The purpose of this page is to inform the public as to what the realistic numbers are regarding solar electric in our area. If a solar salesperson exaggerates energy production, utility rates and /or projected utility rate inflation you may not otherwise know it (until it is too late). Another way to exaggerate financial returns is to leave out all ongoing expenses like insurance, panel cleaning and inverter replacement. I believe that a solid case can be made for solar without these exaggerations and omissions. I also believe that as consumers find out that they are not making or saving the money they were told by their solar salesperson it will tarnish the entire industry. I want to see solar succeed and be what it can be; a model for sustainable, clean energy.
Note 1: Below we will be illustrating a residential, grid-tied system. Commercial projects will have a much lower net cost due to more varied and favorable incentives and tax savings too complex to cover here.
Note 2: Solar prices have been quite volatile, mostly to the down side. The prices mentioned here represent a spot in time and are for illustrative purposes. Please call Kurt if you are considering having a system installed. Pricing may very well be lower for your application.
These days (May 2017), a high quality 5kW grid-tied system for a “typical” home will cost around $2.70 / watt installed, complete. A “typical” home would be single story, with asphalt shingles and roof trusses in good condition, having good access to the roof, attic, and electric panel. High quality means carefully designed and installed using US manufactured equipment. At $2.70 /watt a 5kW system would cost $13,500, or $9,450 after the standard 30% federal tax credit.
Note: Other utility and /or tax incentives may be available; please call Kurt for up to the minute info on these.
For smaller and easily expandable starter systems we like to use microinverters. A 3kW system can be installed on a house like described above for around $9,800, or $6,860 after the 30% tax credit.
A 10 kw system can get below $2.50/ watt, though most homes don’t have that much sunny area on the roof.
This financial number is the hardest to forecast because it has the most variables, and it involves educated guesses going decades into the future. It is also the area most susceptible to manipulation. The numbers on payback may be fluid but some basic truths are not;
With solar the savings on your utility bills will first pay for the system and then become, in effect, non-taxable income. All the while, the system adds equity to your home that can be recovered if or when you decide to sell your home.
With the utility company payback never begins. You’ll gain no equity. Instead of saving money you’ll see only expenses that will accumulate at an uncontrollable pace, forever.
With solar, a social and environmental payback also begins immediately and will continue to pay dividends for many, many years. With the utility company the only social or environmental components are negative. There’s the lack of control, the pollution, and then having to make out that check each and every month.
Calculating Payback Requires:
1) Determining how much your system will cost after incentives,
2) Determining how much electrical energy your system will produce,
3) Knowing what your utility’s electricity rate is,
4) Estimating how much that utility rate will likely change over time, and
5) Estimating what other expenses you will likely incur along the way
1) Once you decide on your solar contractor and together you’ve determined what the appropriate size and type of system is for your circumstances, he or she will give you an installed price. For illustration let’s use $2.70/ watt and size the system at 5,000 watts. Let’s also place the house in Gainesville, FL. Currently the only incentive in our area is the 30% federal tax credit for renewable energy. Your system cost would be $2.70 x 5,000 watts = $13,500 x .70 (– 30% rebate) or $9,450 after tax credit. GRU and Progress Energy (Duke Energy) have had their own additional incentives in the past and may again so call them or Kurt for the latest info.
2) To calculate how much electrical energy your system will produce we enter the necessary data into the most respected and authoritative calculator available. We believe that is the National Renewable Energy Laboratory (NREL) Solar Advisor Model (SAM). The information that we entered is as follows; 32601 zip code (Gainesville), array orientation due South and array tilt at latitude or 30degrees i, nominal system size of 5kw, degradation factor ii of .5% /yr, and 11.42 % in “system losses” (a multiplier that represents a composite of 10 factors that can negatively affect production).
3) We get this information from your utility bill. In this sample we are going to use 14 cents /kwh (per kilowatt hour).
4) The Florida Public Service Commission had projected average monthly household electricity costs to increase at a rate of 4.7% per year from 2008 – 2018. Given that rates have been flat or dropping the last few years I have decided to use a more modest number; 3% in our model.
5) Here is a secret few solar contractors mention; You will need to replace your inverter some day iii. For this 5kw system we will charge $75 per year to cover inverter replacement expense. We are also charging $68 /year expense for increased house insurance inflating at 3% / year. The panels will certainly need to be cleaned once a year after the pollen drop in the spring. If you will need to hire someone to do that you would need to account for that expense separately.
Using the worst case scenario of not qualifying for any utility or tax incentive beyond the 30% tax credit that everyone gets and by entering the data described above into the SAM calculator we get the following data; The array will produce 7,683 kwh the first year. At our rate of $0.14/ kwh savings less the expenses described above the system payback date would be 8.3 years. At year 20 your net cash flow would be + $19,894. At year 25; + $33,632.
Rate of Return
Though solar contractors will make wonderful sounding statements about rates of return and ROI please realize that your rate of return, ROI, etc will very likely be much different (when all of your particular circumstances are considered). This is something better left to your accountant to calculate.
New research by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory shows that the increase in value of homes sold with solar in California is often equal to the original cost of installation. The fact that banks will incorporate the cost of solar into a home loan without requiring additional down payment also speaks to the high equity value of solar systems.
I like to use the term “breakeven” as a more favorable and accurate reference to the financial side of purchasing solar electric than “payback”. Breakeven would be the point at which the increase in the value of your property due to your solar system plus the money you’ve saved on utility bills equals your initial cost. A solid argument can be made that breakeven occurs within the 1st 3 years. Overall I think it is safe to say that an investment in solar electricity pays dramatically better than other similarly safe and predictable investments like CDs or Treasury Bonds.
Solar Hot Water
A typical installation using 1- 4×10 flat plate collector on the roof and an 80 gal storage tank inside the house will cost around $5,200. After the federal 30% tax credit your net cost would be around $3,640. “Typical” assumes a home with a single story asphalt shingled roof in good condition, good access to the roof, a total run of 60′ from the collector to the tank, and an electrical source near the tank. That price would cover either a “drainback” system or one using propylene glycol to prevent freezing. See the Solar Thermal page or call me for more detailed descriptions.
Payback depends on your usage and the type of energy source you have available to power your heater. If you are using electric to power your heater and you have a “typical” family of 4 payback should be within 7 years. Tanks are warranted for 6 years but can last 12 or more if maintained. Collectors are warranted for 10 years but will likely last 20 years. Maintenance is simple and infrequent in both cases. We provide all of our customers with a 3 ring binder containing important phone numbers, pertinent diagrams, product manuals, permit documents, warranty papers and maintenance instructions.
Solar Pool Heating
A typical installation using 10 – 4×12 collectors on the roof, an automatic controller and a solar pool blanket will cost $5,200. “Typical” assumes a home with a single story asphalt shingled roof in good condition, good access to the roof, a clear space on the roof for the collectors, and up to 50′ from collectors to pool plumbing.
Payback depends on your usage and the type of heat source you are comparing to. You can typically expect to reach payback in 3 years or less. The collectors are warranted for 10 years.