Built a solar power / electric changeover calculator

[ChpBstrd]

I currently have a gas stove, water heater, and dryer. I want to look at the economics of switching everything to electric and then installing a solar power system. This would save me about $600/year from not having a gas bill, and an unknown amount from not having to replace my now-70 year-old gas pipes. I received two estimates which revealed cost driving issues that I had not anticipated, such as local codes limiting the amount of roof space I can use, the requirement to upgrade my service box, and the need to run underground conduit, etc. This is on top of spending a couple thousand to wire my house for electric appliances. So this is probably not going to be a slam dunk, but if I can get a 5%-6% ROI, I'll take it. I'm looking at spending $16,000 for a system that will only mitigate a percentage of my electric bill. :(

So what I need is a calculator that will estimate my electricity usage if I switch my stove, dryer, and water heater to electric. Then I need a reliable calculator that can figure out my cash ROI from the solar power investment.

Google has delivered me some ridiculous calculators that don't take enough factors into account, and simply deliver a "you should buy it!" answer because they're run by solar installers - many of which are shady as we all know. Where can I find realistic and detailed calculators for the above factors? Preferably built by an organization without a selling agenda! The issue is urgent because I need to either replace a gas appliance now or make the switch. What do you use to work the maths?

[bill1827]

I doubt that there is an accurate calculator to do that - there are too many variables.

However, you should be able to work out how much electricity you will use to replace the gas appliances. Look at your gas bills to see how much gas you use (over here they give the amount in kWhr as well as volume, which makes it easy). Then multiply the amount by 0.8 to get the approximate amount of electrical energy that you will expect to use. Gas appliances aren't 100% efficient, although condensing appliances can get over 90%, old appliances aren't likely to get anywhere near that.

There should be calculators which will estimate the production from a proposed system, like this one https://pvwatts.nrel.gov/.

[uniwelder]

I agree with the previously mentioned advice--- 1) calculate additional electrical load from the current gas consumption, and 2) use the pvwatts site to estimate solar output and payback.  Keep in mind that pvwatts assumes there are no obstructions from trees, roof dormers, etc.

[secondcor521]

A long time ago, I checked a book out of the local university library on solar power and wrote up my own spreadsheet.

I started with sizing.  I used my KWh per day, then looked at module wattage, peak sun hours for my specific location, incorporated wire losses, battery efficiency, and inverter efficiency to determine power per module and number of modules needed.  At the time, I figured I needed 28 panels at $600 each, for about $16.7K in panels.

In addition to the panels, there is mounting hardware, wiring, regulator, batteries if that makes sense, inverters, connection stuff, tools, permits, and electric company connection fees.  With all that, you can figure out a total system cost.  Probably 90% of the cost of goods is in the panels.  It also seems to me, from talking with some of the solar companies, that they just about double the price of the system for the convenience of doing analysis and project management (and marketing).  So while the price of a system for my house is probably about $13K to $15K, the solar companies will say it's about a $25K to $30K job.

From there, I looked at the cost of my electricity over the next 10 years, assuming a 6% inflation rate for my electricity.  I then figured out what the federal tax credit would be, and the state tax deduction my state happened to have.  From these two sets of data, I could calculate the dollar amount and timing of my payback.

I then calculated some financial metrics, including NPV, IRR, MIRR, and payback.

In my case, what I realized after going through this exercise is that solar makes sense or doesn't primarily based on three factors:  the cost of electricity (cheaper electricity means solar makes less sense financially), the availability of tax credits (helpful to solar, obviously), and how much sunshine an area gets (more sunshine means fewer panels which means lower system cost).

In my case, I had low electricity costs, middling state tax benefits, and moderate sunshine.  So it didn't make financial sense for me then.

But as the price per watt of panels goes down (my spreadsheet calculated about $4.61 a watt, which is I think multiples of the price now) and electricity costs begin to rise, it starts to make sense if the tax benefits remain.  Not so coincidentally, solar companies are starting to pop up, and two of my neighbors have installed systems (out of about 80 homes, so still low penetration).

The other thing to consider for roof-mounted systems is the status of your roof.  I'm going to need new roof shingles in a few years, so I won't get solar before then (and maybe not after, but I'll probably revisit the decision).

[trollwithamustache]

So this doesn't help, but when you find a good ROI calculator, you need to be careful with what it uses for future cost of electricity.  Here in the Nanny republic of California, a solar company is actually limited to using in increase in power price thats solidly 1% less than PGE's historical raises.  (this number may be off, I don't necessarily keep current on PV stuff, but the idea is important when evaluating an ROI from one of the calculators)

But, you are swapping gas, and gas future price raises for solar electricity, and I suspect there isn't anything out there that will do that for you. 

Would you consider solar thermal for your hot water?

[sonofsven]

I currently have a gas stove, water heater, and dryer. I want to look at the economics of switching everything to electric and then installing a solar power system. This would save me about $600/year from not having a gas bill, and an unknown amount from not having to replace my now-70 year-old gas pipes. I received two estimates which revealed cost driving issues that I had not anticipated, such as local codes limiting the amount of roof space I can use, the requirement to upgrade my service box, and the need to run underground conduit, etc. This is on top of spending a couple thousand to wire my house for electric appliances. So this is probably not going to be a slam dunk, but if I can get a 5%-6% ROI, I'll take it. I'm looking at spending $16,000 for a system that will only mitigate a percentage of my electric bill. :(

So what I need is a calculator that will estimate my electricity usage if I switch my stove, dryer, and water heater to electric. Then I need a reliable calculator that can figure out my cash ROI from the solar power investment.

Google has delivered me some ridiculous calculators that don't take enough factors into account, and simply deliver a "you should buy it!" answer because they're run by solar installers - many of which are shady as we all know. Where can I find realistic and detailed calculators for the above factors? Preferably built by an organization without a selling agenda! The issue is urgent because I need to either replace a gas appliance now or make the switch. What do you use to work the maths?

