Solar Panel Math

[Huskie87]

Just looking for confirmation that my math here is correct...

Local utility company has a program going where you can 'purchase' one solar panel and harvest it's 335 watts of capacity for 12 years.  The estimate is that over these 12 years the panel will average 500 kWh per year.  The cost of one panel is $650, and this includes maintenance.

Looking at my statement, I'm paying roughly $0.10 per kWh.  500 kWh * 12 years = 6,000 kWh.  650 / 6,000 = $0.108 per kWh

So my math tells me that I can commit to purchasing solar for roughly the same cost as I'm paying today.  Does this math seem accurate, and the conclusion reasonable?  Seems to me that if the cost is so comparable, more people would be doing this.

[mrl]

time value of money though...

[JumpInTheFIRE]

I think your math is pretty accurate, but the difference is that you have to lay out the capital at the start so in theory you should be comparing the price of electricity with the amount of money your capital would make if it wasn't tied up in a solar panel.  Buying in advance like this could be a nice hedge against rate increases in the future, but unless rates increase more quickly than the stock market grows the price isn't as equal as it looks. 

Another factor to consider is you are only getting the power for 12 years when panels can last 30-40 years but it seems you are paying close to full price for the panel.  If you have your own system, generally it pays for itself in 10-15 years and any power you make after that is essentially free.  In this scheme you lose your rights to the panel right about the point where it pays for itself.  That's partially offset by the convenience of not having to maintain anything and not worrying about being hit with a big repair bill if a major component (like the inverter) goes out but I think to properly analyze this deal you would want to compare it to a rooftop installation over 20-25 years and then determine how much the maintenance is worth to you. 

[Huskie87]

So, I had considered home solar panels, but the angle of my house and my roof just doesn't have a great fit for solar.  My only option would be a backyard unit.  Where I live it would look pretty funny in the yard and since I probably intend to move in 10 years or so, I've got to also consider that into the equation.  If I lived on more land and intended to stay there permanently, I'd definitely look harder at installing my own panels.

And, you're definitely right that the stock market would generate returns on that money.  Most likely well above the rate of electricity inflation.  So my cost may be more like $0.13 per kWh.  Before doing any math, I said I'd be willing to pay double for solar relative to a non-renewable resource, so I guess this still falls within my parameters. 

[BTDretire]

I don't think it is going to pay off. But I would ask the power company to prove the economic viability and then you can start picking, looking at whether they include the lost growth of your money, see if they project electrical cost increases. etc.
 Do they just get all the electricity after 12 years?
 Also, it is my undeerstanding the power output starts to decrease with age.

[Northern gal]

Is the electricity "yours" whether you use it or Not? Most panels generate when people are not at home. On average, you'd be lucky to use 50% of the power you generate

[lifeanon269]

I am guessing that with a deal like this from the utility company, you're ultimately just selling all the electricity that the panel makes back to the utility company and that they're reducing your bill accordingly and paying you back for any extra that you've generated as well. It should be noted that usually in net-metering solar setups like this, your solar panel will not be able to power your home during power outages. To me, providing my home power when the power grid goes out is one of the biggest benefits (environmental aside) of putting solar on your home. You should consider this if you weren't aware of it.

[Arktinkerer]

Not sure about your state but here they will pay you the lowest cost they pay for power.  i.e. its not what they call net metering.  The end result is you get paid wholesale rates for power while you continue to pay retail.

[RelaxedGal]

For what it's worth, our panels were only cost effective due to state (we're in Massachusetts) and Federal tax credits, plus selling the Solar Renewable Energy Credits (SRECs).  If any of those are available to you it might be worthwhile but as you laid it out No, not a good idea.

[Fishindude]

For what it's worth, our panels were only cost effective due to state (we're in Massachusetts) and Federal tax credits, plus selling the Solar Renewable Energy Credits (SRECs).  If any of those are available to you it might be worthwhile but as you laid it out No, not a good idea.

I priced them out for our place. 
It was going to require a bank of panels approx. 70' long x 10' tall, at a cost of roughly $70,000.   With the Federal tax credits and selling the credits, payoff was 20-25 years.
Just couldn't see dropping $70K when my monthly bill is only $250-300.
Other issues included:
* How long were panels going to last?
* How long would converter last?
* Did not include a battery bank, so still had to purchase power when solar didn't operate.

