2. John

    I did a similar investigation without the detailed math you’ve done when I received the “offer” from Enmax. I came to the conclusion that my bill would jump at minimum $30/month, and that much of the solar power generated (and really it’s minimal from a very small system like the one offered) would go into the grid rather than into my own consumption.

    I recalled reading about other places where these systems are offered for “free” or very little cost, which made me immediately think twice about paying almost $11k over 15 years for something that wasn’t really saving me money anyway. Turns out “free” is borne out of FIT programs with an economic cost the consumer must bear somewhere else: http://www.guardian.co.uk/money/2010/aug/14/free-solar-panels

    I’m climate “aware” enough to leave the car home and take the train everyday. That action has the added bonus of saving a significant amount of money. And there’s the conundrum… Until we figure out a way to make clean power price competitive, we’ll see low take up. Guilt and desire to do “the right thing” aren’t strong enough emotions to overpower the economic realities of the middle class IMO, no matter how strong the proscletizing of the green movement.

  3. Oscar

    It is difficult to beat cheap energy from coal, especially in a place where we are energy obese. The concept of electricity from solar panels works fine in places where all you need is an old fashioned radio and a couple of light bulbs. Places where winters are not as harsh as here, or summers are not as hot as Arizona desert.
    It would be inefficient to have a water boiler, air conditioner and a furnace in South America for example. There are places there, that people live fantastic lives with solar panels in their roofs, without relying on expensive electric power grid.
    This concept of electricity from solar source might work in the future when coal becomes really expensive and we can have a better technology to retrieve more energy from solar panels at a lower cost. In the mean time it is not feasible for people in this region to rely on this technology.

  4. John Johnston

    Oscar,

    I agree that is difficult to beat cheap energy from coal. Unfortunately it’s also absolutely essential that we do: coal being the unrelentingly massive pollutant that it is. In my personal economics therefore coal has already become really expensive once its externalities are considered.

    I disagree that it’s not feasible for people in this region to rely on this technology. Certainly it’s not economically attractive at the moment. Unlike famously sunkissed locales like , um, Germany or Ontario or anywhere else with a feed in tariff. But it is undeniably feasible. Calgary is Canada’s sunniest city and while it’s as clear as night follows day that we cannot rely on solar for 100% of our power (because you know.. night follows day) we should be able to generate significant amounts from renewable sources. Alberta is sunny, windy and atop significant geothermal capacity. It’s also home to a lot of kick ass engineers. This province is ideally placed to lead the world in developing a diversified renewable energy infrastructure. We could do it too if only there was a collective will. We’d be more likely to do it too if there were better incentives and fewer “deals” like the one Andrew highlights above.

  5. Kristina

    If people focused first on reducing energy needs then this scenario might be more appealing. We live in a 950sq.ft. 3 bedroom townhouse with all of the modern conveniences you could want and we use on average 180kWh of electricity per month. Investments in new appliances, high efficiency furnace, new lightbulbs and getting rid of the clothes dryer have drastically reduced our energy needs and with a few more tweaks we could comfortably survive on 2000kWh per year. Also, if you consider the true full cost of the energy we use (not just the amount we pay), in terms of industry subsidies and the social and environmental costs that we currently don’t account for, solar would probably be much more appealing and cost effective. I agree that in today’s market the ROI on solar is not typically worthwhile but that is only because the amount we currently pay for energy is far below the true cost and it is relatively cheap. Reducing energy needs, and thus consumption, as well as paying the full cost for the energy we do use is the only way alternative energies like solar will appeal to the masses.

  6. Michael Hotrum

    It would be nice to know if in fact Enmax’ costs are reflective of reality -or simply the expense they charge for installation

  7. Andy

    Your arguments for a carbon tax Mr. Leach are eloquent.

    The absence of a full cost price signal for energy (due to government subsidies and incomplete regulation) make alternative forms of power very uneconomic.

    I hardly think that Enmax is preying on people because they offer products that some of the market desires – even if for some very non-economic reasons.

    That’s hardly ‘preying’ on people. It’s offering choice to different market segments.

    Perhaps your argument would be better phrased in contrasting intrinsic versus extrinsic valuation, and consumers’ perceptions of such.

    It’s curious to hear someone from a business faculty apply such a one dimensional (and thin) analytical approach.

  8. Jason

    Thanks for running the numbers, I was also a little intriuged by this offer. I have read of other installations that were heavily government subsidized in the states with higher electricity costs, that had about a 10 year payback. It’s good to know these numbers are local.

    The other fine print which raised up flags was that Enmax will have full rights to the carbon credits. Curious to know what these would be worth to them? If a user was to install their own system could they sell the credits?

  9. Richard McNabb

    Cost of solar Energy Miss calculation 240 watt solar panel $475. Cost of power ,0175 for one hour Billing admin cost $50 per month. so here is the way I calculate.
    The Frist thing is learn how to use less energy. On the avearge a 240 watt panel per day will make 2000 wats of power or $.1458 dollars per day at a cost of .07 dollars per Kilo Watt Hour. So if if I was to use 60000 watts per month at .07 plus admin my cost would be $4.62 per month plus 50 admin. So if I was to get of the grid and admin the power my self. My Bill would only be 30 days X .1458 = $ 4.374 towards panel. Now lets also look at the cost on this amount of power. Plus wage tax. Monthly power bil of $54.62 X 1.3 = $71.006 So in one year I save 12 X 71.006 = $852.072.
    So in the month I purchase the panel my bill plus wage taxes $475 X 1.3=617.50.
    So in the first year I save $234.572.
    Now lets look at my miss calculation in that now once I have piad for the panel I no longer pay for $50 admin plus 30% tax on money I make as a wage. Once the panel is paid for no more bill.

