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| Tuesday, August 12, 2008 |
| Solar Panels - The cost, the return and was it worth it |
My Photovoltaic panels (commonly referred to as solar panels) have been operating on my roof for a couple of months now. As I mentioned in the post: Before you even think about getting solar panels and in the post: Taking those first steps to putting solar panels on your roof deciding to spend the money on PV panels and then going through the process to get them on my roof was not an easy decision for me. It was also not something I did solely for financial reasons, however, since this blog focuses on finances, I will focus on that aspect of the purchase and leave the other benefits out of this discussion.
I ended up installing 12 190 Watt Evergreen panels on my roof. The manufacturer is important because Evergreen is a Massachusetts based company and using those panels meant I qualified for a better rebate. Note: As you will read, complying with the various terms to maximize your rebates and credits is the key to the financial equation of this purchase. The way the Massachusetts rebate program works, putting any other brand of panels on my roof would not have been cost effective. So, unless another solar manufacturer enters the state, everyone going through the state program will have Evergreen panels on their roofs. Those dozen panels make up a 2.28 kW array and are projected to produce about 2,494 kWh annually or about half of my annual household electric use. I also had an inverter installed in my basement. This converts the DC power produced by the panels into AC power which is first used in my home, with any excess power generated being sent back out to the grid (turning the electric meter backwards - this is Net metering). So the main components of the system are the panels, the inverter, the roof brackets used to mount the panels to the roof, the wiring which connects the panels to the inverter and then the inverter to my breaker box. It took two days to install the panels. The crew of three men spent the first day attaching the panels to the roof and installing the inverter. The second day was basically just the electrician pulling wires and generally connecting everything up. The last steps was two inspection visits (one for the structure, to ensure the panels would not make my roof cave in I guess, and the other for the wiring). Once everything was deemed safe and approved, the switch was pulled on the inverter box and my little rooftop power plant was operational.
Now to get to the main question people ask when they hear about my solar panels, how much did they cost? The total cost of the panels, inverter, labor, inspections, etc. was $20,745.28. I had the money in savings, so was able to pay the bill with cash. However, there are loans available, but obviously taking out a loan adds to the cost of the system.
Now what about all of these rebates I keep talking about? Well, those are what makes all of this much more reasonable. So while I wrote that check for $20,745.28, I knew much of it would be coming back to me. In fact a lot would be coming back to me. After rebates and tax credits, I am expecting $13,510.00 to be returned to me. Making the ultimate cost of my solar panels $7,235.28. I have received most of my expected rebates, but I will not see the last $3,000 until I file my 2008 taxes ($2,000 Federal credit and $1,000 State credit). But still, getting that 65% discount is well worth the wait.
Yes, $7,235.28 is still a LOT of money. Just based on pay back period, it looks like it will take about 14 years (if electric rates stay the same and don't rise or fall) for me to recoup the cost. To some, this time frame is far to long for them. They also might not have $7,000 sitting around in a bank account to basically "pre-pay" a utility bill.
I am fortunate in that I do have the cash and I find value in reducing my monthly costs and investing in renewable energy. I find a lot of pleasure in installing these things on my roof. Someone else might find similar pleasure in upgrading their kitchen for a similar amount. But my putting panels on my roof might turn out to be a smarter home improvement than upgrading a kitchen or bath. According to the paper Why is a solar electric home worth more? (PDF) for every $1,000 in annual cost reductions produced by solar panels, adds $20,000 to the value of your home. So my solar panels might make me money if I ever decide to sell my home.
But I am not planning on selling, so lets look at it another way. The $7,235.28 was sitting in my savings account which is now earning 3.50%. But now that I have converted that money into solar panels, what is the return? Based on a couple of months of utility bills and the projections provided by the installer, a very conservative estimate of my savings for the year is $304. That means my $7,235.28 is estimated to provide me with a 4.20% return the first year (now remember, my panels were installed during the year - so that is not a full 12 months). Considering that 4.20% is tax free, it handily beats the 3.50% I was getting. To get a real calculation of my yearly return, I will have to wait until the full year has completed and look back - but this is my best conservative calculation at this time.
To simplify this whole calculation, I have left out the REC factor in all of this. Since I have not yet sold my RECs, I do not yet have a good grasp on just how that whole marketplace works. But basically, I could sell my carbon offsets from the panels and receive a hundred dollars or more per year - but that is all based on how much I can sell for, etc. But RECs do help speed up your ROI on panels and would boost my percentage return.
Of course, electric rates could plunge or interest rates could soar - in either case my money is now locked into panels on my roof which is a fairly inflexible asset. I am just trying to illustrate that you can look at PV panels from a few different angles. From a purely environmental viewpoint, you could say there is value in putting your money where your beliefs are - I have a very visible way of showing I am walking the walk and not just talking the green talk. You can also point out that I have invested in the PV infrastructure of my home. In the future I can just add some more panels to increase my output. I have lots more available roof space and my inverter is capable of handling more DC power. So if I was to invest in a plug-in car in the future (for example), I can fuel it simply by adding a few more panels.
