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Serving Northern St. Louis County, Minnesota

Can solar or wind cut your power bill?

Payback is slow at current electric rates, but may be a good hedge against rising power costs

Marshall Helmberger
Posted 11/13/09

With the price of electricity headed higher, interest in alternative forms of energy is gradually increasing in the region. While renewable forms of energy production, like wind and solar have …

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Can solar or wind cut your power bill?

Payback is slow at current electric rates, but may be a good hedge against rising power costs

Posted

With the price of electricity headed higher, interest in alternative forms of energy is gradually increasing in the region. While renewable forms of energy production, like wind and solar have traditionally served area residents who live “off-the-grid,” that’s not always the case anymore, says Leo Wilenius, Energy and Environmental Services Manager for Lake Country Power, the rural electric cooperative that serves much of northeastern Minnesota.

“A lot of people want to install renewables as a way to cut their power bill,” said Wilenius, who assists customers who want to install what’s known as a “grid-intertie system.” Such a system enables a home or business owner to remain hooked to traditional power lines while still utilizing an independent power source, such as solar panels or a wind generator. Using a grid-intertie, homeowners can eliminate the need for a battery bank—which is typically used in off-the-grid situations to provide power at night, when it’s cloudy, or when the wind isn’t blowing— since the grid provides power during such situations.

In the past, grid-intertie systems were extremely complicated, both for those installing them and the utilities that would receive the power. But the introduction of more standardized technology and paperwork has made the work simpler, according to Wilenius.

A slew of rebates and tax incentives has also brought the substantial cost of renewable energy systems down to size. “Once I discovered the incentives were there I just jumped all over it,” said Ron Cours, a Greaney resident who had been considering installing solar panels at his home for years. Cours installed his 4,000 watt system in 2007 and says the average Lake Country Power bill for him and his wife Linda now runs about $12 a month. “Once, we had an actual credit,” he said. While service fees still take a bite, Cours said it’s definitely saving money. “Most of the time, it puts out more power than we use,” he said.

Cours has also taken other steps to reduce his power bill. He replaced an electric dryer with a gas model, replaced his incandescent light bulbs with compact fluorescents, purchased an ultra high-efficiency refrigerator, and installed new outlets that allow him to shut off “phantom loads” to things like televisions and other appliances that continue to draw modest amounts of power even when turn off.

Wilenius agrees that’s the right approach. “You can’t talk enough about conservation, particularly when using renewable energy,” he said. In fact, Wilenius said conservation is the first line of defense for homeowners looking to trim their power bill. “A lot of people want to put in renewables to cut their usage. It tell them to look at conservation first. For one thing, conservation helps make your renewables more efficient.”

The system Cours installed is different from most grid-interties, because he also installed a battery bank as backup in the event of power outages. Outages certainly are not unfamiliar to rural residents, but with backup storage, Cours no longer has to put up with the inconvenience.

Just down the road from Cours, Dennis Peterson opted against adding a battery bank when he, with help from Cours, installed a 2,000 watt solar array at his home. “The downside is, if the power goes out from the power company, you still lose power, even if it’s a sunny day,” said Peterson.

Even so, installing a battery bank isn’t a simple operation. Batteries add to the cost of an alternative energy system and they require regular maintenance to remain in good working condition.

Cost high, but rebates help

For those who are already hooked to the electrical grid, the payback on a residential solar array or wind generator can run into decades. “It’s a good thing to do for the right reasons, and there is a payback, but it’s long term,” said Wilenius.

Rebates and tax incentives, which are significant, do help to improve the economics. The state of Minnesota, for example, offers a tax rebate of $2,000 per installed kilowatt for solar or wind, up to $4,000. “That’s why I went with the 2,000 watt system,” said Peterson. “It maximized the rebate.” Some utilities also offer their own rebates. Both Minnesota Power and Great River Energy (which provides power to Lake Country Power) offer an additional $2,000 per kilowatt home or business owners in their affiliated service territories. The Great River Energy rebate will be phasing out, however, at the end of the year, according to Wilenius.

Business owners, however, can also benefit from a federal renewable energy production tax credit, which can further reduce the payback timeframe for renewable power installations.

In Peterson’s case, the rebates reduced the out-of-pocket expense of installing his system from the $18,000 original price tag, to about $8,000. Peterson says his system produces about 200 kilowatt hours per month, yielding a payback of 3-4 percent a year. “It’s not a great payback, but if you compare it to a CD at a local bank, it doesn’t seem so bad,” said Peterson, who acknowledges that environmental concern was his chief motivator in making the investment. “Of course, it’s also a hedge against higher rates in the future,” he said.

Cours has his own take on the matter. “It’s a way better investment than just giving it to the power company. If I didn’t think it was a good investment I wouldn’t have done it.”

Many believe that investments in alternatives like solar will increasingly pay off in the future.

“By 2015, I expect solar panels will be low enough in cost and power rates will be high enough that they’ll be pretty comparable,” said Tom Strom, who operates Greenstone Renewable Energy, in Ely. While renewable energy businesses often rise and fall on the availability of rebates, Strom hopes that will change. “I’d rather we were paying the true cost of the power we use. If we were, we wouldn’t need incentives to buy solar panels,” he said.

Even with the incentives in place, Strom echoes the view of Wilenius and others that conservation should be the first step for any home or business owner. “I’d like to see a requirement that anyone applying for a rebate for alternative energy must first show a reduction in power consumption by 20 percent. Replacing a few appliances and switching light bulbs can have a bigger impact than solar panels.”

solar panels, Lake Country Power