April 15, 2007

Paul Gipe

## Solar Hot Water Systems Tariff Calculation

April 15, 2007

by Paul Gipe

The following spreadsheet calculator is a work in progress. The calculator determines the price or tariff per kWh(thermal) necessary to arrive at the financial targets given for a solar hot water system.

Note that all calculations are before taxes. This is critical to understanding the values produced.

There is currently no solar hot water tariff under Ontario's Standard Offer Program. However, if there were a solar hot water tariff, these calculators provide an estimate of what would be necessary for profitable installation given the assumptions used.

Two calculators are presented. One uses the Chabot Profitability Index Method for calculating the tariff. The second uses an even simpler approach.

### Chabot-Gipe PIM

In the winter of 2004, OSEA invited ADEME's Bernard Chabot to lead a pricing workshop in Toronto. The workshop included stakeholders from all the technologies in the Standard Offer Program. The purpose of the workshop was to determine the tariffs needed for profitable projects.

Bernard Chabot uses a technique that he calls the "Profitability Index Method" to arrive at a recommend tariff. I have adapted M. Chabot's approach to my use here (any errors that result are mine). I will not explain the technique here. The formulas are contained in the cells and M. Chabot has written prolifically on the technique. Some of his papers can be found on this web site.

### @PAYMT Method

The @PAYMT Method uses an internal spreadsheet function for calculating the annual payment of an anuity.

### Variables

The two most critical variables are the specific installed cost in $/m² of collector area and the specific yield in kWh(thermal)/m²/year.

In both sensitivity analyses, the specific installed cost was varied from $700/m² to $1,000/m².

In the Chabot PIM model, the Profitability Index is a critical parameter. In the sensitivity analysis, the PI was varied from 0 to 0.3.

Commercial solar hot water systems have been installed in the Toronto area for $750/m². Solar domestic hot water sytems comprising two panels, heat exchanger, plumbing and installation cost approximately $1,000/m²

RetScreen and other sources estimate that the specific yields for the Toronto area are about 450 kWh/m²/year.

### Results

The following table summarizes the calculations using the Chabot PI method.

The following chart table summarizes the calculations using the PAYMT function.