So was getting solar panels worth it for me? Yes, I am very glad I did it. The process took time and taking the plunge was nerve racking. But since they have been installed they just work. When my electric bill arrives it is a pleasure to open it. I continue to look for new ways to conserve and hope to someday not have to put additional panels on my roof, but rather to reduce my energy consumption to the point that either I can fuel a vehicle from current production or start getting checks from the electric company for my excess power. I am by no means there yet, but it is fun to work toward that goal.
Now I am sure I have left something out in this rather lengthy post, so if you have any questions ask in the comments and I will try to answer.Labels: Solar Panels |
| posted by Boston Gal @ 10:17 AM *
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| 20 Comments: |
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Boston Gal, what is the expected life time on these solar panels? Will they last 14 years without repair or replacement?
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Hi Tcop,
The manufacturer of my panels (Evergreen) provides a 25 year warranty for the panels. That is fairly standard for the industry. However, similar panels installed in the 1970's are still going strong. So the assumption is that these panels will continue working long after the 25 year warranty runs out.
The really cool thing about panels vrs. wind turbines is they need no maintenance. Basically once installed, they just lie on your roof and work. Wind turbines need more looking after since it is very mechanical with moving parts that can wear or need oil etc. For the solar panels, perhaps over the years a wire could fray and need to be replaced - but other than that, there are no moving parts to worry about.
Also, I did put these panels on my home owners policy, so if something should happen (example: a tree falls on my roof and crushes the panels) they are now covered under my policy.
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We're thinking of adding solar (we already have a wood burning stove and a pellet stove). BUT, with the shape of our old roof's home, we could only do one or two panels, which would help decrease our cost of hot water.
Did you consider installing in stages? We may wait a few years, saving for the project and to see if technology and costs improve.
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I would have two questions:
What happens when there is a power outage? If there is sun light, do you have power, or must power be coming in from the grid?
Also, how are they going to handle the winter? (Snow, ice, sleet) You should write up something after each of these during the winter to let readers know what happens.
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Hi Anonymous,
Looks like you have been spending some time, money, and energy looking into ways to reduce your home's energy use - good job!
Yes, I did look into doing this in stages. I kind of consider my current installation of 12 panels as Stage I for my home. In future I may add more since I have more space to add additional panels. The cost of individual panels is not the most important consideration when looking at this project. You also have labor costs to consider. So yes, solar panels might come down in price in five years - but what will labor cost then? How much will the steel brackets cost then? The wires (copper is in those)? Plus, the rebates where a huge incentive, and from experience I know that rebates get less generous as time passes.
I had the money and the drive to do this - so I did it. I would not want to try to "time" the solar panel or any individual investment in renewable energy. To me it feels a bit like the homeowner who is thinking of purchasing a new furnace, but is worried that this years model will not be as good or as efficient as next years - so they continue to heat the home by burning wood in the fireplaces...
Now that is not to say everyone should jump on the solar panel bandwagon. As you point out you are still saving for the panels. I had done my saving and had the cash - so for me, now was the time to do this.
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Hi Scott,
I am currently grid dependant, so if the power goes out, my home loses electricity just like everyone else. If I invested in a bank of batteries and rerouted my inverter, my panels could power the batteries and then I could use them during power outages. This would make my system more complicated and would add to the cost (for the batteries) plus I would now be introducing a component that could require upkeep and replacement (the batteries). Not to mention the space they would take up in my itty bitty home. Since I am in an urban setting and have very stable electric service, this was not something I invested in - however I could in the future if I felt it necessary.
As for the winter - the panels may be obscurred after a heavy snowfall. But the panels are slick, so for the most part once the sun comes out and shines on the snow or ice, the obstruction should just melt or slide off. But the projected production for winter is less because it is assummed snow will have an impact.
As I go through each season I will try to update on the production. I can say that this summer my numbers are not as good as hoped simply due to the large number of rain days. We shall see what happens over the coming months!
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Hi Boston Gal,
Quick question, what happens when you need roof repairs? Do you have to remove the panels or can the roofers work around them?
Spendthrift
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I assume your tenant also gets electricity from the panels. If so, there's another potential source of additional income from the panels: you might be able to charge more for rent or attract more desirable tenants. I could definitely see Boston-area renters seeing solar panels as a perk for an apartment.
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I was interested in your percent return comment. If you are getting a 4.20% return on the panels and that is tax free, that equals almost 5.75% taxable equivalent yield (I assumed you are in the 25% Fed and 5.3% State tax brackets). That is very good for your first year return. What a smart cookie you are!
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Hi Converting a Spendthrift,
As part of the process, your solar installer assesses your roof. If your roof is older and in need of repairs you are advised that those steps need to be taken before installing panels. However, if you roof is newer and in good shape (as mine was) then you are set for the panels.
The panels are positioned in the sunniest portions of your roof - they help protect your roof since the panels take the brunt of the sun, wind, rain, snow, etc.