We have pretty cheap coal power here. 
Would like to go green with something like this, but they need to get the cost of the install down before this is going to make economic sense.

[Huskie87]

Not sure about your state but here they will pay you the lowest cost they pay for power.  i.e. its not what they call net metering.  The end result is you get paid wholesale rates for power while you continue to pay retail.

Good issue to raise.  The contract states that we'll receive 1 kWh credit for each produced by the panel, which will then directly offset each kWh used by my home.  So, I think in this case it won't be an issue.

[Huskie87]

I am guessing that with a deal like this from the utility company, you're ultimately just selling all the electricity that the panel makes back to the utility company and that they're reducing your bill accordingly and paying you back for any extra that you've generated as well. It should be noted that usually in net-metering solar setups like this, your solar panel will not be able to power your home during power outages. To me, providing my home power when the power grid goes out is one of the biggest benefits (environmental aside) of putting solar on your home. You should consider this if you weren't aware of it.

I think I'm only concerned about the environmental impact and not looking to solar to provide power in case of an outage.  Certainly a perk of a home system and another reason I'll definitely have one in my next home.

[Huskie87]

Is the electricity "yours" whether you use it or Not? Most panels generate when people are not at home. On average, you'd be lucky to use 50% of the power you generate

To second what lifeanon said, the way this works is you're essentially helping the utility company build a solar farm.  That electricity will feed into the grid and provide power to the community, and my utility bill will be credited for a pro-rata share of the production.  So as far as wasting the electricity generated, this isn't a concern, though I can see that being a major consideration for a home system.  There must be batteries (Tesla?) designed to cut down on this problem right?  Charge during the day, pull during the night.

[Huskie87]

For what it's worth, our panels were only cost effective due to state (we're in Massachusetts) and Federal tax credits, plus selling the Solar Renewable Energy Credits (SRECs).  If any of those are available to you it might be worthwhile but as you laid it out No, not a good idea.

I priced them out for our place. 
It was going to require a bank of panels approx. 70' long x 10' tall, at a cost of roughly $70,000.   With the Federal tax credits and selling the credits, payoff was 20-25 years.
Just couldn't see dropping $70K when my monthly bill is only $250-300.
Other issues included:
* How long were panels going to last?
* How long would converter last?
* Did not include a battery bank, so still had to purchase power when solar didn't operate.

We have pretty cheap coal power here. 
Would like to go green with something like this, but they need to get the cost of the install down before this is going to make economic sense.

I wonder if the type of set-up I'm considering will become more popular to solve issues like this.  The solar farm that's being built is expected to power thousands of homes in our community and is expected to be built by thousands of 'investors' like me.  It certainly makes sense that it would be cheaper to build one solar farm, rather than make thousands of trips to install panels in each home.

[Prairie Stash]

For what it's worth, our panels were only cost effective due to state (we're in Massachusetts) and Federal tax credits, plus selling the Solar Renewable Energy Credits (SRECs).  If any of those are available to you it might be worthwhile but as you laid it out No, not a good idea.

I priced them out for our place. 
It was going to require a bank of panels approx. 70' long x 10' tall, at a cost of roughly $70,000.   With the Federal tax credits and selling the credits, payoff was 20-25 years.
Just couldn't see dropping $70K when my monthly bill is only $250-300.
Other issues included:
* How long were panels going to last?
* How long would converter last?
* Did not include a battery bank, so still had to purchase power when solar didn't operate.

We have pretty cheap coal power here. 
Would like to go green with something like this, but they need to get the cost of the install down before this is going to make economic sense.

I wonder if the type of set-up I'm considering will become more popular to solve issues like this.  The solar farm that's being built is expected to power thousands of homes in our community and is expected to be built by thousands of 'investors' like me.  It certainly makes sense that it would be cheaper to build one solar farm, rather than make thousands of trips to install panels in each home.

Whats the cost of the underlying land? Who pays the taxes for the land for the farm and how much per panel per year?

With rooftop solar the land costs are included in the house. I'm not sure what the best system is, just providing alternate thoughts.

