A 5kW solar PV system is a rather typical solar project. For most homes it will produce between 65-85% of the yearly electric needs. A 5kW roof mounted solar PV system facing south with an 8/12 pitched roof will produce 7,222 kWh per year in our area (taken from an actual Pathfinder Analysis Software with minor shading). An average cost for a relatively easy installation is about $8,204 (final cost after incentives and tax credits). National Grid charges ~$.155 per kWh average in our area, making the savings on solar $1,119 in year one. With a 5% inflation rate on electric prices and 1% degrading of the solar panels annually, this provides a simple payback of less than 7 years.
The National average per kWh was $.08 in 2002. Most of my customers are currently paying $.155 in the Capital Region today, some more, some less. When I propose a system to my customers I use a conservative 5% inflation on energy prices. But whether you are paying $.11 to $.19 (the range I have seen in our area), one thing is for sure, it is only going to go up.
Many folks look at payback when thinking solar. But payback is really the wrong way to look at solar. When someone asks me about payback I usually ask them, “What is your payback on National Grid?” Although a payback of less than 7 years is consider great by most, there is an even better way to look at solar! Solar can be FREE from day one AND can actually start making you money immediately.
The person with the 5kW solar system scenario above is paying $93.25 per month ($1,119 / 12) to National Grid or their local electric company for the equivalent amount of electricity that the solar system will produce (601 kWh/month on average). If the person finances the solar system, their monthly payment would be $83.06 per month ($8,204 @ 4.07% for 10 years). So from day one the person is actually making over $10 per month ($93.25 - $83.06 = $10.19) by buying solar. In 5 years the National Grid bill will be up to $109 per month (with 5% inflation and 1% power degradation) but the finance charge will STILL be $83.06. So they will be making $26 per month by buying solar.
By year 10 if they did not buy solar they would be paying $132 per month to National Grid and then by year 25 they will be paying a whopping $236 per month. If instead they had invested in solar and borrowed the money, by year 10 they would have paid their solar system off and have over $4,000 in the “bank” from all the savings over the years. Projecting this ahead, after 25 years you would have $52,673 in the “bank,” assuming savings are reinvested at 5%. What else? You would not have paid a penny for all that electricity (160,457 kWh) over the last 25 years! The only “probable” maintenance to the system would be a new inverter sometime between year 15 and 20. Your installation may be more challenging (read, a bit more costly) but I’ll be glad to show you the numbers and how investing in solar will work out very much in your favor.
So looking at solar this way (the right way - IMHO) makes it very difficult for someone NOT to install solar now, especially while the State and Federal incentives are so good.
Please take a look at the attached spreadsheet in RESOURCES, with all the numbers and assumptions of the above scenario.
Michael Cellini is owner of Allura Solar, a local full service solar design and installation company. He can be reached through Member email. For more information on solar PV, solar heating, solar hot water and passive solar design visit http://www.allurasolar.com/.