Upgrade or repair oil boiler?

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NHmaster3015

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Confusion was on my end not yours LOL. I think you would be looking at 30% savings with either unit. I have not had the Firebirds in the field for very long. I like what I have seen thus far though. The System 2000 has a very good and proven track record. Because you have baseboard heating elements, the Firebird probably wouldn't use its full capacity as far as condensing. It doesn't have to condense to still get very high efficiencies but it would be even better if it did. The System 2000 will give you those non condensing efficiencies all day long. If I was the guy selling you I would be trying to push you into the System 2000 because I believe you will see a very significant lowering of your fuel bills along with unlimited hot water
 

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The System 2K control algorithms are well integrated to the unit, but likely to come in at $10K+ for an installed price, and wouldn't likely meet the pay-off in under 10 years criteria. Yes, it would deliver a ~30% reduction in oil use, but it remains to be seen if that's a 30% reduction from 850 gallons/year or a 30% reduction from something less than 500 gallons/year after half the house is heated with the GreenSpeed, the heat from which is already at LEAST 30% less expensive than 85% efficiency oil.

Spending the System 2K money on better-class ductless heat pump technology would very likely pay off in under 10 years, since the BTUs it sources is half the operating cost of 85% efficiency oil.

If sticking with oil, BadgerBoilerMN's recommended Bock 33E HW heater w/ heat exchanger might pay off in 10 years if installed in the basement so that most of the idle losses accrue to the basement zone rather than throwing it away in the garage. This may pay off even if heating half the house with the GreenSpeed. You'd have to do the heat load analysis on the zones heated by the Bock to be sure that there is enough heat emitter to deliver the heat at a temp the Bock can deliver. I'm not sure what the max aquastat setting is, but you can probably muster at least 145-150F at the tank, and at least 130F-135F out of a plate-type heat exchanger. Distributing the heat with 130F water instead of 180F (or whatever temp you're actually running) would have a modest increase in pumping electricity use, but would have much lower distribution losses. Installed in the basement it would likely deliver comparable oil use to a System 2K installed in the garage. But even if it comes in at lower as-used system efficiency than the System 2K, it'll be higher than what you've got and would have a much lower installed cost than a System 2K.

In this Brookhaven Nat'l Labs efficiency testing document heating system #3 is a System 2K, and #6 is a Bock. See Tables 2 & 3, appendix #3 & appendix #6, but note this was apples-to-apples installation location, not garage vs. basement.

The heat load of the basement will probably come in under 10,000 BTU/hr after air sealing & insulating, whereas the first floor's heat load will likely be on the order twice that (or more). If that's the case, you'd get significantly more bang/buck out of a ductless on the first floor than in the basement.

I strongly encourage using a spreadsheet tool to cook up an I=B=R heat load calc for both the first floor and basement at the "after" picture before doing anything with the mechanical systems (other than simply heating the second floor with heat pump only- it'll probably cover the load at least 99.7% of the time given that it's the 3- ton version.) Along with that room-by-room heat load calc, include the length of existing baseboard in those rooms and a BTU/hr per foot of baseboard number, which will tell you about what your maximum water temp requirements are. If the first floor comes in at or under 20 KBTU/hr and the basement is under 10K there is likely some sort of heat pump solution with better economics than oil. Only you know what the 3 ton GreenSpeed cost, but ductless solutions are usually significantly cheaper, and cold climate ductless units have both better capacity per ton at 0F than the Greenspeed and better low-temp efficiency. The MSZ-FH15NA has a COP of 2 @ -13F (where it's still delivering ~15,000 BTU/hr) and it'll deliver 17,500-18,000 BTU/hr @ 0F, which probably covers your first-floor heat load.

This type of heat load calc is pretty simple, if you have the manufacturers' published U-factors for the replacement windows, use that, otherwise presume U-0.5 for clear-glass double panes, U0.35 for code max low-E double panes. You say you're keeping it 68F, and your outside design temp is 0F for a 68F delta-T. Use U-0.5 for solid exterior doors, U-0.2 for panelized doors with some single-pane lights. For 2x4 wall area assume no better than U0.1, and use that for the post-insulted basement wall area as well, but only count the basement wall area from about 1' below grade on up, and just ignore the basement slab and lower part of the wall- the error from that would be "in the noise".