[Huskie87]

Whats the cost of the underlying land? Who pays the taxes for the land for the farm and how much per panel per year?

With rooftop solar the land costs are included in the house. I'm not sure what the best system is, just providing alternate thoughts.

The land and taxes are paid by the utility company.  The only cost is the initial upfront fee.

[Prairie Stash]

Whats the cost of the underlying land? Who pays the taxes for the land for the farm and how much per panel per year?

With rooftop solar the land costs are included in the house. I'm not sure what the best system is, just providing alternate thoughts.

The land and taxes are paid by the utility company.  The only cost is the initial upfront fee.

Sorry, I was meaning in general. The ROI for solar panels can be better on a home based system because the underlying taxes and land use are already paid. When predicting the future of panels, home vs. solar farms, I'm hoping rooftop wins out because of the land use situation. What I'm not sure of is could malls and other large building support the additional weight of panels (are they designed for it?) because that would allow mid-size projects and negate the land use conundrum.

Personally I wouldn't compare the return to the volatility of the stock market. A more appropriate comparison is to stable bonds (treasury) or the like. You have a guaranteed return, the stock market fluctuates. If you go for it then I would take the allocation from your bond part of your portfolio, not the stock part.

[Fishindude]

As a long time builder, I'm not a proponent of rooftop mounted solar systems.   I think they will lead to a lot of roof leaks and make re-roofing or roof repair much more difficult and costly.
Any time you roof mount something it requires a roof penetration which is a potential leak.

Would much rather see them rack mounted on the ground, which also makes them more accessible for cleaning and maintenance if necessary.

[Jrr85]

I am guessing that with a deal like this from the utility company, you're ultimately just selling all the electricity that the panel makes back to the utility company and that they're reducing your bill accordingly and paying you back for any extra that you've generated as well. It should be noted that usually in net-metering solar setups like this, your solar panel will not be able to power your home during power outages. To me, providing my home power when the power grid goes out is one of the biggest benefits (environmental aside) of putting solar on your home. You should consider this if you weren't aware of it.

Just to be clear, solar panels usually do not provide power during power outages.  For a simple solar installation, the solar panels will stop supplying power if the grid power is not available.  For the solar panels to keep pushing power to your home, you need some type of battery or generator setup. 

[lifeanon269]

Just to be clear, solar panels usually do not provide power during power outages.  For a simple solar installation, the solar panels will stop supplying power if the grid power is not available.  For the solar panels to keep pushing power to your home, you need some type of battery or generator setup.

Yup, you got it. Sorry if I wasn't clear in what I stated. Not sure if you were correcting me or just reaffirming what I said. Net-metering setups that are grid tied prevent the panels from powering the home during grid outages due to power fluctuations and safety issues. Battery-tied systems are a way around that, but you won't get paid for any under-utilization of your panels, so it is extra important that you size the system correctly for your needs.

After reading more on what Huskie87 has said though, I now realize that he isn't looking at a net-metering setup for his home, but a solar farm lease. So my statement doesn't really apply in this case. I misunderstood that.

[Jrr85]

For what it's worth, our panels were only cost effective due to state (we're in Massachusetts) and Federal tax credits, plus selling the Solar Renewable Energy Credits (SRECs).  If any of those are available to you it might be worthwhile but as you laid it out No, not a good idea.

I priced them out for our place. 
It was going to require a bank of panels approx. 70' long x 10' tall, at a cost of roughly $70,000.   With the Federal tax credits and selling the credits, payoff was 20-25 years.
Just couldn't see dropping $70K when my monthly bill is only $250-300.
Other issues included:
* How long were panels going to last?
* How long would converter last?
* Did not include a battery bank, so still had to purchase power when solar didn't operate.

We have pretty cheap coal power here. 
Would like to go green with something like this, but they need to get the cost of the install down before this is going to make economic sense.

I wonder if the type of set-up I'm considering will become more popular to solve issues like this.  The solar farm that's being built is expected to power thousands of homes in our community and is expected to be built by thousands of 'investors' like me.  It certainly makes sense that it would be cheaper to build one solar farm, rather than make thousands of trips to install panels in each home.

