Lakeland Electric Solar Hot Water Program

In June, 2009, several Polk County Citizens requested I write a comprehensive report on the application and utilization of Photovoltaic Module Technology for residential homes. These PV modules would form an array and generate electricity which would reduce the homeowner’s dependency on their local electric utility. The report was presented as a 16 chapter series and provided the Homeowner with the ability to determine for themselves, whether this technology was cost effective for them and how long it would take to get a return on their investment. The series began publication at www.polkvoice.com in late July, 2009.

In August 2009, I was asked to comment on the July 21, 2009 Ledger Article concerning Lakeland Electric’s Solar Hot Water Program approved by the Lakeland City Commissioners. The Solar Hot Water Program is another alternate energy technology which uses Solar Panels to generate Hot Water, thus reducing the Homeowner’s water heating cost, which in turn, reduces the electricity required from their local electric utility.

Most solar panels consist of a network of copper pipes attached to a sheet of copper foil, all enclosed inside an insulated box or panel. The panel is covered with special glass to allow sunlight to penetrate, which produces substantial heat inside the panel. The entire assembly is designed to retain or trap as much heat as possible. Normally, these solar panels are placed on the Homeowner’s roof, facing south to take advantage of near, direct sunlight conditions throughout the day. In principle, water from the Homeowner’s hot water tank is circulated through the solar panels. That water is heated inside the solar panel and is returned to the Hot Water Tank. Electronic equipment controls the rate of flow of the water through the panels and protects them from freeze damage or excessive heat buildup. Properly installed, most of the Homeowner’s daily hot water heating needs could be supplied by this system. The advantage is reduced electric cost because the electric heating elements inside the hot water tank will not need to activate as often, thus reducing the electricity used to heat the tank water. Over the course of a typical monthly billing period, the electricity saved benefits the Homeowner and energy conservation.

Because there appeared to be a high level of interest concerning the City of Lakeland’s Solar Hot Water Program and concerns surrounding the actual benefits to its customers, I agreed to provide its residents with an evaluation of the Program’s composition. The Homeowner can then decide if the Program is applicable for their needs.

Before I begin, let us take a look at what portion of the average Homeowner’s electric bill represents hot water heating. As a consulting engineer, often I must calculate estimates for hot water heating consumption. As a general rule, I divide the total electric bill by seven and this provides a reasonably accurate cost for electricity used by their hot water tank. For example, a typical electric bill indicates $200 per month. Then $200/7=$28.57 or approximately, $28.57 is what it costs for hot water for that month. $28.57/$200 represents about 14.3% of the total electric bill. Thus we find, a typical Homeowner’s hot water needs accounts for about 14.3% of their electric bill using this approximation method.

Several years ago, the Florida Solar Energy Center performed a detailed study to determine the actual amount of electricity used by a typical residential Homeowner to provide their dwelling with hot water. The study included 170 residential, 3BR/2B homes in South Florida under the partnership and cooperation of Progress Energy. Each home contained a 50-gallon hot water tank located inside the home, a dishwasher, washing machine and the associated shower/bath/faucets for hot water. An electric recording meter was placed on the hot water tank to measure and record the amount of power it consumed, 24 hours per day, seven days per week, 52 weeks per year. At the end of one year, which included all four seasons of the year, the analysis was performed and it was determined, about 13% of the electric bill was accounted for by the hot water heating.

The following year, the tests were repeated under the same conditions, except insulation was added to the hot water pipes where possible and a thermal insulating jacket was placed around the hot water tank. At the end of one year the results indicated about 12% of the electric bill was accounted for by the hot water heating.

The year after that, the tests were repeated again under the original conditions (no pipe insulation or thermal jacket), however, a solar hot water system was installed on the roof, facing south. At the end of one year, the results indicated 4% of the electric bill was accounted for by the hot water heating. This implies about 70% of the cost for hot water was saved by utilizing the solar system.

From the aforementioned study, it becomes readily evident the average homeowner can save up to 70% in monthly water heating costs by utilizing properly installed, solar hot water panels. So, how much does the Homeowner need to invest in this technology and how long does it take to get a complete return on their investment? The answer, of course, depends upon the costs associated with installation, operation and maintenance of the system.

After consulting several solar equipment contractors, I found the average cost for complete installation, including county permits, ready for operation is $4,500. Also, included in the system are the appropriate valves needed to periodically, flush out the system for maintenance. The electric cost for the operation of the electronic control equipment is about 50 cents per month.

