Does Installing Solar Energy Make Sense?

Does installing solar make sense?

Production

Most consumers have been persuaded by political rhetoric making solar a non-viable energy solution to the north and northeastern United States. For instance, Ohio averages about 4.5 hours of viable solar energy per day. This may not sound as good as southern California at nearly 7 hours per day. However, the solar energy chart published by the NREL (National Renewable Energy Laboratory) does not tell all. Though the sun may shine on some states longer than others does not equate to an automatic ROI verses exclusion to a ROI. Granted Ohio and many other States in the north and north east may not get as many hours of sun, however these states do not get the high temperatures associated with deep south positioning to the equator. Heat is the number one enemy to photovoltaic production. This one condition de-rates energy production as much as 30%. Converse to this condition is extreme cold conditions, which is a great asset. The colder the panel the greater the out put of voltage. Whereas heat is the most common liability to the southern states, temperatures averaging close the STC (standard test condition) of the photovoltaic modules the northern states experience greater efficiency rates. All manufactures test the energy output of photovoltaic modules at 77 F. Most northern states average just 3-8 F above STC. Summer electric production may exceed manufactures label efficiency rates in northern states and may out produce winter electric production of southern states during the shortest days of the year. Thus a module in upstate New York or Maine may produce as much energy as sunny California.

ROI

How does the ROI work in northern states in comparison to the southern states? Most consumers view ROI based on the actual production of a system verses the actual cost to install. Though this may be one means to determine ROI, but this may be short sighted. For example, a house value is not determined by purchase price to market value. You may purchase a house for 120k and in 30 years the house may be worth 360k. However the purchase price plus the interest paid will exceed the market price in 30 years making the investment by all accounts a loss. Though this may be one way of calculating ROI on a home purchase this would also be short sighted. The value is based more on securities and taxes deferred as well as according to need and savings from owning opposed to renting. Though we can see the difference of owning a house and property, solar energy may be more difficult to ascertain.

Consider first the ownership of electric as opposed to renting electric. Currently Americans by majority rent electric from a Utility supplier with little or no control over rates per kWh. The average rate nationwide?

The average cost of residential electricity was 12¢/kWh in the U.S. in June 2010, and ranged from 8¢ in Kentucky to 28¢ in Hawaii. (From the DoE, which also has historical rates) But average rates are misleading, because most utility rates are tiered, meaning that excessive use is billed at a higher rate. This is important because your savings are also figured for the highest tier you’re in. For example, let’s say you pay 9¢/kWh for the first 500 kWh, and then 15¢/kWh for use above that. If you normally use 900 kWh a month, then every kWh you save reduces your bill by 15¢. (once you get your use below 500 kWh, then your savings will be 9¢ kWh.)

Most systems are installed around 17¢ kWh. In many states this is already below the average utility cost. This is not withstanding the rising cost of energy we are facing nationwide at an average of 30% yearly for the last two years and forecasted to not change in the next 5 years. Break even on a system is currently at this standard 17 years.

We cannot leave ROI at this point. The federal tax credit is 30% uncapped for residential systems until 2016. The average system cost reduced 30% lowers the kWh installation price to 12¢ making the system investment very competitive. Further, decreasing the break even from 17 years to just less than 12 years. Make sense to invest in solar energy? Not yet the real numbers are not yet disclosed. Paying for all your electric for the next 25 years one lump sum may not make sense. However, locking in your electric rate at 12¢ is a good idea.

The real ROI is seen in lowering the break even time to 7 years or less. You may at this point be looking at other incentives and thinking a person can get there easy. Though some incentive programs exist they are not available to everyone and they may come with chains and not strings attached to them. Understand that any incentive other than tax relief is not free. The money comes from somewhere and charity is not the program. However for the person who has no incentives available the ROI can be lowered much further.

SREC programs.

September 2010, SREC (Solar Renewable Energy Credit) trade toped $300. SREC’s are a credit that is metered by the amount of solar energy generated by an owner of a solar energy system. One SREC equals 1000kWh of production. In the north the average system will produce about 9 SREC per year. This is equal to an additional $2700 annual income.

If a system base cost is $56k and the homeowner receives a 30% tax credit the systems is reduced to $39200. Take the $2700 per year in SREC production and subtract out the max taxes and you keep $1890 multiplied by 25 years and $47250. At this point the SREC exceeds the cost of installation. Further the savings of the system in utility bills over the warranted life of the system exceeds $100k.
Look at these stats:
System Return on Investment

First Year Utility Savings $1,507
System production x $.12

First Year Return on Investment 3.82%
First year utility savings / Final system cost
“Lifetime” Utility Savings $118,530
First-year utility savings x 25 yrs x 8.5% annual utility increase.
Lifetime Return on Investment 300.78%
Total 25 year utility savings rate.
Average Annual Return on Investment 12.03%
Lifetime return in investment / 25 years.
Increase in Property Value $30,134
Twenty times first year utility savings. Source:
The Appraisal Journal (October 1999)
Increased Property Value Return on Investment 76.47%
Property value increase / Final system cost

Add in the SREC values

System Return on Investment

First Year Utility Savings $3,410
System production x $.12 +SREC production
First Year Return on Investment 8.65%
First year savings / Final system cost
“Lifetime” Utility Savings $166,106
First-year utility savings x 25 yrs x 8.5% annual utility increase.
Lifetime Return on Investment 421.50%
Total 25 year utility savings rate.
Average Annual Return on Investment 16.86%
Lifetime return in investment / 25 years.
Increase in Property Value $68,195
Twenty times first year utility savings. Source:
The Appraisal Journal (October 1999)
Increased Property Value Return on Investment 173.05%
Property value increase / Final system cost

For most homeowners the increase in property value is not an ROI. However the investment of solar can yield nearly 17% annually over the next 25 years. Check out the numbers and consult a Solar designer and installer for the numbers concerning the production and cost of a system. Most installers may not have SREC information and prices, however they will know the nuts and bolts of a systems and how much power it will produce for your location. Don’t leave the leave ROI to be calculated by politicians or Utility providers! They are installing systems but not telling you the real savings!