Building utility scale solar is so much more cost effective than residential rooftop, and relatively hassle free, that you're probably going to see a lot more of it.  The only challenge is that it is still power that needs to be distributed, so the utility has to take some risk in order to provide a kwh for kwh offset to customers bills.  But lots of states already require a similar subsidy to be paid to owners of rooftop solar, with the costs of that subsidy passed on to other customers.  So if regulators likewise allow a subsidy for the "community solar" to be passed on to non-participating customers, there will basically be no obstacle (and the required subsidy should be much smaller and maybe not even required at all in some instances). 

so all that has to be done is to allow the utility to pass on the cost of any subsidy utilities to provide a subsidy to rooftop solar owners

[MoonLiteNite]

Not even checking your math, the opportunity cost for buying solar is very very very unlikely to beat the average returns of a stock market.
SO basically you will be asking yourself the normal question of "mortgage or invest?"

I personally bought the solar panels, and i personally feel i made a HUGE mistake 8 years ago when i did such a thing.

My panels say cost me 40k
I save 200$/mo on my electric bill (in reality i only use about 90$ in the summer and 40 in the winter)
Thus in 8 years i have saved 19,200$ so far.

Now had i taken that money and invested it for 8 years at 7% i would have 67,700$~  - 40,000 = 28,700~ profit. Divided out over the years and months comes out to be 299$/mo of lost profits.

Investing was better, in my case.

Now do the math for :P

[MoonLiteNite]

I am guessing that with a deal like this from the utility company, you're ultimately just selling all the electricity that the panel makes back to the utility company and that they're reducing your bill accordingly and paying you back for any extra that you've generated as well. It should be noted that usually in net-metering solar setups like this, your solar panel will not be able to power your home during power outages. To me, providing my home power when the power grid goes out is one of the biggest benefits (environmental aside) of putting solar on your home. You should consider this if you weren't aware of it.

With most major cities now, that is how it works.

ALL power you make goes back to the city, their grid. And you get credits for it at whatever rate. Then they sell you electricity like normal, and bill you like normal which include your credits.

And yes, 99% of cities do NOT allow you to use your own generated power, it has to go to them, thus if there is a power outage, you do not have power.

Lots of info online on how to bypass cities that do this to you, but in most cities, it is illegal due to "Safety" reasons, but if you just do things right, it can be just as safe as anything else.

[Huskie87]

Not even checking your math, the opportunity cost for buying solar is very very very unlikely to beat the average returns of a stock market.
SO basically you will be asking yourself the normal question of "mortgage or invest?"

I personally bought the solar panels, and i personally feel i made a HUGE mistake 8 years ago when i did such a thing.

My panels say cost me 40k
I save 200$/mo on my electric bill (in reality i only use about 90$ in the summer and 40 in the winter)
Thus in 8 years i have saved 19,200$ so far.

Now had i taken that money and invested it for 8 years at 7% i would have 67,700$~  - 40,000 = 28,700~ profit. Divided out over the years and months comes out to be 299$/mo of lost profits.

Investing was better, in my case.

Now do the math for :P

I know full well that my ROI will not beat the market, that was never my question. I'm not buying solar panels to increase my net worth faster than I could in the stock market. 

[sol]

I have solar panels:  https://forum.mrmoneymustache.com/welcome-to-the-forum/solar-panel-installation/

Details are included in that threat, but the gist of it is that in my area, they are profitable because of the tax rebates and not because of the free power.  Power is 7.5 cents per kWh here, so the payoff would be decades without the 30% federal tax credit and the $5k/year production incentive.  With those things included, it's more like 4 or 4.5 years but most of that is not made up of the cost of power.

I viewed it as akin to purchasing an intermediate term bond.  I was buying guaranteed future return that would return my principal and then average about to about 3% over six years, beyond which it will continue to make me a few hundred dollars per year for the life of the system.  Not as good as stocks, or RE, but it's not that kind of investment.  I was primarily buying clean power, and making a little bit of profit on the side.

[Dave1442397]

Here's a one-year follow-up from someone in San Diego. She did a lot of research (she has a link in there to her post from a year ago) and seems to have done well, but a lot of the benefits are due to being grandfathered in to legislation that is now changing.

http://forums.timezone.com/index.php?t=msg&goto=7443147&rid=30285#msg_7443147