Are your gas lines leaking? New gas line is generally flex line now so in theory it is less expensive to install than threaded iron pipe.
It's a big upfront purchase (new appliances, new panels, related electrical updates) for very minimal cost savings, especially if you don't use much electricity/gas in the first place. Electric appliances can be more efficient than gas but gas is often cheaper to run because of the low price of gas.

Also my utility charges something like $12-15/mo regardless of usage, so even when your production is greater than your usage you are still paying an electric bill.

My own home is like yours: gas dryer, range, and water heater, no AC or heat (woodstove). With such a small amount of electric usage my payback for installing solar was something like 23 years. Of course converting gas to electric would shorten that somewhat, as would the downward trend of panel costs/increased efficiency.

For myself I like having gas for cooking and hot water in case of a power outage. If I was building from scratch I would probably go full off grid with panels, batteries, and emergency generator.

I did install solar on a spec home because I wanted hands on experience and the new owners allowed me to keep online access to the system so I can monitor production, but I don't know what their electric bills are, and they don't seem that interested in it, unfortunately. It cost around $21k for 18 panels (approx 5400 watts total), installed. The most cost efficient time to do it is on a new house build, but my electrician is very expensive. Quick glance at my phone app (Enlighten) shows production of 1 MWH in June 2021 (highest of the summer months) and 201 KWH in December 2020 (lowest). But again, without knowing their usage those numbers are of limited use.

Amazingly, there are currently no tax breaks for a builder installing solar on a house to be sold, which seems like a missed opportunity.

Sorry I couldn't be more helpful with a calculator.

[K_in_the_kitchen]

One thing to keep in mind is that it takes more energy to produce heat with electricity than with natural gas, which is why many homes have natural gas for cooking, heating, and hot water.  I'm somewhat surprised by how much electricity my electric oven uses -- we switched from a natural gas stove to an induction stove, and while the cooktop is efficient, I can see in my electric usage the days I use the oven.  Switching to all electric appliances would increase what size system we would need to power everything.  And where we are we don't have the option to disconnect from the natural gas even if we aren't using it, and we would still have a bill.

We've done the math, and we still aren't sure we should take on the responsibility for installing a solar voltaic system -- especially now when new solar customers with our utility company are required to have time of use (TOU) plans that make electricity more expensive when the solar panels aren't producing.  People with older system are being grandfathered in but only until their systems are 20 years old.  We'd have to install a significant battery bank to store enough energy for late afternoon and evening cooling in summer, which with our house is when we need the A/C most.  And the utility company is paying less for the excess electricity sold back to them during periods of high solar output.

If we move, and if that move includes building a house, we'll probably spend the money on a solar voltaic system that can meet the needs of a small house built as energy efficient as possible and with passive solar in mind, and we'd likely add other systems such as solar hot water, full grey water system, etc.  But that wouldn't be with this utility company.

[ChpBstrd]

Looks like there are no online calculators that would capture the complexities of my decision. So I built the attached spreadsheet. Incredibly, the two options (sticking with natural gas vs. going all electric with solar) have an NPV within a few hundred dollars of each other over a 25 year period - not adjusted for inflation and at a 6% discount rate.

So the question is whether this small inflation hedge is worth paying a thousands of dollars for today?

I still need to add some items such as the small increase I'll see in my homeowner's insurance and a depreciation allowance to cover the high probability that some component like an inverter will burn out within the next 25 years, the cost of removal and reinstallation when I get my roof replaced, or the unknowable probability that net metering will be scaled back in my area.

As far as the numbers are concerned, it's looking like I'm not a good candidate for solar. However, I still like the idea of locking in my utilities budget for the first couple of decades of FIRE. It's a good inflation hedge and a good SORR hedge.

Let me know if you can think of any other cash flows I missed.

[lutorm]

In my mind, the expected ROI is important but just as important is the error bar on that number, ie getting PV is also insurance against increased electricity (and gas rates, in your case) in the future. Given the transitions needed to limit climate change, I think there's a significant uncertainty in future predictions. If you're self-sufficient, you're immune to that risk.

[uniwelder]

I don't understand Net Present Value in regards to inflation and the investment.  Since you're using a 6% value in the Excel sheet, does that mean its equivalent to a 9% return if there was 3% inflation or a 3% return instead?  I tried playing with the numbers a little and got confused.  Can you explain?

Also, not the point of your posting, but if you change out the anode rod (maybe every 2-5 years depending on depletion) in your water heater, you shouldn't have to keep replacing it every 6 years.  Is a $30 part that takes 15 minutes to swap.  Theoretically, your water heater will last forever if you keep up with it.  Nit pick detail-- you ended up with an extra replacement in 2043.

I have a friend with a solar installation business.  He says to figure on a string inverter replacement after 10 years and micro inverter replacements at least once every few years.  The micro inverters come with a 25 year warranty, but since you'll have about 20 on your roof, the likelihood of one going bad is pretty high.  Depending on the panel location, a few panels might have to be removed to access it.

[ChpBstrd]

Here's a new and improved version of the spreadsheet. I found multiple positive/negative number errors and resolved them in the attached. I also accounted for:
-inverter failure in year 11, costing $1k
-remove and reattach part of the system in 10y when we replace the roof for $2k
-panel production decay - I plugged in 3%/year which is higher than the salespeople say
-replace existing used gas appliances with used electric appliances for a net loss
-increase in homeowner's insurance, per offhand text message with my agent
-will eventually have to replace my home's electrical panel and gas lines in maybe 10y if I stay with the status quo systems

I'm now able to easily adjust for inflation estimates, system size, and panel decay. With all these changes in place, this is looking like a better and better investment.