The basic calculation is:

U-factor x square feet of exterior surface x delta-T (in your case 68F)= BTU/hr

Be sure to subtract out your window & door area from your wall area, but run this calculation on each room, by floor. Rooms that are divided only by open archways could be considered one room, since convection keeps them within a couple of degrees of one another if heated by a point source (like a wood stove or ductless head.)

If you want to do it for the whole house, the upper floor ceiling's U-factor is probably no worse than U0.05 now that you've added some insulation and air sealed it a bit.

At your large air leakage numbers you'll have to add a fudge factor to the heat loads to be realistic. Air leakage of 4000cfm/50 is an air leak equivalent to a medium sized double hung window that is left open, but in terms of how much infiltration and heat loss that becomes depends a whole lot on where that leakage is. If it's one big hole in the basement and a similar sized hole in the upper floor ceiling it's an energy disaster, but if the basement & upper floor ceiling are tight it's more of an energy-annoyance. Using a "N-factor" approach to approximating the leakage, the N-factor for our region would be about 15, so the presumed "natural" leakage (with very wide error bars to the 1-sigma ticks) would be 4000/15= 267cfm, or ( x 60=) 16,020 cubic feet per hour. The approximate specific heat of air is about 0.018 BTU per degree F per cubic foot, so 16,020cfh of natural ventilation at a delta-T of 68F represents a heat load of 0.018 x 16,020 x 68F= 19,608 BTU/hr which is a large fraction of you fuel-use estimated total.

In reality it's usually much less than that, since there is a "heat exchanger effect" at the leakage points, and the air that makes it fully outside the building envelope is leaving at a much cooler temp than 68F, and the air entering the conditioned space is at a temp warmer than 0F, but the infiltration is probably still more than 10,000 BTU/hr. Assuming with further air sealing you get it down to 3000cfm/50 (likely) for a natural infiltration heat load of 15,000 BTU/hr at the full 68F delta, but realistically more like 12,000BTU/hr distributing that heat load over ~3000 square feet of conditioned space is would be a 4 BTU/hr per square foot of floor area load adder to a given room. (eg, say the I=B=R for a 225' bedroom comes in at 4200 BTU/hr , add 4 x 225' = 900 BTU/hr to the load, making it 5100 BTU/hr.) This will never be a high precision number since you won't be able to measure the natural air leakage on a room-by-room basis, but it's better than a WAG. For somewhat tighter homes just throwing a 15% fudge factor at it usually has margin.
 

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I've seen easier swap outs than that (without an indirect) quoted at $8K in MA.
 

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I'd like to follow up a bit on the discussion pertaining to the cost and availability of #2 fuel oil. There is no doubt that the price of the product has risen substantially in the past decade or two but then so has the price of L.P. gas and natural gas as well and while natural gas is less expensive there is not always a readily available supply particularly in the Northeast. I live on the edge of the natural gas supply. The city I work in has natural gas but the next town up and those to the east and west do not. There are still large areas of New Hampshire, Maine, Vermont and Mass ( and northern states to the west also)that do not have natural gas service. The alternatives are wood and wood products (pellets) L.P. gas and solar. Of the three wood and wood products are the most common in use because the price of propane is far more expensive than oil. Solar doesn't really figure in because the average person can't afford the price of a system large enough, with enough storage to take care of the load. Dana says that oil is on its way out. Maybe so, but not in the next few decades unless someone can figure out how to lower the cost of electricity. Mini-splits are efficient and so are ground water heat pumps but both have drawbacks in delivery, operation and installation cost. Most homes in the Northeast are capes and ranches and don't lend themselves to mini-split installations because of the lack of open space. Heat pumps on the other hand are very expensive to install and increasingly under scrutiny due to drilling of the well(s) required. We just finished up a very high end housing development using GW heat pumps. The cost of installation for a single system came in at close to 40 grand. Its going to be a lifetime to get any ROA on that investment but......its what their association required so.....I get to buy a new bass boat this year too. Anyway, the point here is that oil will be around for a good many years to come and with the right equipment and the right installation it will provide cost efficient heat and hot water.
 

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Natural gas prices are WAY below traditional cost per BTU relative to oil or propane. It's been a decade since ng was more expensive to heat with than oil, and there's no realistic scenario for that flipping. Yes, ng prices have doubled since the all time record low price of a couple of years ago, but the delivered residential price per BTU to the customer today is barely more than half the price per BTU of oil in high distribution-cost areas like New England, and less than half the price in regions that don't rely on LNG for any share of the gas.