However, to answer your question - yes, if you need to work on the part of your roof covered by solar panels, those panels will need to be removed for the work. Currently my panels cover about 25% of my roof surface. If work needs to be done to the other 75% - my panels stay as is. Only if something needs to be done to that 25% would I have to incur the cost of removing and then reinstalling.
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In 14 years, you will be 50, old, and still single. Why don't you sell the panels and get a couple of drinks?
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Wow, a single woman who considers herself energy-conscious uses 5000 kWh per year ... am I missing something here? I just looked at my NStar bills (I'm in Natick) and I used 879 kWh in the past 3 months (most expensive of the year). Even if I continue this electricity usage, that will total 3500 kWh for the year for a family of 3 living in a SFH, and we're not even that energy-conscious. Our ranch is 1600 s.f., so I can't imagine your house is much bigger than ours since you live alone. Some insight would be helpful for the both of us. BTW, we did get about 3/4 of our windows upgraded to Harvey double-pane windows and our washer/dryer/fridge are all brand new, but besides that, our other appliances are pretty old and we don't go running around shutting off the lights like crazy. (PS - we rarely run the A/C either ... just ceiling fans all day)
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Hi Mike,
Well, my household electric bill includes two living spaces. My portion of the house and the basement apartment occupied by my tenant. So two autonomous living spaces do use more electricity than a single home with a family. At least it does if you consider my home has two of everything - two refridgerators, etc.
I am working on consuming less. I switched out my lightbulbs for CFLs, unplugged countertop appliances when not in use, put certain items on powerstrips and automated some to shut off using timers, etc. In the calendar year 2006 my household kWh usage was 5,045. Since I started the solar panel process in 2007, they used my 2006 numbers to qualify me for the panel array.
However, I continued to work on conservation in the home while my paperwork made its way through the system. For the calendar year 2007 my total household kWh usage was 3,922. Even now that I have my panels I will continue to work on ways to conserve. For example, just the other month I replaced my ancient energy hog dishwasher with a super efficient Bosch dishwasher.
My hope is to keep working on this and someday get my total usage covered by my current panel array. This may or may not be possible. I have only so much control over the basement apartment.
If you really want to compare your usage to mine I would be happy to provide more details - email me. It sounds like your family is doing a good job keeping usage low.
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WOW, installing solar panels on your own home? Amazing. I guess the future world we spoke of about 15 years ago is finally becoming a reality. Congratulations and can not wait to hear the future articles related to it!
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Don't listen to Jackass! You should still be single and fabulous in 14 years - why drag yourself down with a partner when you don't have to?
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I'm glad you bought Evergreen for purely selfish reasons -- because I invested in them last year! Everyone was crazy about Sunpower and I did buy a couple stocks from them, but I regretted it, as their stocks have plummeted due to legislation that didn't support solar. But Evergreen seems like a good company and their stock has held fairly steady through the downturn.
I was glad to read about your solar panels. We live in Tucson, and if we planned to stay past next year (we don't) I would seriously look into photovoltaics. Here, with 330 sunny days a year, it doesn't take long to recoup the cost.
Kudos to you for putting the panels on (and does jackass know that, with a net worth of 500 grand you could buy a drink anytime)!
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I'm convinced. I'm in MA and heard our gov say on the radio last night that 60% ???? is that right? of the cost of solar is re-imbursed by the state. I use 10 kwh per year and would like to replace it all - but may go more conservative in stages. I'm waiting on quotes now. Also I want to put geothermal in for heat/AC but there seeems little in the way of incentives financially. It's expensive but I'd do it in the blink of an eye if I cuold get an low / no interest loan. Great blog - good info. Thanks.
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Hi Boston Gal,
Do you need to get permission from HOA if you have one?
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I think your investment is a good one, especially since the cost of electricity is pretty much guaranteed to rise significantly. Coal, which is cheap and our nation's main source of electricity, is going to play a less prominent role in our future. Investment banks are already factoring in the cost of carbon taxes when deciding whether to finance coal plants, making coal plants less likely to be built.
This will increase demand for natural gas driving up the price. Add to that increased worldwide demand for electricity and the growth of a world market for natural gas.
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Ah, here we go. I'm glad you ignored all the nay-sayers. This is about the return I would expect for you. Electric rates will continue to go up at about 5% / year which is a very conservative estimate. Also the economy and associated investment rates aren't expected to get much better any time soon. I'm glad you also found the ongrid.net reference to to increase in home value - this is one of the most misunderstood things that really keeps people from making the plunge.
Lastly, I'd say this is about the most safe investment anyone can make. Energy is already capacity strained and demand is never going down despite the most valiant conservation efforts and the grid infrastructure is old and is on it's last leg, and new electric capacity is extremely expensive to build. Electric rates will only go up and up and up at a surprising rate in the next 20 years.
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Boston Gal, what is the expected life time on these solar panels? Will they last 14 years without repair or replacement?