I don't understand Net Present Value in regards to inflation and the investment.  Since you're using a 6% value in the Excel sheet, does that mean its equivalent to a 9% return if there was 3% inflation or a 3% return instead?  I tried playing with the numbers a little and got confused.  Can you explain?

NPV is a way to compare this investment with my alternative use of the money - at a similar level of investment safety. So for example, instead of doing this project, I could buy a preferred stock fund like PGF and pay my bills with the 4.8% dividend. We'll call this return my discount rate. If this project yields higher than my discount rate, it will have a positive number for the NPV. I.e. I should be willing to pay up to that much extra to pursue this investment instead of getting my default discount rate. If I was comparing 5 possible projects, I could rank them by NPV.

I'm not actually considering buying PGF... but I used to have about the value of this solar investment in some nursing home REIT preferred stocks yielding 6%.

If you adjust the discount rate so that the NPV equals zero, that is basically your rate of return. So then you can think about a deal like this, despite all its weird cash flows, like you would think about a bond. E.g. At this level of risk, would you buy bond yielding X%?

Now to the inflation part of your question. Part of the returns on this project are tied to inflation, which is utterly impossible to accurately predict. Other parts like the upfront investment and "customer charges" on my bills are not. Ideally, my discount rate is based on alternative investment opportunities with a similar inflation profile, but that's a can of worms. The preferred stock fund I suggested as a discount rate might not keep up with inflation, and would probably be decimated if interest rates rose rapidly. So perhaps by using such a discount rate I can answer the question "how does the NPV on this inflation/SORR hedged investment compare with the NPV of not inflation/SORR hedging?" I have lower long-term inflation expectations, so I plugged in 3% as my estimate. If actual energy inflation ends up higher than that, the solar project starts looking much better. So I'm setting a conservative hurdle, just like I did with the panel decay variable. If it's a winner at 3% inflation and 3% decay, it'll be a big winner at 5% inflation and 2.5% decay.

Also, not the point of your posting, but if you change out the anode rod (maybe every 2-5 years depending on depletion) in your water heater, you shouldn't have to keep replacing it every 6 years.  Is a $30 part that takes 15 minutes to swap.  Theoretically, your water heater will last forever if you keep up with it.  Nit pick detail-- you ended up with an extra replacement in 2043.

I have a friend with a solar installation business.  He says to figure on a string inverter replacement after 10 years and micro inverter replacements at least once every few years.  The micro inverters come with a 25 year warranty, but since you'll have about 20 on your roof, the likelihood of one going bad is pretty high.  Depending on the panel location, a few panels might have to be removed to access it.

Yes I agree! My last WH with 6 year warranty was 18 years old when it started leaking this week. Somebody must have maintained it at some point. I will write a note on the side of the next WH to change the anode in 2027. I've recently learned there is no safe investment in existence with the ROI of anode replacement ($50 saves $600).

I also agree on the inverters. How many complex home electronic items last 25 years? None. I threw on a $1k expense in year 11 for this. Based on your comment, I probably need to factor some additional maintenance items.

Again, everybody, please feel free to nitpick my calculations.

[trollwithamustache]

Very interesting, not the outcome I was expecting. Since I believe your nat gas inflation rate is horrendously too low, you've got my vote of approval.

I'll disagree with the pack here and say you should be able to get an inverter that lasts 25 years. The cheap ones the low cost solar cave people installers are slinging out not so much. Stuff made by Schneider electric and other commercial grade brands definitely should. Inverters can need some cooling, ie shade and ventilation room. 

[uniwelder]

Here's a new and improved version of the spreadsheet. I found multiple positive/negative number errors and resolved them in the attached. I also accounted for:
-inverter failure in year 11, costing $1k
-remove and reattach part of the system in 10y when we replace the roof for $2k
-panel production decay - I plugged in 3%/year which is higher than the salespeople say
-replace existing used gas appliances with used electric appliances for a net loss
-increase in homeowner's insurance, per offhand text message with my agent
-will eventually have to replace my home's electrical panel and gas lines in maybe 10y if I stay with the status quo systems

I would figure 0.5%-1% decay for the panels, depending on quality.  Also 2k replacement cost for the inverter.
edited to add---- I realize you want to be conservative in your numbers but 3% decay is unrealistically high.  1% would be realistically conservative I think.

Thanks for adding inflation to the spreadsheet.  I just need to sit down a little bit more and understand NPV.  Your explanation makes sense until I start plugging numbers into excel--- I'll get there.

[uniwelder]

I'll disagree with the pack here and say you should be able to get an inverter that lasts 25 years. The cheap ones the low cost solar cave people installers are slinging out not so much. Stuff made by Schneider electric and other commercial grade brands definitely should. Inverters can need some cooling, ie shade and ventilation room.

I'll check back in with him to ask, but 10-12 years has been his general rule of thumb.  He's been doing this for 14 years, has a mechanical engineering degree, and 12-15 employees at this point.  We live in a small town (so he sees his customers regularly) and he's done more than half the total installations in the area, so not a fly by night operation at all.  SMA is generally the inverter brand that is being installed, indoors (garage or basement) whenever possible.

[catprog]

One thing to keep in mind is that it takes more energy to produce heat with electricity than with natural gas, which is why many homes have natural gas for cooking, heating, and hot water.  I'm somewhat surprised by how much electricity my electric oven uses -- we switched from a natural gas stove to an induction stove, and while the cooktop is efficient, I can see in my electric usage the days I use the oven.  Switching to all electric appliances would increase what size system we would need to power everything.  And where we are we don't have the option to disconnect from the natural gas even if we aren't using it, and we would still have a bill.

Are you using restive heating or heat pump for heating and hot water in your comparison?

[trollwithamustache]

I'll disagree with the pack here and say you should be able to get an inverter that lasts 25 years. The cheap ones the low cost solar cave people installers are slinging out not so much. Stuff made by Schneider electric and other commercial grade brands definitely should. Inverters can need some cooling, ie shade and ventilation room.