The price of PV is already cheaper than you think, and getting cheaper at an accelerating rate. The 20 year lifecycle cost of PV even at the un-subsidized ~$4/watt cost for small scale grid-tied PV is already below the average residential retail rate in New England, and in the states like VT & MA with substantial subsidy it's literally half the cost. At the current residential retail rate for electricity air source heat pumps are already cheaper heat than oil at any efficiency. Ground source heat pumps are indeed $40K/pop, and uneconomic without subsidy (or even WITH subsidy.) Mini-splits + radiant cove auxiliary heating for doored-off rooms is a workable solution in many small to mid-sized houses, and ductless + PV (even at 2014 pricing) is often at parity in net power use with far more expensive ground source heat pumps. And when the un-subsidized cost of PV hits $1.50/watt (many analysts believe that will be the case before Y2020) the lid is going to blow off- putting utilities who haven't prepared for it back on their heels and potentially putting the already marginal ground source heat pump business in a museum.

Ducted air source heat pumps have efficiency and capacity issues for New England design temps, but there is incremental improvement every year. When the price of the ducted system capable of handling the load is so egregious that it's cheaper to add PV to cover the difference in power use for a mini-split + auxiliary heating solutions, those with a big enough roof or yard can add more PV. It's not 100% bankable for $0 down loans in 2014, but it will be in less than five years.

It's not just idiot green-heads with starry eyed dreams saying this. The analysts at Citi Group, are smellling the blood in the water, and analysts the investment bank Sanford Bernstein are going so far as to project a broader world wide energy price deflation setting in prior to 2030 due to the combination of cheap PV and cheap grid storage (which is already well ahead of projections on falling cost.)

http://reneweconomy.com.au/2013/citigroup-how-solar-module-prices-could-fall-to-25cwatt-41384

three-speed-scenario.jpg


^Using a logarithmic scale on vertical axis in the City Group graphic above ^ allows more detail, and avoids the compression in the linear scaling used in the Sanford Bernstein graphic below. But both scales are useful for grasping just how close the market is to a tipping point.

bernstein-solar-coal-lng.jpg


Steven Crane CEO of NRG, the largest independent power generation company in the US, with a lot of nuclear & coal fired assets recently stated that the domination of PV (both utility-scale and distributed) is inevitable: "The fact that distributed solar is going to take over the built environment in the United States, it's a completely foregone conclusion that that's going to happen,"

That fact will be self-evident in under 10 years, and when it does, there is a high likelihood of a flight of capital from the incumbent energy companies toward cheap renewables, accelerating the shift. The fact that investment banks are saying this stuff publicly in 2014 makes me believe that the tipping point may be only months away, not decades, but certainly not more than a few years out.

What does it mean for heating oil prices over the next decade? Not much- oil use for the transportation sector worldwide will continue to drive prices, even in the face of electric cars taking an ever bigger slice of personal transportation in the already-developed world. If Sanford Bernstein's projections prove true the shift toward electric-everything MIGHT temper heating oil price inflation by 2030, but probably not before then. PV & wind is already tempering retail electricity pricing TODAY, despite projections by some that we'll see 2-2.5% electric rate inflation over the next decade (maybe true for the US in general, but less likely in New England.)

In 2013 PV accounted for 0.85% of all kwh going onto grids world-wide- which doesn't seem like much. But it's the leading thin-edge of the wedge, the first hint of the swell of a tsunami. In places where electricity prices are high, people have the money to spend and insolation rates are high, it's already threatening to crush utilities, leaving them with un-paid for stranded generating assets and no budget for maintaining the grid.

At less than half the 2013 installed pricing it can potentially crush the business models of utilities at New England insolation levels even without the cheap grid-storage that is also coming. Sober people are already talking about how to manage the onslaught to avoid complete grid-defection by those with the capital to set it up, once they are net-zero on grid use. If the fees for staying connected are too egregioius, low cost storage will make grid defection economically attractive, but the value of that output & storage to the rest of the grid users has value- it's not a desirable outcome.

Edited to add: Another writeup the Sanford Bernstein analysis projecting energy price deflation due to PV.

PV has disrupted wholesale electricity prices even in foggy-dew Germany
 
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Tom Sawyer

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Natural gas prices are WAY below traditional cost per BTU relative to oil or propane. It's been a decade since ng was more expensive to heat with than oil, and there's no realistic scenario for that flipping. Yes, ng prices have doubled since the all time record low price of a couple of years ago, but the delivered residential price per BTU to the customer today is barely more than half the price per BTU of oil in high distribution-cost areas like New England, and less than half the price in regions that don't rely on LNG for any share of the gas.