Assuming the Homeowner pays cash for the system, he will receive a $500 rebate from the State of Florida and a 30% Federal rebate in the form of reduced income tax liability. In this case, the Federal rebate is $4,500×30%=$1,350. Therefore, the total cost is $4,500 -$500 -$1,350 = $,2650. To calculate the return on investment, we must determine how long it will take to recover that initial $2,650 investment. For the Homeowner with a $200/month electric bill and using the FSEC figure of 13% for an average hot water usage rate, we have a total monthly hot water cost of $26. If we utilize our solar hot water system, 70% of that amount, $18.20/month is saved in hot water costs. We can calculate the total number of months it will take to recover our initial investment by dividing $2,650 by ($18.20 – $.50) which is 149.72 months or 12.48 years. Of course, other accounting factors would include any future repairs, maintenance and any loan interest paid if cash payment was not applied. These are variables the Homeowner can factor in on an individual basis. So, for our example, it will take this Homeowner at least 12.5 years to obtain a return on his investment. At that point, if there are no repair costs, he will begin saving on electric utility costs.

Now let us look at the Solar Program offered by the City of Lakeland. I reviewed the July 20, 2009 Memorandum to the Mayor and City Commission of Lakeland, which included the Solar Water Heating Energy Purchase Agreement between The City of Lakeland and the California based Solar Equipment Company, Regenesis Power, LLC. It also, included the contract between Lakeland Electric and its Customers. Basically, the Solar Program offered utilizes the same aforementioned equipment and its performance should be consistent with the information I provided earlier in this article. However, there are substantial differences between the Program and a Privately Purchased System the Homeowner should take into account before signing any agreement. I will list them below.

1) With respect to the Lakeland Electric Solar Program Contract, the Homeowner does not own the equipment. Therefore, he does not qualify for the State or Federal Solar Equipment Rebates. Communication with the I.R.S. and the Florida Governor’s Energy Office indicates only those who can produce proof of ownership of equipment are entitled to the rebate incentives.

2) With respect to the Lakeland Electric Solar Program Contract, the Homeowner must agree to remain in the program for a minimum period of 20 years. Should they sell their home, default on the monthly payments or decide to cancel the program, they will be required to pay a $250 fee for equipment removal.

3) With respect to the Lakeland Electric Solar Program Contract, the Homeowner must pay a monthly fee of $34.95 for a period of 20 years. This totals $8,388.

At the end of the contract period, the Homeowner will be required to sign up for an additional period of time. The contract does not specify what the new monthly fee will be nor the new contract period. It is reasonable to assume the monthly fee will not remain at $34.95/month.

4) With respect to the Lakeland Electric Solar Program Contract, the Homeowner, should he replace his roof or perform construction which requires dismantling or reinstalling the solar panels, will be charged for this service by Lakeland Electric. Neither the Homeowner nor a Homeowner hired Contractor are permitted to work on the equipment.

5) With respect to the Lakeland Electric Solar Program Contract, the Homeowner must agree to the use of a mediator to settle any dispute or claims. Utilizing a standard Court of Law is not permitted.

6) With respect to the Lakeland Electric Solar Program Contract, the Homeowner, must provide homeowner’s insurance on the equipment should he wish to protect the equipment from non-natural events. If he does not, he will be liable for the equipment should it be damaged or vandalized.

7) With respect to the Lakeland Electric Solar Program Contract, the Homeowner must allow the Solar Equipment Company or its representative to enter the home residence at any time with proper notice. Failure to accommodate them implies a breach of contract. The Homeowner may not approve of a particular contractor, however, he has no choice but to allow them entry.

With respect to the Lakeland Electric Solar Program Contract, the Homeowner must continue to pay the monthly fee in the event there is an unpreventable break in service. For example, should a storm damage the solar equipment, the Solar Equipment Company has up to 90 days to make repairs. This implies the homeowner may be without service but be required to pay $34.95 for up to three months.

9) With respect to the Lakeland Electric Solar Program Contract, the Homeowner who signs up for the Program may receive used system components. Since the contract states there is no warranty or performance requirements there exists the distinct possibility of the installation of equipment that does not meet new or maximum efficiency standards of operation. For example, a solar panel that was not properly cleaned on a periodic basis may possess an internal coating of mineral deposits which decrease the efficiency of the overall system. In the same manner, a solar hot water tank with a coated heating element will waste electric power. For those customers with water conditioning equipment, special arrangements must be made with respect to the components inside the tank itself. There is no provision for this in the contract.

10) With respect to the Lakeland Electric Solar Program Contract, the Homeowner will receive the benefit of free maintenance and repair of their system should it fail through no fault of the Homeowner. My experience as an engineer indicates a properly installed solar system will not require this service for many years to come if basic maintenance is exercised. Basic maintenance is a simple process.

11) With respect to the Lakeland Electric Solar Program Contract, there is no provision for the Homeowner to receive compensation for increased property tax. Even though the Homeowner does not own the solar equipment and it can be removed at any given time, it has to be installed via County Building Permits which facilitates an increase in property tax the Homeowner is responsible for.

Although, the Customer Contract is several pages in length, the aforementioned 11 items represent the main elements of the contract. It is important for the Homeowner to consider their ramifications before signing up for the Lakeland Electric’s Program. Now, let us compare the two Solar Options for the Homeowner.