I'll check back in with him to ask, but 10-12 years has been his general rule of thumb.  He's been doing this for 14 years, has a mechanical engineering degree, and 12-15 employees at this point.  We live in a small town (so he sees his customers regularly) and he's done more than half the total installations in the area, so not a fly by night operation at all.  SMA is generally the inverter brand that is being installed, indoors (garage or basement) whenever possible.

My limited time being involved with actually installing PV was working for an industrial  contractor, so while you can get longer lived systems, they may not cost effective at home. I am curious what your guy says.

[NorCal]

I'm in the process of doing the same thing to my house over an extended period.  I actually just replaced my gas water heater with a heat-pump version yesterday.

While it's not "you-specific", probably a good place to get started is the energy star labels on the devices themselves.  My new water heater estimates 942 kWh/year in usage.  While I have no idea how accurate these ratings are, you can probably safely assume that as a rough estimate. 

If these labels are correct, the new water heater will cut my water heating bill by about half, and my annual emissions by about 2,200 lbs.

It's also worth checking your utilities rules on solar system.  My utility (Xcel CO) limits solar system size to 110% of estimated annual usage, based on historical billing.  So here you need to make the changeover to electric before you size the solar system.

[secondcor521]

@Syonyk ?

[Syonyk]

Uh...  no idea, really.  Sorry.  Other people have covered the estimates.

My response would be to pay an electrician to do the internal electrical upgrades because I don't like running conduit (our house is wired with 12AWG and 20A breakers which should cover most needs, cheap upgrade at manufacture time) and have them install an oversized main panel busbar in the process (put a 300A panel in for 200A service or something like that, depending on your power use and such).

Then stuff about as much solar on your roof as (1) you can fit, or (2) your utility will let you, and call it good.  If it doesn't offset all the use, oh well.  If it's running a surplus, find something interesting to do with the excess (I blow off some of my office surplus doing BOINC compute stuff, used to run Folding@Home until I donated my GPUs to a friend who makes far better use of them than I was).

You could also do the electric conversion, run a year or so with it, and then see if solar makes sense, but... eh.  It's spending money now to help lock in your costs for an uncertain future, and that's worth a good bit to me.  Plus, tax credits are still around and may not be in a few years.  If you can get the installed cost around $2/W (most installers won't come anywhere near that), go for it, otherwise do the work yourself/with friends and see what you can figure out.

While you're rewiring, make sure you've got a 14-50 in your garage for EV charging.  That's another major energy user (12k miles/yr at 3mi/kWh is 4MWh/yr consumption) that solar can help offset - and there, it's offsetting gas costs, not just electric costs.

I'm not a "Make a detailed spreadsheet and figure out projections 30 years into the future" sort, because I'm quite comfortable with the fact that the only thing that those projections will be is wrong.  I'm trying to reduce my long term costs by doing things now that will serve me many years into the future.  Since I built my solar, repair costs aren't a big deal for me - I have a spare inverter laying around, and it's half an hour to swap an inverter, plus another half an hour to commission it, and then I can hopefully RMA the old unit for repair.  Same goes for a failed panel, I'll just deal with it myself.  I have spares.  If I go through enough spares that I run out, it's probably time to consider re-paneling the system anyway, which also isn't a huge cost, and I can build a solar pergola or something with the ones that work.  Heat a hot tub or something with 'em.

Good luck, do it yourself, have fun! :D

[ChpBstrd]

After letting this sit on the mental back burner for a while, I realized what I neglected to do.

Because of my limited physical space, I can only install a system that covers maybe 80% of an electric bill that would double anyway if I went all-electric. So I'm going to use all of the juice my solar panel system produces regardless of whether the three appliances I'm considering are converted to electric or not.

Gas is generally a cheaper fuel source than electricity. So why not get all the benefits of buying the most productive asset (solar) in addition to burning the cheapest fuel (gas) for the energy needs that solar cannot fulfill. So I entered this "do both" 3rd option to see if I could get an even better NPV.

Surprisingly, it didn't work out. The natural gas + solar option falls between the status quo and full electric with solar. The status quo is most expensive, followed by gas+solar, followed by the least expensive option solar+all electric.

Please double check my work because this doesn't make 100% sense to me on some levels. I.e. the bill for the 3 appliances as electric appliances (2nd tab, sum of C17-E17) is higher than my gas bill, and yet leaving them on gas does not help, maybe because it's the worst of both choices in terms of the costs.

[NorCal]

Based on my electric stove usage, your stove consumption looks about right, but maybe slightly on the high side.

The water heater looks like a traditional electric water heater.  If you go with a heat-pump variety, your consumption would be much lower.  The label on mine estimates 942kWh per yer.  They are more expensive upfront, but should pay for themselves over their lifetime (with the swing factor being your inflation assumptions).  They don't work in every house, as they make some noise and need a place to drain condensation.  But I'm a fan.

[uniwelder]

I'll disagree with the pack here and say you should be able to get an inverter that lasts 25 years. The cheap ones the low cost solar cave people installers are slinging out not so much. Stuff made by Schneider electric and other commercial grade brands definitely should. Inverters can need some cooling, ie shade and ventilation room.

I'll check back in with him to ask, but 10-12 years has been his general rule of thumb.  He's been doing this for 14 years, has a mechanical engineering degree, and 12-15 employees at this point.  We live in a small town (so he sees his customers regularly) and he's done more than half the total installations in the area, so not a fly by night operation at all.  SMA is generally the inverter brand that is being installed, indoors (garage or basement) whenever possible.

My limited time being involved with actually installing PV was working for an industrial  contractor, so while you can get longer lived systems, they may not cost effective at home. I am curious what your guy says.