The price of PV is already cheaper than you think, and getting cheaper at an accelerating rate. The 20 year lifecycle cost of PV even at the un-subsidized ~$4/watt cost for small scale grid-tied PV is already below the average residential retail rate in New England, and in the states like VT & MA with substantial subsidy it's literally half the cost. At the current residential retail rate for electricity air source heat pumps are already cheaper heat than oil at any efficiency. Ground source heat pumps are indeed $40K/pop, and uneconomic without subsidy (or even WITH subsidy.) Mini-splits + radiant cove auxiliary heating for doored-off rooms is a workable solution in many small to mid-sized houses, and ductless + PV (even at 2014 pricing) is often at parity in net power use with far more expensive ground source heat pumps. And when the un-subsidized cost of PV hits $1.50/watt (many analysts believe that will be the case before Y2020) the lid is going to blow off- putting utilities who haven't prepared for it back on their heels and potentially putting the already marginal ground source heat pump business in a museum.

Ducted air source heat pumps have efficiency and capacity issues for New England design temps, but there is incremental improvement every year. When the price of the ducted system capable of handling the load is so egregious that it's cheaper to add PV to cover the difference in power use for a mini-split + auxiliary heating solutions, those with a big enough roof or yard can add more PV. It's not 100% bankable for $0 down loans in 2014, but it will be in less than five years.

It's not just idiot green-heads with starry eyed dreams saying this. The analysts at Citi Group, are smellling the blood in the water, and analysts the investment bank Sanford Bernstein are going so far as to project a broader world wide energy price deflation setting in prior to 2030 due to the combination of cheap PV and cheap grid storage (which is already well ahead of projections on falling cost.)

http://reneweconomy.com.au/2013/citigroup-how-solar-module-prices-could-fall-to-25cwatt-41384



^Using a logarithmic scale on vertical axis in the City Group graphic above ^ allows more detail, and avoids the compression in the linear scaling used in the Sanford Bernstein graphic below. But both scales are useful for grasping just how close the market is to a tipping point.



Steven Crane CEO of NRG, the largest independent power generation company in the US, with a lot of nuclear & coal fired assets recently stated that the domination of PV (both utility-scale and distributed) is inevitable: "The fact that distributed solar is going to take over the built environment in the United States, it's a completely foregone conclusion that that's going to happen,"

That fact will be self-evident in under 10 years, and when it does, there is a high likelihood of a flight of capital from the incumbent energy companies toward cheap renewables, accelerating the shift. The fact that investment banks are saying this stuff publicly in 2014 makes me believe that the tipping point may be only months away, not decades, but certainly not more than a few years out.

What does it mean for heating oil prices over the next decade? Not much- oil use for the transportation sector worldwide will continue to drive prices, even in the face of electric cars taking an ever bigger slice of personal transportation in the already-developed world. If Sanford Bernstein's projections prove true the shift toward electric-everything MIGHT temper heating oil price inflation by 2030, but probably not before then. PV & wind is already tempering retail electricity pricing TODAY, despite projections by some that we'll see 2-2.5% electric rate inflation over the next decade (maybe true for the US in general, but less likely in New England.)

In 2013 PV accounted for 0.85% of all kwh going onto grids world-wide- which doesn't seem like much. But it's the leading thin-edge of the wedge, the first hint of the swell of a tsunami. In places where electricity prices are high, people have the money to spend and insolation rates are high, it's already threatening to crush utilities, leaving them with un-paid for stranded generating assets and no budget for maintaining the grid.

At less than half the 2013 installed pricing it can potentially crush the business models of utilities at New England insolation levels even without the cheap grid-storage that is also coming. Sober people are already talking about how to manage the onslaught to avoid complete grid-defection by those with the capital to set it up, once they are net-zero on grid use. If the fees for staying connected are too egregioius, low cost storage will make grid defection economically attractive, but the value of that output & storage to the rest of the grid users has value- it's not a desirable outcome.

Edited to add: Another writeup the Sanford Bernstein analysis projecting energy price deflation due to PV.

