Introduction

This section analyzes the economic factors involved in the decision to implement solar panels on the roofs of buildings at Lafayette College. In this section we calculate what Lafayette currently pays for electricity on an annual basis. Subsequently, we detail our attempt to estimate the costs of installing solar panels on campus and compare our results from the two calculations. Our team believes there is added value that comes from the qualitative benefits solar energy systems would add to our campus that are difficult to account for in quantitative costs. That being said, in strict dollar terms, our estimated costs of implementing solar energy systems on campus are greater than what the College currently pays for electricity. We based our analysis of economic factors on common industry standards, best practices in project management, and communications with Lafayette faculty who specialize in renewable energy.

What is electricity used for on college campuses?

Electricity is a necessity for modern day life. Some of the major uses of electricity in the United States are lighting, heating, cooling, refrigeration and for operating appliances such as computers, electronics, and machinery (EIA, 2016). All of these components are crucial in order for Lafayette College to operate the way it does. College campuses are interesting in the fact that they host different types of buildings: residential buildings, dining halls, classrooms, science building, sports facilities, and libraries to name a few. At other universities, science buildings and recreation buildings use the most energy (Helmer, 2017). Lafayette is no different in this regard. As per the 2011 Climate Action Plan: “The most significant contributors to Lafayette’s emission are the science and engineering buildings, Acopian Engineering Center and Hugel Science Center, and the Kirby Sports Center, which require large volumes of conditioned air” (Lafayette College, 2011).

What does Lafayette currently pay for electricity?

A good starting point in determining the economic feasibility of adding solar panels to roofs on Lafayette’s campus is to consider what the school currently pays for electricity and compare it to what it might cost to add renewable solar systems. Lafayette’s Campus Energy Manager, Nick Desalvo, assesses the College’s kilowatt hour (kWh) usage each year. His office has documented usage for each of last three years, as well as the unit cost the College pays for that electricity. By multiplying the number of kWh used by Lafayette by the unit cost per kWh (also provided by The Office of Sustainability) we were able to estimate the College’s annual costs for electricity, detailed in Table 1 below.

Lafayette’s electricity usage has remained relatively constant over the last three fiscal years at about 27 million kWh. Costs of roughly 7.50 cents per kWh equate to an annual electricity cost of about $2 million for each of the last three fiscal years.

How much would solar energy cost Lafayette?

The price of solar energy systems has consistently dropped in recent years. Per the National Renewable Energy Laboratory’s (NREL) September news release:

The installed cost of solar power fell to record lows in the first quarter of 2017 because of the continuing decline in photovoltaic (PV) module and inverter prices, higher module efficiency, and lower labor costs, according to an analysis by the U.S. Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL) (NREL, 2017).

In order to calculate how much solar energy systems would cost to implement at Lafayette, we had to determine how much rooftop space would be available for solar panels. As discussed in the Technical Analysis,the most optimal buildings capable of supporting solar panels are Buck Hall, Kirby Sports Center, and Skillman Library. By consulting campus floor plans, we found the square footage of each building and converted that number to square meters. Our findings are detailed in Table 2 below.

This calculation allowed us to estimate the number of kWh of electricity those panels could produce using the formula for returns on energy explained in the Technical Analysis. Equation 1 is detailed below.

With 18,952 square meters of solar panels the school would be able to produce roughly 4,669,000 kWh of electricity, close to 18% of the total electricity it used in FY2016. Greenhouse gas (GHG) emissions from generating electricity by burning fossil fuels are on the magnitude of ten to twenty times greater than GHG emissions from generating electricity from photovoltaic systems in terms of grams of CO2 per kWh (Alsema, de Wild-Scholten, & Fthenakis, 2006). Considering how many kWh of electricity Lafayette uses annually, and understanding that all of those kWh come at the cost of polluting the environment excessively, to be able to potentially get 18% of our electricity in a sustainable way is significant.

One thing to note: the estimated square meters of roof space available is based off of building floor plans. It is optimistic to assume that every square meter of floor space on the ground level is equal to a square meter of roof space, and every one of those square meters can host solar panels. Putting 18,952 square meters of solar panels on the roofs of Buck Hall, Kirby Sports Center, and Skillman Library is a best case scenario projection.

Next we estimated how much it would cost Lafayette to actually produce these 4,669,000 kWh of clean electricity. In order to do so, we used the levelized cost of electricity (LCOE) benchmarks reported by the NREL in September of 2017. The LCOE is one of the solar industry’s most commonly used metrics. It takes into account the upfront project cost of implementing solar systems, which includes acquiring materials and installation, as well as lifetime operations and maintenance costs. The idea behind the LCOE is that it is supposed to be a 1 to 1 comparison of going solar versus staying on the grid (Bushong, 2016). Simplified, the LCOE is essentially equal to the lifecycle cost of a solar project divided by the lifetime energy production of that solar project. See Equation 2 below.

In September, the NREL reported that the LCOE, excluding any subsidies for commercial solar systems, is between 9.2 and 12.0 cents per kWh (NREL, 2017). By multiplying the LCOE that the NREL reported by the 4,669,000 kWh of electricity a solar system on campus could produce we were able to estimate costs of implementing such a system, detailed below in Table 3.

Based off of our calculations, we expect it would cost between about $430,000 and $560,000 annually to get this renewable solar system on the roofs of Buck Hall, Kirby Sports Center, and Skillman Library. In terms of total costs, Lafayette could expect to pay between 4% and 10% more than what it paid in FY16. Again, this cost increase would allow Lafayette to produce 18% of its annual electricity needed in an environmentally friendly, sustainable way. If unit costs are on the lower end of that range, a 4% increase in costs is not all that much. It would equate to roughly $80,000 annually. Likely, the cost would fall somewhere in the middle of that range, and as stated in the introduction, having a renewable solar system would add value beyond what is taken into account in these quantitative estimates.