I'm back with some clarification.  He tells customers to plan on 10-12 years for the inverters, but reality is that they've really only had a batch from their earlier days that have been unreliable.  About 1/3 of that set, all about 12 years old, have needed to be replaced.  Otherwise, inverter failures have been random--- some after 6-12 months, some 6-12 years, and greater majority that have not failed in 10-14 years so far.

Regarding commercial equipment, he doesn't have much experience.  There is a small solar farm they perform regular maintenance/repairs for, which generally is due to the motors/controls for solar tracking fouling up, and otherwise sheep causing damage.  The facility wasn't designed for animals, otherwise panels should have been mounted higher from the ground and hardware protected better.  They have not worked on the inverters there, but he suspects that in most operations, commercial inverters likely have replaceable parts rather than removing the entire inverter from service and sending back to the manufacturer, hence a likely longer lifespan, though maybe not really.

[aetheldrea]

Going with solar is probably the right thing to do for the planet, that’s got to be worth something, right? Maybe not a lot, but it would for sure be worth more than zero dollars to no longer be burning fossil fuels.
Here’s kind of a fun video showing that the gas companies know that cooktops are the only thing that people like about gas, which otherwise pretty much sucks.
https://youtu.be/hX2aZUav-54

[ChpBstrd]

Partial decision made:

I'm spending $3500 on an upgraded service panel and 3 appliance lines next week. Having hot water again will at least buy some time to do research, etc.

The suggestion to use a heat pump water heater is interesting to me, particularly because we've always had indoor humidity problems and this seems like a way to solve the humidity while saving money on water heating. However, we need the indoor space more than anything, so the WH is going into an outdoor storage closet. If it was staying indoors, I'd be all over that. Probably our old indoor gas WH contributed a lot to the humidity anyway, by constantly sucking air into the house from outside and by allowing backdrafts through the flue when it wasn't burning.

The service box upgrade needed to happen at some point anyway, and we don't have to change over all our appliances at once. We can slow shop for an electric stove and dryer on the used or scratch/dent marketplaces and make our moves after the bathroom remodel and after solar panels if that deal works out. Luckily the tax rebate extends until Dec. 2022 now.

My main concern is that going solar does not seem to break even until at least a decade out. I don't know that American democracy will exist a decade from now, not to mention me living in the same house in a quarter-century. Given my personal history of moving around a lot, I may end up abandoning a significant portion of this sizeable investment someday. If I run the analysis for only the next decade, and assume minimal residual value, sticking with natural gas wins - by a lot!

Overall, these investments only make financial sense for someone who wants to do something to hedge inflation risk and SORR. With lower utility bills, I am less vulnerable to a long bear market early in retirement. Essentially, going solar is a form of pre-paying for electricity at the lower rates available today. Mortgages and solar energy are about the only two places where it is possible to lock in prices for decades or to pre-pay for assets that will last decades.

[NorCal]

Partial decision made:

I'm spending $3500 on an upgraded service panel and 3 appliance lines next week. Having hot water again will at least buy some time to do research, etc.

The suggestion to use a heat pump water heater is interesting to me, particularly because we've always had indoor humidity problems and this seems like a way to solve the humidity while saving money on water heating. However, we need the indoor space more than anything, so the WH is going into an outdoor storage closet. If it was staying indoors, I'd be all over that. Probably our old indoor gas WH contributed a lot to the humidity anyway, by constantly sucking air into the house from outside and by allowing backdrafts through the flue when it wasn't burning.

The service box upgrade needed to happen at some point anyway, and we don't have to change over all our appliances at once. We can slow shop for an electric stove and dryer on the used or scratch/dent marketplaces and make our moves after the bathroom remodel and after solar panels if that deal works out. Luckily the tax rebate extends until Dec. 2022 now.

My main concern is that going solar does not seem to break even until at least a decade out. I don't know that American democracy will exist a decade from now, not to mention me living in the same house in a quarter-century. Given my personal history of moving around a lot, I may end up abandoning a significant portion of this sizeable investment someday. If I run the analysis for only the next decade, and assume minimal residual value, sticking with natural gas wins - by a lot!

Overall, these investments only make financial sense for someone who wants to do something to hedge inflation risk and SORR. With lower utility bills, I am less vulnerable to a long bear market early in retirement. Essentially, going solar is a form of pre-paying for electricity at the lower rates available today. Mortgages and solar energy are about the only two places where it is possible to lock in prices for decades or to pre-pay for assets that will last decades.

If moving is a real possibility, you could look at the financing options. While I’m not familiar with the nitty gritty details, I believe they’re typically structured where the new owner will assume the loan.  This could still cut your inflation risk while giving you a less expensive “out” if you move.

Just don’t do a system lease. Those can be a bit of a nightmare.

[CowboyAndIndian]

One thing to keep in mind is that it takes more energy to produce heat with electricity than with natural gas, which is why many homes have natural gas for cooking, heating, and hot water. 

Only true if you directly convert electricity to heat, i.e use a heating element.

When you use a heat pump for heating and cooling your house, it moves heat between the outside/inside and is far more efficient. The modern versions of the heat pump work well into frigid temperatures(0F or -17C). https://www.energy.gov/energysaver/heat-pump-systems

There is a new generation of heat pump water heaters which run at 120V and are very efficient. They are expected to hit the market in 2022. https://cleantechnica.com/2021/11/29/120-volt-heat-pump-water-heaters-hit-the-market-make-gas-replacements-even-easier/

Not sure of what to do in the kitchen. Induction may be the way to go since we do not bake or use the oven.

As you can see, I am planning to get rid of my gas furnace (2 years old), water heater (2 years old), and AC(15 years old) and replace them with electric. The minute something dies, I'm going to switch. Based on the age, I might have to wait a few years.

[boarder42]

i'd get an induction range if you're going all electric its better than gas and there is electricity savings there as well.

[aetheldrea]

If you put in solar and then move, someone will still be able to use it. Not like the new owners would rip it all out because they like paying more for electricity. As a home buyer, a house with a solar system would be more attractive to me than an identical home without.