PV has disrupted wholesale electricity prices even in foggy-dew Germany

A lot of the predictions are counting on government subsidies that may or may not continue depending on the political climate at the time IOW there are a lot of folks that take umbrage to paying taxes so folks can afford new heating and cooling equipment. Also on the horizon and again a political football is the continued drilling and oil exploration going on in the Dakotas that again have the possibility of lowering fuel costs although I rather think it has a better chance of stabilizing or slowing the cost increase rather than lowering it. PV's are also as you say getting better and may indeed prove to be a salvation but again, nothing is for nothing and I just don't see the companies making the things giving them away. Remember that drastic lowering of energy costs would have a sweeping effect on the economy. Maybe for the better in the long run but in the short term, disastrous.
 
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Dana

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That ship has already sailed- the crash in PV pricing is coming with or without government subsidy. The excessive German feed in tariff was at least partially responsible for getting the cost points down, but the price point has already passed the tipping point for making it mainstream going forward in parts of the world with expensive electricity, and the size of that market is increasing with every drop in cost. And every increase in the market has been met with ramped up production, higher competition, and lower prices. It has already hit a virtuous market cycle. While the US is still a double-digit fraction of the world market for PV, subsidy in the US market is not necessary for this market growth to be self-sustaining, and downward driving on the installed cost.

Even without subsidy of any kind the lifecycle per-kwh cost of PV is already below the residential retail rates in New England, and before 2020 it will be less than half the current cost, even if the US federal tax subsidies evaporate on-schedule in 2017. The tax subsidy is scheduled to drop from 30% to 10% of the installed cost at the end of 2017, but even if that were revised to 0%, at City Group's projected $1.12/watt (or even $1.50/watt, the D.O.E.'s target) for residential rooftop cost it's a bankable almost no-brainer kind of investment for New England home owners even in a rough-justice "run the meter backwards" net-metering environment. A peak watt of PV at New England insolation intensities returns between 1.1-1.2 kwh per year averaged over the first 20 years, but even if it were just 1 annual kwh at 15 cents/kwh that's an internal rate of return of 10% at the $1.50 price point, and at 20 cents/kwh it's a 13% IRR. Where else can you invest money at a very low-risk after-tax return of 10-13%? There is enough arbitrage in the 20 year lifecycle cost and the residential retail rate that third party money can (and will) install & maintain it for you, and give you a break on your electric rates, even without subsidy. There is no doubt that the $1.50/watt price point will be met in many areas by 2017- they are nearly there in Texas in 2014. There is more than a dozen well capitalized third party ownership solar companies already operating in US states that expressly allow that business model (including all of New England except Maine), who aggregate and sell the solar output via power purchase agreements. This busieness model will continue to work in New England in a post-subsidy world even at 2014 PV pricing, but at post 2017 pricing it'll have much better margins.

In the scramble to deal with the capacity lost in Japan by shuttering all their nukes lots of plans have been made for generating capacity of all types, but the time scale, construction cost, and fuel cost of expanding the fossil-burner fleet has proved to be uneconomic relative to PV and wind, and this is a country that had fairly weak renewables programs prior to the disaster, since they had enjoyed strong political backing for a mostly-nuclear path forward (but not so much now.) The lights are still on in Japan, a combination of demand-response control & running the pre-existing assets at maximum capacity factors, but they have become the new hot market for PV (and to some extent wind), as well is home-grown micro-cogenerators. Plans for new large scale fossil burners to pick up the slack have been on the table, but almost none of them are actually being built, due to the vagarities and high volatility of the fuel prices, all of which would be imported. Japan has emerged as one of the hottest markets for grid tied PV, but even THEY don't install as much per year as the domestic Chinese markets. If India relaxes their domestic content requirements (or figures out how to compete with China and US on PV production) India would easily charge into the forefront for several years even as the market mushrooms in the rest of the world. Bottom line, ever cheaper PV is going to happen independent of US policy (short of outright banning of PV imports and disallowing net-metering or something, which has no political traction anywhere in the US.)

It's a competitive market- the companies aren't giving them away AT ALL, (despite allegations of dumping by a handful of larger Chinese manufacturers), but the roadmap to 25 cent/watt panel cost is pretty clear, and not dependent upon subsidies or dumping. The amount of capital thrown at it in China (including buying up US techology companies) has been huge over the past 5 years. By 2017 even the amount of raw silicon going into PV panels will have been reduced by 75% or more due to now fairly robust thin-polycrystalline kerfless wafer production methods that have been developed in the past 4-5 years. (Some of the US companies who developed the methods have been bought up by large Chinese conglomerates already. It may only be a matter of time before some large player buys up 1366 to own their cheap thin-silicon casting technology rather than having to license it, but they are just one of a good handful of emerging thin-silicon technologies that can be implemented cheaply.)

