Solar cars and homes and panels. Oh, my!

I will be in Berkeley for only one more day so I'm sitting in a Starbucks thinking about the synergies between buying a solar home and buying an electric vehicle. Let's do some arithmetic together --- concerning the simple economics of green product bundling and the joint purchase of solar panels and an electric vehicle.

In case #1, a solar home owner doesn't own an electric vehicle and she can't sell back "excess power" generation (production - household electricity consumption) back to the grid.

In Case #2, a solar home owner doesn't own an electric vehicle and she can sell back "excess power" generation (production - household electricity consumption) back to the grid at a constant price per kWh.

In Case #3, a solar home owner owns an electric vehicle and she can sell back "excess power" generation (production - household electricity consumption - electricity used by the electric vehicle) back to the grid at a constant price per kWh.

If our goal is to increase residential solar installation then; Case #3 > Case #2 > Case #1. Why?

Consider Case #1: households will only install solar panels if they are big Berkeley greens (the warm glow) or if they are major electricity consumers and located in an area (San Diego) that is sunny and where electricity prices are high.

Case #2: The payoff of selling back power back to the grid is low if the price per kWh is low.

Now consider Case #3: Suppose that an electric car travels 3 miles per kWh. A household who drives 45 miles per day will either need to generate 15 kWh using its solar panels or purchase this extra power per day. If this household owned a vehicle that achieved a MPG of 22.5 and if the price of gasoline is $3 per gallon, then this household would have spent $6 per day (roughly $2,000 a year on gas).

I recognize that a price of $.1 per kWh, it appers to be cheap to purchase this power from the utility for your PHEV rather than producing the power yourself.

So, those who install solar panels have an incentive to buy a PHEV vehicle. The incentives for PHEV owners to install solar panels appear to be lower unless the price of electricity is expected to sharply increase.

The ability to recharge your vehicle using your own self generation (the solar panels) allows you to insure yourself against gas price volatility. You know have the option of selling your power to the utility or reducing your gasoline bill. (So I am implicitly assuming that a household owns 2 vehicles and one is gasoline and one is a PHEV vehicle).

An interesting economics question is whether households who own PHEV vehicles AND if they could sell power to their adjacent neighbors for their PHEV vehicles would choose to supersize their solar systems to generate more power than their residential home needs. Would the California PUC support this?

Now, I have not discussed PHEV demand in multi-family buildings. I predict a type of Tiebout sorting will take place as "green", electric vehicle lovers will self select to live in buildings that advertise that they have installed recharger stations. For some details click here .

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