[ChpBstrd]

If you put in solar and then move, someone will still be able to use it. Not like the new owners would rip it all out because they like paying more for electricity. As a home buyer, a house with a solar system would be more attractive to me than an identical home without.

True, but how much extra would the marginal buyer pay for something they probably weren't shopping for? Half price? One-third price? I'd be surprised if solar panels held their value better than a bathroom remod, but if anyone has sources I'd love to be surprised.

[Systems101]

True, but how much extra would the marginal buyer pay for something they probably weren't shopping for? Half price? One-third price? I'd be surprised if solar panels held their value better than a bathroom remod, but if anyone has sources I'd love to be surprised.

Close to net price of the system in the first 10 years according to A study from LBL (you may prefer to read the fact sheet)

You can find newer studies, but usually from solar-funded sources.  Then again, those show some areas it not only increases value but helps the home sell faster, see (solar funded) data from Texas.

ETA: I have solar panels, should be positive cash flow in ~12 years, they are 101% of the target generation as of my last check in October, and getting back net value in a sale (meaning they are effectively an immediate benefit) was definitely a factor in eliminating any stress in the decision

[NorCal]

If you put in solar and then move, someone will still be able to use it. Not like the new owners would rip it all out because they like paying more for electricity. As a home buyer, a house with a solar system would be more attractive to me than an identical home without.

True, but how much extra would the marginal buyer pay for something they probably weren't shopping for? Half price? One-third price? I'd be surprised if solar panels held their value better than a bathroom remod, but if anyone has sources I'd love to be surprised.

On the flip side, if you bought it and financed it, how much would a buyer discount the property for assuming the loan?  Probably not much.

I have seen the studies that say they do increase property values.  From my anecdotal observations, it seems to improve property values a bit in neighborhoods where solar is more of a novelty.  I live in a neighborhood where everyone has solar, so it's just part of how the neighborhood itself is priced.

[ChpBstrd]

True, but how much extra would the marginal buyer pay for something they probably weren't shopping for? Half price? One-third price? I'd be surprised if solar panels held their value better than a bathroom remod, but if anyone has sources I'd love to be surprised.

Close to net price of the system in the first 10 years according to A study from LBL (you may prefer to read the fact sheet)

You can find newer studies, but usually from solar-funded sources.  Then again, those show some areas it not only increases value but helps the home sell faster, see (solar funded) data from Texas.

ETA: I have solar panels, should be positive cash flow in ~12 years, they are 101% of the target generation as of my last check in October, and getting back net value in a sale (meaning they are effectively an immediate benefit) was definitely a factor in eliminating any stress in the decision

Thanks for digging up this obscure but important research @Systems101 !

In the attached version of the spreadsheet, I depreciate the system at a decelerating pace over 25 years instead of just going by cash flows. This way, I'm accounting for my great fear of selling before the panels pay for themselves, and getting nothing for the investment.

I'm having trouble figuring out how to translate the article's model coefficients into a depreciation schedule, but the authors state "...the market quickly depreciates PV systems in their first 10 years at a rate exceeding an average rate of PV efficiency losses, e.g., 0.5%/year (Dobos, 2014), and also exceeding the depreciation expected were straight-line depreciation applied over the asset’s life; this might indicate functional obsolescence setting in." So I conservatively went with a depreciation schedule that starts out rapidly, and then slows down.

FWIW, I'm looking at quotes in the $2.41/watt range. Obviously a lot has changed since 2013, when the article's data series ends. Given the slow deterioration of solar panels, I agree with the authors about the depreciation of solar panel systems being driven by the falling price of new systems. I.e. in the future, why should someone buy my decade-old system for $2/watt when a brand new installation costs $1.50/watt? Of course, there is no guarantee the net prices of solar installations will continue to fall. The prices of labor and components could start rising in an inflationary environment or if there is trade trouble with China. If the tax credits go away, already-installed systems will have a higher replacement cost, and therefore be worth more than otherwise.

Conclusions, at 6% discount rate and 3% inflation:
1) Solar+all electric remains the clear winner on a 25 year timeframe.
2) Solar+gas wins by a few hundred dollars of NPV over Solar+all electric in a 10 year timeframe.
3) Solar+gas is the clear winner in a 5 year timeframe.

This supports the idea of getting solar ASAP, slow-shopping for all-electric appliances, and switching off the gas at some point in future years or as convenient. I suspect the breakeven for solar is probably between years 10 and 11, but it all depends on one's depreciation schedule. Overall I'm feeling better about the financial wisdom of this investment.

[NorCal]

True, but how much extra would the marginal buyer pay for something they probably weren't shopping for? Half price? One-third price? I'd be surprised if solar panels held their value better than a bathroom remod, but if anyone has sources I'd love to be surprised.

Close to net price of the system in the first 10 years according to A study from LBL (you may prefer to read the fact sheet)

You can find newer studies, but usually from solar-funded sources.  Then again, those show some areas it not only increases value but helps the home sell faster, see (solar funded) data from Texas.

ETA: I have solar panels, should be positive cash flow in ~12 years, they are 101% of the target generation as of my last check in October, and getting back net value in a sale (meaning they are effectively an immediate benefit) was definitely a factor in eliminating any stress in the decision

Thanks for digging up this obscure but important research @Systems101 !

In the attached version of the spreadsheet, I depreciate the system at a decelerating pace over 25 years instead of just going by cash flows. This way, I'm accounting for my great fear of selling before the panels pay for themselves, and getting nothing for the investment.

I'm having trouble figuring out how to translate the article's model coefficients into a depreciation schedule, but the authors state "...the market quickly depreciates PV systems in their first 10 years at a rate exceeding an average rate of PV efficiency losses, e.g., 0.5%/year (Dobos, 2014), and also exceeding the depreciation expected were straight-line depreciation applied over the asset’s life; this might indicate functional obsolescence setting in." So I conservatively went with a depreciation schedule that starts out rapidly, and then slows down.