I'm not saying that Sanford Bernstein's prediction of actual energy price deflation is a given, but it's clear that PV will have a strong moderating influence on electricity pricing, and also more broadly as other sources of energy. Some believe that $200/kwh storage price for high power-density batteries like lithium-ion will be the tipping point for US consumers to start buying plug-in cars (Elon Musk, founder of Tesla has that as the target price for 2017, and is building the battery factory that he thinks will get us there) others think it takes $100/kwh, but the $100/kwh price point for stationary grid batteries looks very likely by 2020, which is going to be part & parcel of the melt-down of the traditional utility business models. Some planners think 2-way smart chargers will have cars stablizing the grid, but even cheaper lower power-density stationary batteries may beat them to the punch. Regulators in CA just this week pushed back on utilities who had tried to limit the ability of private grid tied PV operators to also have their own site storage without separate metering to ensure that they don't just charge their storage from the grid during off-peak only to sell it back to the utility at peak or full-retail. This has opened the door for third-party ownership companies with capital behind them to start installing them in droves. In particular this immediatly affects Solar City who had already sold and installed a bunch, but had until this week been barred from throwing the switches by the utilities. You can't stuff the genie back in the bottle- privately owned grid storage on the ratepayer's side of the meter is looking like a done-deal in CA, and probably will be soon in Hawaii.

At the rate of oil demand increase in the developing world you could add a North Dakota every year for a decade and not even begin to nudge the world price downward. The fact that the production is happening in ND doesn't much affect the price of oil products in the US- it's a world market. It takes almost two orders of magnitude (100x) more drilling to produce oil out of tight formations than from traditional methods, and the rates of depletion on the old oil fields is also accelerating (though at $100/bbl they can slurp harder using more expensive methods), but this isn't likely to keep up with world demand growth. There was something like a 4-5x increase in the world price of oil less then 10 years ago, and that price increase has barely eked out less than a 10% increase in worldwide production. At $75/bbl world price tight oil is profitable, but the sustained actual world price for the past 5-6 years has been 30-33% higher than that. We'd be very lucky if new production continued to keep up to the point that $100/bbl continued to be the "new normal". Most oil market analysts estimate oil consumption in the US peaked in 2006, and is continuing to fall, but even the combination of contracting US consumption and increased worldwide production has clearly not been fast enough to affect the world price of oil in the face of new demand from Indian and Chinese middle classes continuing to buy cars in record numbers.
 

Tom Sawyer

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That ship has already sailed- the crash in PV pricing is coming with or without government subsidy. The excessive German feed in tariff was at least partially responsible for getting the cost points down, but the price point has already passed the tipping point for making it mainstream going forward in parts of the world with expensive electricity, and the size of that market is increasing with every drop in cost. And every increase in the market has been met with ramped up production, higher competition, and lower prices. It has already hit a virtuous market cycle. While the US is still a double-digit fraction of the world market for PV, subsidy in the US market is not necessary for this market growth to be self-sustaining, and downward driving on the installed cost.

Even without subsidy of any kind the lifecycle per-kwh cost of PV is already below the residential retail rates in New England, and before 2020 it will be less than half the current cost, even if the US federal tax subsidies evaporate on-schedule in 2017. The tax subsidy is scheduled to drop from 30% to 10% of the installed cost at the end of 2017, but even if that were revised to 0%, at City Group's projected $1.12/watt (or even $1.50/watt, the D.O.E.'s target) for residential rooftop cost it's a bankable almost no-brainer kind of investment for New England home owners even in a rough-justice "run the meter backwards" net-metering environment. A peak watt of PV at New England insolation intensities returns between 1.1-1.2 kwh per year averaged over the first 20 years, but even if it were just 1 annual kwh at 15 cents/kwh that's an internal rate of return of 10% at the $1.50 price point, and at 20 cents/kwh it's a 13% IRR. Where else can you invest money at a very low-risk after-tax return of 10-13%? There is enough arbitrage in the 20 year lifecycle cost and the residential retail rate that third party money can (and will) install & maintain it for you, and give you a break on your electric rates, even without subsidy. There is no doubt that the $1.50/watt price point will be met in many areas by 2017- they are nearly there in Texas in 2014. There is more than a dozen well capitalized third party ownership solar companies already operating in US states that expressly allow that business model (including all of New England except Maine), who aggregate and sell the solar output via power purchase agreements. This busieness model will continue to work in New England in a post-subsidy world even at 2014 PV pricing, but at post 2017 pricing it'll have much better margins.

