Monday, August 24, 2015

My Solar Investment



After a couple years of dreaming about it, I’m finally getting solar panels on my roof.  I’m excited and I can’t wait to get them up and running.  I've just signed the construction proposal and contract, so I'll have to wait a few weeks for permits and interconnection before the panels get installed.  I don’t plan on staying at this house for life, so I’ve decided to have the panels installed on the east-facing pitch of the roof - which is the back side of my house.  I think they will look great, but I hear some people don't agree.  That way, if a future buyer isn’t as thrilled as I am, they should be at ease knowing that the panels aren’t visible from the street.  Though any buyer should be excited about a system will cover about 75% of the electric bill.

Solar energy seems out of reach for many people, mostly due to the large upfront expense.  With snowy winters and many rainy days, Iowa isn’t the best place for huge annual productivity from solar panels.  There isn’t a huge market for solar energy in Iowa yet, so companies that will lease a system to you with zero money down aren't big here yet.  But that doesn't mean it isn't viable.  Both the federal government and the state of Iowa offer tax credits right now, so a solar panel system can still make financial sense to help with the environmental case.

After doing my own numbers, I decided that it was a good investment for me.  Most sellers/installers promote the payback time along with the current tax credits.  For me, a 14 year payback time didn’t sound so appealing, because that seems like forever.  I preferred to compare it to my other investments and calculated my ROI.  When I think about it as a 7% return on investment, it becomes much more appealing.  That’s the ROI for my solar energy system - using the annual electricity bill savings compared to the installation cost.  When you add in the expected home value increase, the system will actually pay for itself.  My solar energy system should net me $3,000 in value and then keep saving me $500 in electricity costs every year!

Finally, a solar energy system helps do your part to make our environment cleaner.  I feel great knowing that 75% of my electricity use will come from the sun and a large portion of the other 25% will come from wind energy.  In Iowa, Mid-American Energy, is helping us lead the nation in renewable energy sources and has nearly 40% of their grid fueled by wind energy.  My system helps lessen their load and allows them to reduce their use of fossil fuels.

So, if you have the cash saved or the equity in your home, a solar energy system could be a great investment for you.  Check out the actual numbers from my system at the bottom.  I'll post some production figures after its up and running for a while.  Check out one of your local installers and get your own quote - they are usually free!  Mine was CB Solar - http://www.cbsolarinc.com/ - and I look forward to working with them.

Now, the numbers:
  • Over the past 24 months in this house (with 2 people, one of which works nights), the average annual electricity usage was 6,600 kWh
    • That equates to about $720 in annual electricity costs (based on total electric bill - does include all fees associated with service)
    • Taking a simple average, my average cost per kWh is 10.9 cents - about Iowa's residential average
  • The quoted production for my solar energy system is 4,877 kWh for an installed cost of $14,548
    • System design is 4.2 kW capacity - this is for 15 SolarWorld 280 mono black panels, connected to a SolarEdge SE3800 inverter
    • That's 73.89% of my current usage, by the way
      • 4,877 / 6,600 = 73.89
  • I'm doing well for myself, but that is a lot of money!  BUT, right now there's a federal tax credit of 30% and the great state of Iowa has a tax credit of 18% - both until the end of 2016 (if it doesn't run out ... also, no added property tax for 5 years)
    • Federal tax credit - $14,548 x 0.30 = $4,364.40
    • Iowa tax credit - $14,548 x 0.18 = $2,618.64
    • This makes the net cost to me $7,564.96
  • With my interconnection to Mid-American Energy, they will "net bill" my usage by subtracting my production from my usage - should I produce more than I use during a given month, they will carry that excess over to the next month (forever if needed, but I won't ever get paid for it)
  • So, if my system produces its production estimate, my net annual usage will be 1,723 kWh
    • 6,600 - 4,877 = 1,723
  • Using my current simple average cost (10.9 cents/kWh) that means I should pay $187.96 per year for electricity after the system is installed
    • Also means I'm saving $532.04 per year!
  • Figuring out the investment factors:
    • Simple payback time = 14.22 years
      • 7,564.96 / 532.04 = 14.22
    • Return on Investment = 7.03%
      • 532.04 / 7,564.96 = 0.0703
  • Lastly, it is estimated that for every dollar saved in energy costs, the home value goes up by 20 dollars.  So, adding this system should add $10,640 to my home value.  That gives me a net added value of $3,075!
    • 532 x 20 = 10,640
    • (7,564) + 10,640 = 3,075
  • Or, the Berkeley Lab ran a study that found the premium value added when selling homes with solar panels - using the lower "Rest of U.S." value of $3/watt means my system would add $12,600 to my home value.  That number gives my house a net added value of $5,036, which I like even better!
    • 3 x 4,200 = 12,600
    • (7,564) + 12,600 = 5,036
  • I could also calculate the reduction in carbon emissions, but that would get tricky, so I'm happy knowing my solar system will reduce said emissions
    • Also, my carbon footprint will get even smaller when my main transportation is an all-electric Tesla Model S
If you're curious, my panels will be these: http://www.solarworld-usa.com/~/media/www/files/datasheets/sunmodule-plus/sunmodule-solar-panel-280-mono-black-ds.pdf              ... all black, of course!


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