Qualitative Value

There is qualitative value that comes from implementing renewable solar energy systems on campus that is difficult to put a number on. Some of that qualitative value comes from doing the right thing. Implementing solar systems on the roofs of buildings can potentially allow Lafayette to produce 18%, almost a fifth, of its total annual electricity needs without burning fossil fuels. As stated previously, photovoltaic systems emit ten to twenty times less grams of CO2 per kWh than burning fossil fuels (Alsema et al., 2006). The decision to add this type of solar system to campus would significantly reduce the school’s carbon footprint. Lafayette confidently claims it is committed to being a sustainable campus. Its website reads, “We’re working to cut global warming emissions, integrate sustainability into the curriculum, and cultivate solutions to ensure a healthier environmental future. Exploring sustainable living on campus prepares students for a life of environmental citizenship” (Lafayette College Office of Sustainability, 2017b). LEED certified buildings like Grossman House and the soon to be Rockwell Integrated Sciences Center prove this is the case. They are also examples of projects where the cheapest option was not the best option. Lafayette could have certainly had Grossman or Rockwell designed to be less expensive, but the school was willing to pay more for the environmental benefits that come from LEED certified buildings. That same logic should apply for decisions in how to acquire electricity. The environmental benefits that come from having a sustainable solar system on campus are worth the additional costs involved in making that system a reality.

Lafayette would receive educational benefits from adding a solar system to campus as well. Nicholas Pratt and Jordan Crolly from the Department of Energy & Mineral Engineering at The Pennsylvania State University wrote, “A photovoltaic array on a university campus can have a variety of educational benefits….There are many courses spanning several subject areas that could integrate the data generated by the solar array into their lesson plan. Courses ranging from business, to engineering, to liberal arts, could use this data in educational exercises specific to their courses” (2013). It would not happen immediately, but it does not seem unrealistic to believe future classes of students could benefit from analyzing these solar panels implementation and effects. Discussions about the construction of Rockwell Integrated Sciences Center have been a part of many engineering courses recently so there is no reason to believe the the installation of a photovoltaic system would not yield similar beneficial discussions.

There is also value that comes in improving Lafayette’s image in the eyes of prospective students. Today’s generation of students cares about the environment. When considering colleges, prospective high school juniors and seniors want to see sustainability efforts when they visit campuses. An article published on EnergySage stated:

For many students in the modern era, especially in liberal urban environments, the prospect of going to a school or university that is seen as being sustainable and eco-conscious can be a distinguishing factor. Thousands of students seek out schools that will be the best environment to study sustainable practices and green policy, which makes solar-powered universities a very attractive option (Richardson, 2017).

Staying competitive is especially important right now for Lafayette, as the school has plans to increase its size in the coming years. If adding solar panels to roofs on campus truly has an impact in students decisions on where to attend college, then not implementing these types of systems would hurt Lafayette in the increasingly competitive landscape of admissions. Other top schools that Lafayette competes with for students are starting to add solar systems to their campuses, and it is only a matter of time until it is the norm. Getting solar panels on campus before it becomes standard will help Lafayette continue to bring in strong classes of students, and the value generated in doing so helps offset slightly higher energy costs.

Tax Incentives and Subsidies?

Most homeowners, businesses, and other corporations receive some sort of tax incentive or other subsidy when making the switch to solar systems that offset some of the costs incurred when doing so (Energy.gov, 2017). These incentives can make the LCOE for solar energy equal to or even less than grid costs. Unfortunately, non-profit organizations do not qualify for most of these subsidies. In conversations with Professor Wilford Hunt, she confirmed that Lafayette operates as a non-profit and is incapable of attaining the potential tax benefits that exist for implementing a solar system. However, as described in the Political/Policy Context,there are a few specific grants Lafayette could apply for. Notice that in the LCOE range discussed above we specifically mentioned that it is excluding any subsidies.

Non-profit organizations can indirectly receive a financial subsidy from adding solar systems in the form of power purchase agreements. Per the Environmental Protection Agency, “A Solar Power Purchase Agreement (SPPA) is a financial arrangement in which a third-party developer owns, operates, and maintains the photovoltaic (PV) system, and a host customer agrees to site the system on its property and purchases the system’s electric output from the solar services provider for a predetermined period” (US EPA, 2016). Essentially, the third-party provider would own the solar system on Lafayette’s campus and receive tax incentives because it is not a non-profit organization. Lafayette would indirectly receive some amount of those incentives because the school would theoretically pay less money per kWh for the electricity it purchases from the third-party provider. According to the Office of Sustainability, Lafayette has actually looked into how feasible a PPA would be. However, it is unclear how seriously the school has considered it and how comfortable the school would be hosting a solar system that it did not own or maintain.

Conclusion

There are multiple things to consider from an economic standpoint when thinking about the feasibility of adding solar panels to the roofs of buildings on campus. The cost of solar energy has been falling every year, but as detailed above, is still more expensive than for Lafayette to stay on the grid. We estimate that Lafayette’s total annual costs would increase between 4% and 10% compared to what they paid for electricity in FY16 if they added solar systems to the rooftops of Buck Hall, Kirby Sports Center, and Skillman Library. That increase in costs would allow the school to produce 18% of the energy they need annually in a sustainable way. The qualitative benefits that come from implementing a solar system of this nature, such as reducing our carbon footprint, educational possibilities, and becoming a more enticing college in the eyes of prospective students make up for this difference in costs.

 

Next Section: Conclusion