In the scramble to deal with the capacity lost in Japan by shuttering all their nukes lots of plans have been made for generating capacity of all types, but the time scale, construction cost, and fuel cost of expanding the fossil-burner fleet has proved to be uneconomic relative to PV and wind, and this is a country that had fairly weak renewables programs prior to the disaster, since they had enjoyed strong political backing for a mostly-nuclear path forward (but not so much now.) The lights are still on in Japan, a combination of demand-response control & running the pre-existing assets at maximum capacity factors, but they have become the new hot market for PV (and to some extent wind), as well is home-grown micro-cogenerators. Plans for new large scale fossil burners to pick up the slack have been on the table, but almost none of them are actually being built, due to the vagarities and high volatility of the fuel prices, all of which would be imported. Japan has emerged as one of the hottest markets for grid tied PV, but even THEY don't install as much per year as the domestic Chinese markets. If India relaxes their domestic content requirements (or figures out how to compete with China and US on PV production) India would easily charge into the forefront for several years even as the market mushrooms in the rest of the world. Bottom line, ever cheaper PV is going to happen independent of US policy (short of outright banning of PV imports and disallowing net-metering or something, which has no political traction anywhere in the US.)

It's a competitive market- the companies aren't giving them away AT ALL, (despite allegations of dumping by a handful of larger Chinese manufacturers), but the roadmap to 25 cent/watt panel cost is pretty clear, and not dependent upon subsidies or dumping. The amount of capital thrown at it in China (including buying up US techology companies) has been huge over the past 5 years. By 2017 even the amount of raw silicon going into PV panels will have been reduced by 75% or more due to now fairly robust thin-polycrystalline kerfless wafer production methods that have been developed in the past 4-5 years. (Some of the US companies who developed the methods have been bought up by large Chinese conglomerates already. It may only be a matter of time before some large player buys up 1366 to own their cheap thin-silicon casting technology rather than having to license it, but they are just one of a good handful of emerging thin-silicon technologies that can be implemented cheaply.)

I'm not saying that Sanford Bernstein's prediction of actual energy price deflation is a given, but it's clear that PV will have a strong moderating influence on electricity pricing, and also more broadly as other sources of energy. Some believe that $200/kwh storage price for high power-density batteries like lithium-ion will be the tipping point for US consumers to start buying plug-in cars (Elon Musk, founder of Tesla has that as the target price for 2017, and is building the battery factory that he thinks will get us there) others think it takes $100/kwh, but the $100/kwh price point for stationary grid batteries looks very likely by 2020, which is going to be part & parcel of the melt-down of the traditional utility business models. Some planners think 2-way smart chargers will have cars stablizing the grid, but even cheaper lower power-density stationary batteries may beat them to the punch. Regulators in CA just this week pushed back on utilities who had tried to limit the ability of private grid tied PV operators to also have their own site storage without separate metering to ensure that they don't just charge their storage from the grid during off-peak only to sell it back to the utility at peak or full-retail. This has opened the door for third-party ownership companies with capital behind them to start installing them in droves. In particular this immediatly affects Solar City who had already sold and installed a bunch, but had until this week been barred from throwing the switches by the utilities. You can't stuff the genie back in the bottle- privately owned grid storage on the ratepayer's side of the meter is looking like a done-deal in CA, and probably will be soon in Hawaii.

At the rate of oil demand increase in the developing world you could add a North Dakota every year for a decade and not even begin to nudge the world price downward. The fact that the production is happening in ND doesn't much affect the price of oil products in the US- it's a world market. It takes almost two orders of magnitude (100x) more drilling to produce oil out of tight formations than from traditional methods, and the rates of depletion on the old oil fields is also accelerating (though at $100/bbl they can slurp harder using more expensive methods), but this isn't likely to keep up with world demand growth. There was something like a 4-5x increase in the world price of oil less then 10 years ago, and that price increase has barely eked out less than a 10% increase in worldwide production. At $75/bbl world price tight oil is profitable, but the sustained actual world price for the past 5-6 years has been 30-33% higher than that. We'd be very lucky if new production continued to keep up to the point that $100/bbl continued to be the "new normal". Most oil market analysts estimate oil consumption in the US peaked in 2006, and is continuing to fall, but even the combination of contracting US consumption and increased worldwide production has clearly not been fast enough to affect the world price of oil in the face of new demand from Indian and Chinese middle classes continuing to buy cars in record numbers.