FWIW, I'm looking at quotes in the $2.41/watt range. Obviously a lot has changed since 2013, when the article's data series ends. Given the slow deterioration of solar panels, I agree with the authors about the depreciation of solar panel systems being driven by the falling price of new systems. I.e. in the future, why should someone buy my decade-old system for $2/watt when a brand new installation costs $1.50/watt? Of course, there is no guarantee the net prices of solar installations will continue to fall. The prices of labor and components could start rising in an inflationary environment or if there is trade trouble with China. If the tax credits go away, already-installed systems will have a higher replacement cost, and therefore be worth more than otherwise.

Conclusions, at 6% discount rate and 3% inflation:
1) Solar+all electric remains the clear winner on a 25 year timeframe.
2) Solar+gas wins by a few hundred dollars of NPV over Solar+all electric in a 10 year timeframe.
3) Solar+gas is the clear winner in a 5 year timeframe.

This supports the idea of getting solar ASAP, slow-shopping for all-electric appliances, and switching off the gas at some point in future years or as convenient. I suspect the breakeven for solar is probably between years 10 and 11, but it all depends on one's depreciation schedule. Overall I'm feeling better about the financial wisdom of this investment.

Your thinking is on the right track, and largely mirrors mine.  I think I'm slightly more ready to jump to all electric, but I'm also okay if it's a slight cost instead of being a true financial return. 

I also expect energy inflation is going to be higher than core inflation over the next decade, at least in states that are actually doing something about emissions.  While I can't quantify that precisely, I certainly lean towards reducing that inflation risk when two options have similar NPV's.

If you do plan to convert to electric over the long term, I do recommend doing some of the prep-work in advance.  For example, if you plan to replace your water heater and stove with electric when they fail, run the 240V lines now.  There's nothing like having a hot water heater fail and then realize the only plumbers available to install it aren't qualified to do electrical work.  It's a zero-return expense for the moment, but it would potentially save some big headaches later.

[ChpBstrd]

True, but how much extra would the marginal buyer pay for something they probably weren't shopping for? Half price? One-third price? I'd be surprised if solar panels held their value better than a bathroom remod, but if anyone has sources I'd love to be surprised.

Close to net price of the system in the first 10 years according to A study from LBL (you may prefer to read the fact sheet)

You can find newer studies, but usually from solar-funded sources.  Then again, those show some areas it not only increases value but helps the home sell faster, see (solar funded) data from Texas.

ETA: I have solar panels, should be positive cash flow in ~12 years, they are 101% of the target generation as of my last check in October, and getting back net value in a sale (meaning they are effectively an immediate benefit) was definitely a factor in eliminating any stress in the decision

Thanks for digging up this obscure but important research @Systems101 !

In the attached version of the spreadsheet, I depreciate the system at a decelerating pace over 25 years instead of just going by cash flows. This way, I'm accounting for my great fear of selling before the panels pay for themselves, and getting nothing for the investment.

I'm having trouble figuring out how to translate the article's model coefficients into a depreciation schedule, but the authors state "...the market quickly depreciates PV systems in their first 10 years at a rate exceeding an average rate of PV efficiency losses, e.g., 0.5%/year (Dobos, 2014), and also exceeding the depreciation expected were straight-line depreciation applied over the asset’s life; this might indicate functional obsolescence setting in." So I conservatively went with a depreciation schedule that starts out rapidly, and then slows down.

FWIW, I'm looking at quotes in the $2.41/watt range. Obviously a lot has changed since 2013, when the article's data series ends. Given the slow deterioration of solar panels, I agree with the authors about the depreciation of solar panel systems being driven by the falling price of new systems. I.e. in the future, why should someone buy my decade-old system for $2/watt when a brand new installation costs $1.50/watt? Of course, there is no guarantee the net prices of solar installations will continue to fall. The prices of labor and components could start rising in an inflationary environment or if there is trade trouble with China. If the tax credits go away, already-installed systems will have a higher replacement cost, and therefore be worth more than otherwise.

Conclusions, at 6% discount rate and 3% inflation:
1) Solar+all electric remains the clear winner on a 25 year timeframe.
2) Solar+gas wins by a few hundred dollars of NPV over Solar+all electric in a 10 year timeframe.
3) Solar+gas is the clear winner in a 5 year timeframe.

This supports the idea of getting solar ASAP, slow-shopping for all-electric appliances, and switching off the gas at some point in future years or as convenient. I suspect the breakeven for solar is probably between years 10 and 11, but it all depends on one's depreciation schedule. Overall I'm feeling better about the financial wisdom of this investment.

Your thinking is on the right track, and largely mirrors mine.  I think I'm slightly more ready to jump to all electric, but I'm also okay if it's a slight cost instead of being a true financial return. 

I also expect energy inflation is going to be higher than core inflation over the next decade, at least in states that are actually doing something about emissions.  While I can't quantify that precisely, I certainly lean towards reducing that inflation risk when two options have similar NPV's.

If you do plan to convert to electric over the long term, I do recommend doing some of the prep-work in advance.  For example, if you plan to replace your water heater and stove with electric when they fail, run the 240V lines now.  There's nothing like having a hot water heater fail and then realize the only plumbers available to install it aren't qualified to do electrical work.  It's a zero-return expense for the moment, but it would potentially save some big headaches later.

