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Does Efficiency Really Save When Installing a PV System?

3/9/2009 4:15:00 PM

Tags: energy efficiency, solar panels, Dan Chiras

Several readers have questioned the validity of my assertion that energy efficiency can dramatically reduce the initial cost of a solar electric system. In my blog Making Solar Electricity Affordable, I noted that each dollar invested in efficiency could save $3 to $5 in initial costs. The reason for this is that it is much cheaper to save energy than to generate it with a photovoltaic (PV) system.

To illustrate my point, I’ve included a table from a book I am publishing later this year entitled Power from the Sun. It’s an introduction to solar electricity that’s being be published by New Society Publishers. This data was provided to me courtesy Kurt Nelson, an experienced PV installer and teacher.

In Table 1, I list four energy efficiency measures and how much they’ll save a homeowner in watt-hours (column 4). Column 5 shows the cost of each measure.


Table 1: The Cost of Energy Measures and Energy Savings

Efficiency Measure  New Consumption  Old Consumption  Energy Savings  Cost to Implement 

New Refrigerator

1,300 Wh/day

2,200 Wh/day

900 Wh/day


New Chest Freezer

900 Wh/day

1,800 Wh/day

900 Wh/day


Six 18-Watt CFLs

432 Wh/day
(@4 hrs/day)

1,800 Wh/day
(six 75-watt
@ 4 hrs/day)

1,368 Wh/day


Eliminate Phantom Loads
via Power Strip


384 Wh/day

384 Wh/day


Table 2 lists the daily and annual savings in kWh and the total cost of the improvements. It also lists the annual savings and the cost of the system. As you can see, the return on investment is 5.5 percent. These measures will save about 1,296 kWh of electricity per year. These changes cost nearly $1,700.


Table 2: Energy and Economic Savings from Efficiency Measures

Daily Energy Savings  3,552 watt-hours per day
Annual Energy Savings  1,296 kilowatt-hours
Annual  Savings  $92
Cost of the Improvements  $1,685
Return on Investment  5.5 percent

Now, here’s where things get interesting. Table 3 shows how much it would cost to generate this same amount of electricity via a grid-connected solar electric system — the cheapest of all PV systems. A PV system that generates 1,296 kWh per year would cost about $10,000 in Wisconsin. As you can see, it is nearly six times more expensive to generate electricity than to conserve it.

Factoring in the 30-percent federal tax credit drives the system cost down to $7,000. Even so, it is still four times more expensive to generate electricity via a PV system than to save it through efficiency measures. Every dollar invested in efficiency would save $4 in system cost.

Remember, energy efficiency measures will reduce the initial cost of battery-based systems even more, because batteries add substantially to the cost of these systems. And, off-grid systems don’t qualify for federal tax credits. In this example, an off-grid system that produces 1,296 kWh of electricity per year could easily cost $14,000. In this case, a PV system is 8 times more expensive than efficiency. Every dollar you’d invest in efficiency could save $8 in installation costs.


Table 3: Comparison of Costs and Savings from Efficiency vs PVs

  Energy Efficiency  PV System 
Cost  $1,685 $10,000
Annual Savings  $92 $92
Return on Investment  5.5 percent 0.9 percent

All this is to say, that efficiency measures are far cheaper than a new PV system. I’m not trying to discourage people from installing PV systems, just trying to encourage people to implement efficiency measures first. That way, you’ll end up spending less on a PV system.

Contributing editor Dan Chiras is a renewable energy and green homes expert who has spent a lifetime learning life’s lessons, which he shares in his popular blog, Dan Chiras on Loving Life. He’s the founder and director of The Evergreen Institute and president of Sustainable Systems Design. Contact him by visiting his website or finding him on .

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Dan Bossenbroek_1
3/9/2009 9:38:13 PM
Great article. It's interesting that those results can be achieved by using lower cost effective measures like replacing refrigerators and freezers. I'm sure the ratio of the cost of PV vs energy saving measures would be even higher if you had included a programable thermostat, low flow shower heads, weatherizing windows and adding insulation.

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