I'll wrap up by saying that you are more optimistic than I am. I don't see the utilities laying down that easily
 

Dana

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I'm not thinking of it as optimism- more like grim realism. If they screw it up it could be very disruptive.

Utilities don't really have much of a choice- it's "adapt or die" time. If they make grid connection too onerous for PV operators who stay connected but with net-zero or very low net kwh consumption, grid defection not only can but WILL take place, once grid storage drops below $200/kwh. RMI's recent white paper on the breakpoints where defection is economically viable (though not desirable) seems actually pretty close to the mark, but even that may be too conservative. There is already a company advertising on TV in high-electricity priced Hawaii marketing a "utility in a can" packaged deal for those who have the money and want to get cheaper & more reliable power than what the utility company offers. The utility & regulators there are scrambling to figure out how to save the grid and the utility before only the less-well off ratepayers are stuck with 100% of the grid costs. It could get ugly, or maybe they can figure it out- I'm cautiously optimistic that they'll avoid the death-spiral, but not exactly convinced that they will. But there is no question but that they'll all be screwed (and the ratepayers too), if individuals and companies start cutting ties with the grid in significant numbers.

There is no reasonable doubt about grid storage hitting those lower price points- it'll probably in under five years, maybe less than three. Elon Musk is betting a billion dollars that even (comparatively expensive) lithium ion will be at $200 in three years, but other technologies being employed by ABB and other grid-goodies companies are already closing in on that price point. Germany has mandated grid storage to stabilize their high-renewables grid portfolio going forward, as has the state of CA, with multiple vendors competing for market shares, and in other well developed well financed markets.

For states where decoupling utility profits from kwh sales is the regulatory environment (CA, MA, NY and several others) the utilities have a chance, but not if they or their regulators let themselves get blindsided by the cheap-PV factor. Utilities that spend their money trying to set up roadblocks are likely to get crushed, whereas those who adapt becoming primarily service companies or even go into the business of selling distributed solar & storage assets to the ratepayers have a real shot of coming out ahead, but it's a very strange time to be in the utility biz. The state regulatory agencies (never nimble in the best of times) may have a difficult time staying ahead of it to even SAVE the utilities. Assuming decoupling will smooth it out somewhat, states with the best shot at a less-disruptive ride are probably the ones in brown:

twomaps_vertical.jpg


The short course on why oil heating has no future can be summed up in two pictures:

oil-price-vs-world-oil-supply.jpg


The world supply of oil is fairly inelastic to the price at the current levels. Anybody who can make a buck at $100/bbl oil is already drilling as fast as they can, and opening up drilling on public lands in the US won't much change the world supply (and thus price), only which hole in the ground it's coming out of. If the Saudis or Iraqis could get it together, collectively they might be able to exert short-term downward price pressure, but don't hold your breath. The Saudis already see it in their interest to pump as much as they can, keeping the customer base from moving on to other energy resources, but it's not clear that other OPEC nations are that clear-sighted.

...and...


oil-consumption-bp.jpg


Oil use in emerging markets (primarily India and China) has overtaken that of the former Soviet Union (FSU) and the OECD countries combined. (Organisation for Economic Co-operation and Development== basically all of the fairly well industrialized countries of the world, such as China, Brazil, USA, etc.)

Whatever measures the OECD countries take on energy policy are rapidly becoming irrelevant to the price of oil, which is now driven by developing country demand more than OECD demand. This is an extremely different scenario than the price shocks of the 1970s and early 1980s, when team USA was nearly half the world market, and the entire OECD something like 90% of the market. At that time the price could be driven down by conservation & efficiency measures of the OECD countries and de-controlling the wellhead price for US producers, which is what happened between 1982 and the 1998 price bottom when crude oil was trading at about $11/bbl, about 1/8th the recent 5-year average. If we cut the OECD share of world oil consumption to near-zero the price would likely come down briefly, with a lot of volatility around the $75/bbl price point that makes it or breaks it for the exotic-production methods oil production, but not even those drinking the frack-water are predicting that rapid a change.
 
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