  10. Maury Markowitz

    Andrew’s done a good job on the $ side of the equation, so maybe I can butt in with some calculations for the generation side…

    Go here: http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/

    Click the “Canada” button, and it’s already on Calgary. Press the “Start PVWatts” button at the bottom of the page.

    On the new page that appears, change the “DC Rating” to 1.3 to match their offering.

    The “DC to AC Derate” is notoriously low for PVWatts, they use 0.77, which means a full 23% of the power off the panels will disappear before it hits your home. I have panels on my roof and I can say with no hesitation that the *minimum* you should put in this field is 0.82.

    Finally we need to put in the panel tilt. That depends on your roof, as most are somewhere between 22.5 and 45 degrees. My roof was flat so I was able to tilt the panels to the “perfect” angle for Toronto, at 33. For argument’s sake, put in 45.

    Click Calculate. On the page that comes up, look on the right for the “AC Energy” column. I get 1854 kWh a year. Normally we standardize this to a 1 kW array, which in this case gives us 1426 kWh/kW/year.

    So, two things…

    1) Calgary has a *fantastic* solar resource, if PVWatts is to be believed. I’m going to run this again with REITScreen to see what it says.

    2) Something seems odd about ENMAX’s numbers. Their prediction is lower than what my system makes in Toronto, and in my experience Calgary is sunnier than Toronto. Moreover, most of your production will be in the summer, and the higher latitude means more hours of summer sunlight.

    I’d be curious how they came up with these production numbers.

  11. McDermott in NYC

    The economics would be better for you if Canada had incentives equivalent to those in America where the Feds give a 30% grant/tax credit against the cap-ex of the solar system and a generous 5 year depreciation term. Moreover, many US states have feed-in-tariff or Solar REC programs to add to the federal juice. Unfortunately Canada nor Alberta have those incentives — a point you don’t often hear about despite the rhetoric about complementarity with the Americans on policy.

    1. Erik

      The point is exactly reverse: “incentives” aren’t going to do anything to the underlying economics – technology, cost, and prevalence of sun in the climate generate those economics.

      McDermott is saying our Governments are doing a good job by not distorting these markets with perverse incentives which, take money from other taxpayers, to generate power at higher costs, just so certain individuals who make economic decisions based on emotion, can feel smug.

  12. McDermott in NYC

    On the production: I run a 17 MW solar portfolio in New Jersey. We use PVWATTS with an 0.825 derate and design tilt and azimuth. 4 years of historical data across 15 systems shows the actuals running about 103% of the PVWATTS estimat on an insolation(sunlight)adjusted basis (I own a number of weather stations for the data to make that adjustment). Snow is the wildcard. When the module is covered in snow you get 0 production -Its the largest production sensitivity.

  13. Jessica Lajoie

    According to the Climate Change and Emissions Management Corporation website (ccemc.ca) Enmax received $14.5 million to deliver “9000 turnkey home generation solutions to residential consumers across Alberta” which would equate to over $1,500 per installation. I’m curious how this money has been used to improve the offer given to residents?

    Also a comment on the offsets. Scenario: Enmax reaches 9,000 installations, each producing 1.4 MWh / year for a total of 12.600 MWh. Carbon offsets are generated at a rate of 0.65 per MWh, so 8,190 carbon offsets (t CO2e). The market price is capped at $15 (using $13 to be conservative): $106,470. Not much to get excited about.

    Looking at it another way, CCEMC collected $15/offset and paid Enmax $1,770 / offset.

  14. Jessica Lajoie

    In previous post 12.600 MWh should be 12,600 MWh.

  15. Elisa Humphreys

    Just wondering if any of you solar-nurds can answer a few questions for this newbee…. can this enmax system be used off-grid… and what would be the cost to purchase these same components from a supplier separately… not in a package… and not from Enmax

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  23. Concerned citizen

    we are all slaves to the cheap fossel fuels. I work in the Energy performance industry and for years most companies would not look beyond a 5 year pay back, however that is changing and now most want to appear to be “Green” and that requires an investment with long paybacks. A plan like ENMAX offers is a cheap entry into solar power for any home owner. keep the blinders on if you believe that your power rtates are not going to go up as we run out of coal. If rates continue as they have over the past 10 years these solar systems will have a payback of 10 years or sooner.

  24. Rob Magee

    I was wondering if there may be some insight to Enmax’s new in in incentive
    program for the solar installation. My site evaluator mentioned that the program has been updated.

  25. Craig

    Thank you for making the economics more understandable. Looks like everyone agrees the program is more about helping the environment and being that cool kid on the block with solar power than it is about saving money. Kind of like the cool kid who gets a Tesla electric sports car, not to save money, but because it’s fun.

    Anyway, I’m glad that there are now options to lease solar panels instead of shelling out thousands to buy. This makes solar power more accessible to everyone. I’m guessing we will continue to see prices come down over the next 10 or 20 years, so we are seeing the beginning of something good. Just like buying a computer in 1978 was not economically viable, but if no one bought the $10,000 toys back then, we wouldn’t have the $300 laptops we have today.

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