COG = Cost of Goods

 

Finally the cost of material have hit an all time low. For installers and consumers photovoltaic equipment has dropped to the lowest prices possible. Good news? The common answer to these questions is usually “it depends”. Cost of living has not changed. Electric prices have not decreased. Labor cost has not decreased.

Maybe the industry has paid for the R&D for solar energy, however an unseen force is looming in the background that may be more a tempest rather than a spring zephyr. The US  market has been swamped with products from the Far East. This has created an atmosphere of product security. However several questions must be answered as an installer and consumer concerning these upstart manufactures in China and abroad.

1.    Will these manufactures be around for the warranties they sport as a POD? (point of distinction)

2.    Does Purchasing modules from these manufactures add value to the grid and US economy?

3.    Is the low cost a value in exchange for low efficiency rates

Many China made modules sport a 25-year transferable warranty almost unmatched by most other manufactures. However, as we have noted over the 20 years, these manufactures supply an inferior product and fold up after 10 years. Consumers must be careful when purchasing product from China. This is not a shirt or handbag purchase.

US economy is in dire need of home town support. The difference in purchase cost is less than $2000 on most residential systems. Carefully choosing US made modules support our economy and keeps Americans working. When unemployment rates are at an all time high (17%) consumers must consider purchases carefully.

Tragically the cost analysis trade for purchase price and 20-year performance is dramatic. Solar energy is a large investment. This is not a penny stock option. Rather average installation cost is $23000. Break down the numbers and the cost of installation is $1150 per year invested. Average monthly utility bill is $300 nationwide. That equates to $3600 yearly! Installing a china made product will yield and average of 14% efficiency compared to US made products of 17%. 3% loss of efficiency over 20 years is exponential! That means to produce the same amount of energy in 20 years the system will have to be oversized 30%. The cost of the modules is small compared to the efficiency. A 30% increase in system size will cost $6700. Saving $2000 in panel cost may not be the most fiscally responsible investment. Consider carefully when purchasing components. Made in the USA is not a label rather a statement the includes quality, commitment and pride. These can not be made cheap or inexpensive.

Cost adders to Solar Energy Systems

Residential Systems can be challenging for every solar installer when it comes to local permit offices. Government offices are not easy to work with as a general rule. Inspectors punch time clocks and are not necessarily in the favor of home owners or contractors. This is a lesson hard learned! Take for instance applying for an electrical permit, the process will at min cost an additional $50 to apply. In addition to this permit depending on the authority, you may have to apply to a local township or city for permits adding to the bill. However this is not the big expense. Electrical permits that are in conjunction to roof mounted systems a building permit must be attained to allow installation. This permit may start around $75. Again this may be in addition to local city and or township permits. We came up against a brick wall with additional cost that we were not prepared for. Some local authorities require State certified Architectural drawings for each system install. Regardless of the rated snow load and structural integrity of the roof this certification is required. Guess the price of this piece of paper? $1000!
System cost escalates significantly when such government charges are assessed! Consider these figures: 5000 watts of Photovoltaic power placed on a residential house cost around $7-8 per installed watt; $35000-40000 + 150 permits + $1000 state certification + $1800 average structural upgrade = $37950-42950. This increases system installation cost 11%!

Some authorities even charge extra for pole mount systems and dictate the location on the property they can be placed.
It pays to check local authorities before you apply for permits! Most authorities do not have a clue what a solar energy system is and what it entails.

Do it yourself Solar Energy

For the DOIY person Solar Energy is not rocket science. Programs are available for a person to learn all that is needed to design and install a system on a house, garage, or barn. The internet is filled with instruction guides and resources to add a new skill set. However there are a number of important notes to consider before purchasing panels and components.
First local zoning commissions may have requirements prohibiting home owners from installing grid tied solar energy systems. These requirement may include the need for a NABCEP certified installer. All grid tied systems require at least an electrician to hook up the system to the electric grid.
Second, Homeowners associations may have regulations that prohibit the use of some racking solutions like pole or ground mounted systems.
Third, county and city engineers may require upgraded roof structures to accommodate the added weight of the system particularly in areas of heavy snow loads.
Further, grants and local incentives are most always available to participating design and installation contractors who carry certifications required for eligibility.
These are only some of the potential issues that can challenge a DOIY system install.
However, there are a number of solutions available to help the DOIY homeowner. Consider carefully your plan to design and install solar on your home prior to purchasing panels and components.

Energy Independence

Energy independence is a valuable asset to every persons financial portfolio. Just like property ownership is a valuable asset and investment strategy, investment in personal energy ownership is an option available to americans. The american dream revolves around owning a house and accumulating a retirement for the years when working is not a viable option. However the uncontrollable cost of renting electric by the kilowatt hour may be the proverbial straw that breaks the camels back. One investment strategy includes the purchacing of a solar engery system that locks the price per kilowatt hour a cost that is both controlable and reasonable. Greens Solar Solutions provides such investment strategies at a fraction of the cost available 12 months ago. New Tax credits further make this option of investment appealing and reasonable.

Renewable Energy

Electricity – who controls how much you pay?
Until now the utility companies have been in control. No more – with a Greens Solar Solutions Solar Energy System, you can realize BIG SAVINGS or virtually eliminate your monthly electric bill, insulate yourself from utility rate increases, and increase your home’s value. By …installing a Solar Energy System you’ll take control of your energy costs and enjoy all the benefits of obtaining your electricity from a clean, renewable resource: the sun.