I'm wary about narratives that say fossil fuel inflation will exceed regular CPI. I've been hearing them for decades. When I look at a 25 year chart of natural gas prices, for example, I can't establish a pattern that reflects any narrative I've heard. Wholesale natural gas prices are much lower today than they were from 2006-2009: https://tradingeconomics.com/commodity/natural-gas

Electricity prices show a more steady rise - in the same trend line as CPI: https://fred.stlouisfed.org/graph/?g=JWyv

I think it's reasonable to assume both natural gas and electricity will track inflation - although gas is something of a wildcard. However, if I could accurately predict either market, I'd make such a fortune in futures that I wouldn't even be considering $17k worth of solar panels as a way to mitigate SORR during early retirement. :) There's also a scenario where initiatives to get off fossil fuels in cities like LA and NYC, or reductions in the number of NG plants being used, will only depress demand and cause NG prices to fall further.

If solar panels and an all-electric house were a breakeven proposition, I wouldn't do it. With a gas + electric house, I'm immune to power outages in terms of my ability to generate heat, take hot showers, and cook. If I go all-electric, I'm putting myself in the position a lot of people were in during the weeks-long Texas outages - frozen pipes causing tens of thousands in damages, no way to cook or warm water, etc. The solar panels only feed into the meter, and without a very expensive battery or a gas/diesel generator, they can't do me any good.

My purpose is to reduce my sequence of returns risk and invest in positive-NPV projects to diversify my stock-heavy portfolio. Solar panels are essentially a way to pre-pay for future energy usage, earn bond-like returns, and insulate oneself from certain price hikes. On the flip side, it comes with technical risks, financial risks, and outage-related risks.

[CowboyAndIndian]

FWIW, I'm looking at quotes in the $2.41/watt range.

Just got 8.5kw panels installed (20 panels) from Tesla. The price was $2.11/watt.
Panels - $4125
Inverters - $2152
Hardware - $1076
Install/Permit - $10581

Total= $17935

Now they do not sell the panels alone but you need to buy one powerwall.

[Cadman]

Even with a solar install, I also wouldn't go all-electric if I lived in an area with a natural gas connection. Size your PV as though you were all-electric and "pay the gas bill" with the overproduction. As a gas appliance nears its end of life cycle, run the numbers at that time to see if changing makes sense.

In a previous thread someone mentioned it was fairly involved ($$) getting their utility to disconnect them from gas so as not to incur the monthly meter fee even with zero use.

The flip-side of assuming nat gas cost is going to increase is that utilities are continuing to make PV installs less attractive, and there's no guarantee that today's contract will be the same as it is in 5 years.

[Systems101]

If solar panels and an all-electric house were a breakeven proposition, I wouldn't do it. With a gas + electric house, I'm immune to power outages in terms of my ability to generate heat, take hot showers, and cook. If I go all-electric, I'm putting myself in the position a lot of people were in during the weeks-long Texas outages - frozen pipes causing tens of thousands in damages, no way to cook or warm water, etc. The solar panels only feed into the meter, and without a very expensive battery or a gas/diesel generator, they can't do me any good.

Are you sure you're immune?  I would think you're only immune only if you can store or generate energy.  I don't have batteries with my solar, so when the grid goes dead, I'm dark.  My solar production is wasted.  So to be able to use natural gas for heat or hot water still requires a generator to get those systems started/the gas lit.

Even with a solar install, I also wouldn't go all-electric if I lived in an area with a natural gas connection.

This is where I am today - gas stove, gas heat, gas hot water.  The "disaster recovery" of being able to run heat/hot water in the winter with a small generator, and cook on a stovetop as long as I own matches has value.  There are other advantages to Induction cooktop (efficiency and less inside air pollution), but I haven't gotten over the mental hurdle to make the switch.

Size your PV as though you were all-electric and "pay the gas bill" with the overproduction.

Not sure this makes sense - it will depend heavily on what you get for overproduction.  I overproduce (partially because I put the panels on right after moving into a new home, so had no baseline)... but I only get wholesale pricing for overproducing (-313 kW in December).

In addition, with prices still dropping on the equipment, if you wait N years and add panels to handle a transition to electric, those panels are likely to be cheaper than today (assuming the trend holds)

So if you only look at it financially, IMHO it's very hard to justify overproducing.

[Cadman]

Size your PV as though you were all-electric and "pay the gas bill" with the overproduction.

Not sure this makes sense - it will depend heavily on what you get for overproduction.  I overproduce (partially because I put the panels on right after moving into a new home, so had no baseline)... but I only get wholesale pricing for overproducing (-313 kW in December).

In addition, with prices still dropping on the equipment, if you wait N years and add panels to handle a transition to electric, those panels are likely to be cheaper than today (assuming the trend holds)

So if you only look at it financially, IMHO it's very hard to justify overproducing.

To overproduction, I look at it a lot like planting a tree...while panels should continue to get cheaper, at no time have they ever been cheaper than today. If one can reasonably upsize without hitting the next major cost hurdle (use more efficient panels, extra row of panels, additional pair of ground piers, etc.), I suggest they do it. A majority of PV cost ends up being in the labor, copper and racking, so the longer you can keep an inverter in saturation without exceeding Input Vmax, all the better.

But you're absolutely right about the utility's payback method. We're also wholesale, but their fee for net metering jumped up 2 years ago. I've heard horror stories from others; one can only hope the rules don't change drastically for the worse.

[CowboyAndIndian]

Installing a PV system did not make sense financially when I checked it out 10 years ago. That combined with a roof that needed replacing in 5 years made it a bad idea.

At present, with the interest rates and the low prices, I think it makes a lot of sense.

For example, my 8.5kw PV system combined with 2 Powerwalls cost about $21k after the rebates (TRECS $6.5k and federal tax rebate $7k).

Even if it pays 80%(Approx $1500) of my electric bill (Approx $1800), that is a  return of  7%. My loan is at 2.99%, so I am still making about 4%. Better than most bonds and definitely better than any bank account/CD.

If I can get some kind of separation from the grid (my PV system runs even if the grid is down), I will be very happy. Living thru the east coast blackout and Hurricane Sandy, this would provide insurance from grid outages.