Solar has always been interesting to me. There is no free lunch, but back in the old days of being at my cabin in Minnesota, we didn’t have electricity. When my grandfather built it, there wasn’t any access to water or electricity! Our water came from a spring on a hill. We had a generator which we lovingly called a “light plant”. We put solar in with a large enough array to power two cabins but the reality is you couldn’t do much with it because we didn’t have enough battery storage. But, it was nice to be able to turn a light on and read a book at night. You can see the solar system we had in the upper left-hand part of this photo.
When I rehabbed these two cabins, I thought about putting a big solar field in with enough battery, but it was totally cost-prohibitive. I ran power and running water to each of them along with 1 gig fiber to my door. At the time I rehabbed, I wanted to put a solar roof on them since they had just come out. Tesla wouldn’t come out here to the remote wilderness to install one. At that time, it would have been slightly more expensive than putting the metal roof that we installed. Now a solar roof would be crazy expensive. But, I think they are cool. I think Ferraris are cool too.
In doing my research for solar at my house in Las Vegas, I wanted a simple calculator that I could use to pump out objective numbers so I could make a good decision. It’s impossible to find an unbiased calculator online. Virtually every link you sign up for puts you on an email list or phone list. Gee, thanks!
So, I will share how I got to my numbers. You can follow this process yourself and chug and plug on Excel to see what you come up with. Even if you aren’t doing solar, it might be interesting for you to know so if the planets aligned, you would know the numbers and could pull the trigger.
First, I asked the solar company to provide me with the per day output their panels would have by month. January had 37.3 kw/H per day and 30 days, which gives me a total of 1119 kw/H per month. I did that for each calendar month.
Next, I looked at my energy bill and calculated the actual number of kw/H I used for the month. In my January example, I used 2472 kw/H. Hence, my deficit is 1353. I would have to buy power to cover the deficit and I calculated that at the current rate of .16 which I pay in Las Vegas. However, rates are going up another 30%. They are already up 45% this year. What inflation?
In a month like May, I used 1291, and am projected to generate 2675. Hence I have a surplus and can sell that back to the grid at 75% of the going rate which I used .12 for.
It makes total sense but because of the time of year, being in the northern hemisphere, the angle of the earth, and its spot in orbit, the best months for solar are April-July. August/September are okay. But, for the rest of the year, you are guaranteed to be at a deficit.
I did not buy any battery storage. If I was in an area that had a lot of rolling blackouts and power outages, I would have thought seriously about it. When there isn’t an outage, you can program the battery to sell back to the grid at the highest price, but to be clear that battery will never pay for itself. It’s not economical, it is an insurance policy. It’s no different than buying a natural gas or gasoline generator.
In my case, we put electric heated floors that we love to turn on from November to February/March. My forced air heat never, or rarely ever, comes on. My house faces north, which is great during the hotter parts of the year. I searched online and other people confirm that sort of data that live in other parts of the country.
For grins, I compared what my actual power bill was each month, without including taxes and the other add-ons, with what my power bill would have been if I had solar power. My net out-of-pocket savings between the two variations is the number I used to calculate how many years it would take to break even on the system.
I also estimated what my actual bill would have been had I owned the system and sold back energy to the grid. It was close to the comparison number, but not exactly the same because of the difference between buying at .16 and selling at .12. The energy company keeps the spread.
They were within $400.
Divide one of those numbers into the cost and you get your payback period. Without the 30% federal tax rebate, my payback period is 9 years. With the rebate, it’s 6.5 years. If I impute a higher cost for power by the expected 30% increase, the payback period goes to 7 without the rebate, and a shade under 5 with the rebate.
I decided the five-year payback was good enough so it was feasible to take the plunge. Longer than that, it probably doesn’t make sense, for me. Everyone has their own elasticity. Ideally, this system would pay for itself in three years. If energy costs go sky-high, it might, but it is not realistic. I didn’t run a sensitivity analysis to see how high rates would have to go to make the payback period drop appreciably.
If you want to get highly technical, you can add-in the degradation of the panel over time into your calculation. I didn’t. There just isn’t that much degradation in the first five to ten years. They drop around .5% per year. After 25 to 30 years, it is time to see if you should replace the panels.
One tricky part of the whole thing is dealing with the government and energy company. There is an inspection to make sure everything is hooked up right. The energy company has to install a net metering device on your house to calculate how much solar power you are selling back to the grid. There is some permitting and back and forth. That should take no more than 40 days but I have family members in other states that got everything installed and they are still waiting on the government.
The one nice data point I am finding is that when you sell your house, you recoup the cost of the system in the sale almost dollar for dollar. Hence, if you spend $20k on a system, it goes into the value of your house. But, you must own your system. Never lease. Leasing is a nightmare.
The system I bought is flush-mounted. It doesn’t have a rail system, so it will look fine. The panels don’t have a grid system and it keeps out ice, rain, and hopefully pigeons! I will have to get on a ladder and hose it down a few times a year to get dust off of it. My house is single-story, so that’s not a major undertaking. A two-story house is a different ballgame.
One key is having a good inverter to convert the solar power to A/C current for use in your home. If you have a bad inverter, the loss is large.
The real cost of this system is labor taking up 59% of the total cost. If you are interested and want to save $500 on the cost of your system, click this link. I decided to go with Tesla ($TSLA). They were about $6k cheaper than a local company and because I don’t think Tesla is going out of business any time soon, along with being a national brand, I decided they were the best option.
By the way, I promise I won’t be like the Vegans and talk about solar all the time here.
Jeffrey, thanks for replying. I enjoy your columns. I am an engineer and doing a spreadsheet for me is easy. Your analysis is easy to follow and understand. The biggest unknown is always what if the government changes the rules on buying back electricity or other aspects of the regulations ( which you mentioned with permits). Thanks for writing a very good article.
The Biden admin's Inflation Reduction Act which had zero to do with inflation contains massive green energy inducements to produce and deploy American solar panels, but in the normal political process the reality is nowhere near the plan.
These comments pertain to the "power sector" which is the electric companies that in turn pass some of the credits along to individual consumers. It is complicated.`
1. The plan was to drive production of American solar panels -- wafers and housings -- by offering tax credits of 40%. This was to create American factories and American jobs.
This was to be 30% tax credit for the solar system and a 10% bonus for US content.
Clearly, the US content was driving the credits.
The objective was to onshore/re-shore solar panel manufacturing to the US bringing manufacturing plants and attendant jobs to the US.
In short order more than $13B of US solar manufacturing plants were announced. Info from the Solar Energy Information Association.
2. In the Rules implementing the plan -- the Congress writes laws and then the Deep State writes Rules implementing the laws -- the Treasury Dept/IRS dramatically reduced the amount of "content" that had to be made in America to be considered "American" and thus be eligible for the tax credits.
The Inflation Reduction Act was passed in Aug 2022 and the Rules were promulgated in May 2023.
3. As an aside, if you bought First Solar Inc stock when the IRA passed in August 2022 at $114, it hit an all time price of $231 when the Rules were released in May 2023.
4. In reality, the solar manufacturers got together and lobbied the government and essentially killed the requirement for US content meaning the solar manufacturers can import cheap Chinese wafers and put them in housings in the US and qualify for the credits.
JLM
www.themusingsofthebigredcar.com