If the Homeowner purchases his own system, he receives the same benefits of reduced energy costs for the hot water portion of his electric bill as he would, had he signed up for the Program. If we use the $200/month sample electric bill, it will take about 12.5 years to recover his original investment and begin profiting from the investment. The Homeowner also, owns the equipment and receives rebates from the state and federal governments. His increased property value can be applied to the selling price of his home should he decide to sell. He can leave the equipment behind to serve as added value or take it with him when he sells the home.

If the Homeowner utilizes the Lakeland Electric’s Program, he does not own the equipment, is not entitled to any rebates and in the case of the $200/month electric bill example will be paying more for the electricity to heat the water than he would if he did not buy any equipment. For example, his monthly cost for hot water is $26 but he pays the utility $34.95/month which is $8.95/month more than if he did not have any solar system. For those whose electric bills are less than $200 per month, this figure becomes larger. In addition, the Homeowner will pay this amount for 20 years which will most assuredly, increase when the new contract period is established following the 20 years.

The result is there is never a return on investment for the Homeowner and it costs more to become part of the Program as opposed to doing nothing at all. As a matter of fact, at the end of 20 years the Homeowner’s investment is $8,388 compared to the final cost of the purchased system of $2,650. That represents an extra cost of $5,738.

It is true, the Program provides free maintenance. However, if properly installed, this is not much of an added value or incentive for joining the Program. When the Homeowner sells his home, he must pay a $250 fee for equipment removal unless he can convince the new owners to continue with his program.

Several Polk County citizens have asked my opinion as to what choice I feel is in the best interest of the Homeowner. Outside of the Lakeland Electric area the Program is not available so at this time I will address only citizens that qualify for the program. If cost and return on investment is most important to you, then clearly, purchasing your own system is the way to go. If a sense of duty requires you to support a municipally owned entity because you feel the entity belongs to all citizens in the area, then the cost factor and return on investment individually may not be relevant to you. In fairness to the City of Lakeland and Lakeland Electric, they appear to be looking ahead to the future where Solar Technology and other alternative energy options will be applicable as a means to reduce fossil fuel emissions and comply with future state requirements. For that, I applaud their efforts. The more people who sign up for their Solar Program, the more Renewable Energy Credits (RECs) they will receive.

These RECs do not represent cash in the bank but rather negotiable forms of stock. If invested wisely, they can reward Lakeland with profit. However, like stock values, they can become worthless at any given time and poor investment can devalue them.

As a consulting engineer, I have to believe any program which requires 20 years to complete is simply too long to be valuable in the long run. Technology and legislation are changing at a rapid rate. Lakeland Electric’s 20 year “locked in” requirement “locks out” any opportunity for the Homeowner to benefit from any new and improved program that comes along in the future.

As a matter of fact, I am unhappy with the 12.5 year return on investment for the equipment purchased individually by the Homeowner for $4,500. I believe a proper return on investment time should be less than one year. Is that possible? Yes it is, however, it would require the support of new legislation and some minor effort on behalf of the Homeowner. The results would be a significant reduction of fossil fuel emissions and less electricity used by Homeowners on a large scale. This would make the State of Florida confident in its ability to reduce fossil fuel emissions and satisfy the Homeowner’s demand to be able to reduce their electric usage. Here is how it would work.

For years, many articles have appeared which show the average Homeowner how to build their own solar hot water panels. Popular Science, Popular Mechanics and Popular Electronics to name a few, are magazines which have provided step-by-step instructions on how to construct, test and operate a solar hot water system. The most important point is they are very inexpensive to build and can be constructed in a couple of days.

Will the solar panels be as efficient as those commercially available? The answer is no. However, this is irrelevant because the Homeowner can simply make an extra panel or two to compensate for any loss of efficiency. The electronic controls systems are very reliable and inexpensive to purchase.

If you can change an electric outlet and work with copper pipe, you can accomplish this task, save a bundle of money and enjoy the same benefits of commercially installed systems for a fraction of the price. Even if you are not confident with some of the applicable skills, you can obtain help from a neighbor or local contractor. All of the materials and system components except for the hot water tank can be purchased for less than $300. It is not necessary to purchase a solar hot water tank. With a few, inexpensive modifications, a standard hot water tank can be converted into a solar tank.

The Application Fee and County Permit Fee presently total $90 and can be obtained by any Homeowner. Since the completed system must pass inspection by a County Agent, safety and proper construction must be observed. If there is sufficient interest, I may provide a modern set of plans to the PolkVoice web site for all Polk County Citizens.

In conclusion, I wish to reiterate what I said in the PV series I wrote earlier this year for Polk Voice that legislators must accomplish three objectives:

First, provide the Homeowner the same rebates and incentives for installing their own solar equipment as they do for contractors.

Second, prevent Electric Utilities from inserting costly requirements for the Homeowner which negates his ability to become energy independent.

Third, find a way to allow the Electric Utilities to remain profitable as they see electric demand decrease as a result of the Florida Homeowner utilizing more energy saving products and methods.

Frank E. Orzechowski

Consulting Engineer

Polk County, Florida