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Solar Actually Pays! Let Me Show You How


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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. 

Here's how:

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/

RESOURCES:


PDF document:   Scenario Spreadsheet

Comments on "Solar Actually Pays! Let Me Show You How"

  1. OEIC default avatar rwsimon January 13, 2012 at 9:34 pm

    Excellent article.  The basic premise is spot on.  To be fair, however, the projected output for a system in the Capital Region will not be as high as mentioned here.  Insolation data for Albany predicts an average of 3.5 effective hours of sun per day.  Thus a 5 kW system in a typical year will produce 5kW x 3.5 hr/day x 365 days =  6,387 kWh.  This is the ideal case with no shading.  So probably some number more like 6,000 kWh is what would typically be observed.  My experience with a system here bears these numbers out.  All that being said, if you plug in those numbers, PV is still a great deal.

  2. OEIC default avatar Michael Cellini January 13, 2012 at 10:28 pm

    Thank you for your comment. NYS requires us to perform a Pathfinder Analysis or equivalent to determine system outputs. The 7,222 kWh was taken from an actual reading at a client’s home in Ballston Spa. I can send you the report if you’d like to see it. He does have a perfectly pitched roof and faces true south. But as you already pointed out, even producing 6,000 kWh still makes going solar great financial sense. The actual system is slightly over a 5kW at 5,280 watts. I rounded it off to make things easier to follow.

  3. OEIC default avatar rwsimon January 14, 2012 at 12:19 am

    The data you cited is perfectly believable.  The calculation I performed was based on average annual insolation for Albany.  If you look at the detailed data from NREL, you will see that the maximum output in the region can be about 20% higher.  So in a very sunny year (which could be a fairly local observation), a 5 kW system can certainly produce the output you measured.

  4. Dan Gibson's avatar Dan Gibson January 15, 2012 at 11:05 am

    Thank you Michael for sharing the current PV cost/benefit details. As you say, even if the installation is not optimal, PV investment is financially rewarding. Do you have a similar analysis for leasing?

  5. OEIC default avatar Bill Lasher January 16, 2012 at 7:03 pm

    We installed a 5.4kw solar system in 2007 at our Galway home.  It produced 6,126kw in 2008, 6,065km in 2009, 6,172kw in 2010, and only 5,616kw in 2011 (too much rain!). Our average year usage was 4,555kw so we got $ credit towards our $16.54 a month distribution fee.  Our actual cost for electricty for the last 4 years was less than $250.  In 2010 we installed a hybred hot-water heater and now heat our water with an electric heat pump so we now have less surplus kws to sell to the Grid.  We have worked hard on conservation of our electric usage. I projected a 10 year payback and after four years we appear to be on schedule.

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