A Cost-Benefit Analysis For Solar Panels On Your House.

Posted on August 2, 2010

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Rated at SEER 11 when it was new, my old air conditioning unit was a contractor-grade raging piece of inefficient shit. Limping along via patchwork for the last two years, it had to run almost constantly to keep the house even semi-cool. The new unit I had installed in April of this year is a much more efficient two-stage SEER 16, and when its running I can actually look at my electric meter without throwing up. June’s electric bill came and I’m very happy to report that it’s down significantly from last year’s ($190.23 vs $278.08) — and keep in mind, this June was one of the hottest on record. So needless to say, I’m really pleased with my new a/c system. Now I don’t expect to save $85+ from my electric bill each month because as cooler weather approaches, the air conditioner plays less and less of a role. But I figure it’s pretty safe to say the new system will save me around $450-$500 a year. Thus the new system should pay for itself in a hair over ten years. And that’s not to say that I consider my air conditioning an investment — I’m paying for the comfort and convenience of cold air — it’s efficiency certainly makes that big price tag a little easier to live with.

So yesterday when I opened my mailbox and found an sales flier for home solar panel systems, I actually took a few minutes to read it and genuinely explore the option. So I poured myself a fresh glass of bourbon and did some looking around their website. I tried to ignore the, “solar power is fucking awesome,” salesman bullshit and focus on the real numbers. What caught my eye were, “Solar electric systems currently average $3500.00 to $8500.00 after State and Federal incentives.” And, “In Southwest Florida, the “average” residential customer uses 18,000 to 22,000 KWh per year. A two-kilowatt system would supply about 15% of a customer’s total demand. A five-kilowatt system might supply 35% of an average customer’s needs.” So that got me to looking at my own electric bills and using the last twelve months bills I was able to calculate that I used about 21,000 KWhs costing me $2205, for an average of $0.105 cost KWh. Using that number as a benchmark, I decided to run some numbers. And keep in mind the cost of these solar systems is after Federal and State incentives, meaning tax credits, which means that first the money needs to come out of my pocket first. This the $8,500 five-kilowatt system will probably cost me close to $15,000 out of pocket, with me re cooping the $6,500 come tax time. But for the sake of argument, let’s assume that we do all of this on April 14th, I file your taxes electronically, both federal and state governments process my paperwork, at the blink of an eye and I get your credits applied the next day. Preposterous, I know, but humor me. We will also assume that these solar systems never need any sort of maintenance or cleaning, and they never get damaged during a hurricane; both would drive up their costs even higher.

2KW SYSTEM 5 yrs 10 yrs 15 yrs 20 yrs 25 yrs 5KW SYSTEM 5 yrs 10 yrs 15 yrs 20 yrs 25 yrs
total kw 10,000 20,000 30,000 40,000 50,000 25,000 50,000 75,000 100,000 125,000
cost per kw $0.35 $0.175 $0.116 $0.087 $0.07 $0.34 $0.17 $0.113 $0.085 $0.068

The break even point — where my cost to purchase the solar panels versus their electricity they produce, in terms of $/KWh — is 16 years and 2 months for the five-kilowatt system, and 16 years and 8 months for the two-kilowatt system. Up until then, it would be cheaper for me to purchase my electricity from my electric company, than it would be to generate it myself using solar panels. I stopped at 25 years for the simple reason that’s how long current solar panels are expected to last. After 25 years they have to be replaced, and we start this whole process over again with newer technology. There are also some articles that suggest the efficiency of solar panels deteriorate over time, even as much as 80% after 20 years. But for shits and grins we’ll assume my solar panels are as awesome as I am, and thus work consistently from the first day of installation to the day they’re ripped off of my roof in a drunken stupor. So at that 25 year mark, here’s how the numbers look in regards to the electricity I generated vs the same electricity I would have otherwise purchased from my electric company:

total kw produced cost of solar system cost from lcec @ $0.105 total $ saved
2kw system 50,000 $3,500 $5,250 $1,750
5kw system 125,000 $8,500 $13,125 $4,625

So if you want to save money in the long term, solar power looks like a smart investment, right? Wrong, motherfucker. Here’s why. Let’s say that instead of spending that $3,500 on a new two-kilowatt solar system, I instead stuck it into some sort of investment fun earning a very conservative 5% interest per year. At the end of 25 years that account would have a balance of $12,121 — subtract $5,250 for that portion of electricity I’ve paid for over the last two and a half decades, and I’m $6,871 richer. For the five-kilowatt system and I’ve got an extra $16,313 in my pocket.

Translation: if you’re looking for a home solar system to save money, the joke is on you because the technology isn’t cost effective yet. Prices will have to drop by another 40%, bringing the break even point to around ten years, before I’d consider solar as a viable alternative. I’ll be more apt to spend my money on something that I’m actually going to get some enjoyment out of – like a new kegerator. But if you think coal is horribly filthy source of energy and you want that warm and fuzzy feeling that you’re saving the planet? Hey, all the power to you… get your solar power system. If you live out in the middle of East Fucking Be’Jesus, and getting on the grid isn’t an option for you? Get your solar power system. Or if you’re believe that going green is the only way to stop the zombies so you plan on having electricity after civilization crumbles? By all means, please go get your solar power system. Because once that happens, guys like me with the guns will come to your house, shoot you in the fucking face and take your shit. It’s every man for himself, hippie. Oh, and speaking of zombies

Yes I know there are a few factors that I didn’t take into account, such as inflation and the corresponding increase in utility prices. Or on the flip side of that coin, the fact that the inverters can shit the bed every ten years or so. Or the fact that you poor fuckers in California can pay upwards of $0.57 per KWh — fuck that! Or that the two-kilowatt/five-kilowatt numbers are based upon 365 sunny days, and variables such as cloudy days and panel alignment can drastically reduce those figures.

-via Ernie-

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Posted in: Global Warming