Earlier this year, I started to explore whether going with solar power would save me money. The research was very general, whatever I could get from keyboard. Living up to my pseudonym, I hadn’t gotten off my tuchus to get real data from some local companies. Thanks to a post on My Journey to Millions, the topic of leasing solar panels was explored.
Finally, I emailed two local solar power companies to get some estimates. While waiting for those appointments, I found this solar calculator by Mr. Electricity. It looked very detailed and, since it only took a couple of minutes from my keyboard, I figured well worth a shot.
I pulled my electricity bill and averaged my energy use over the last 12 months. We use 718kwh a month, which went straight into the calculator. Having done the research before, I knew my state offers grants of $1.25/watt… big item in the calculator. Though I still need to consult with my tax advisor I am going to presume that the Federal tax credit applies. Living in New England, I assumed the worst energy producing scenario – cloudy.
Mr. Electricity allows you to do two scenarios, so I created another case where the energy production was better. However, in this scenario, I estimated that we’d need more energy (two baby boys will use more electricity as they get older). I put a more expensive rate for installation, the one thing that I really couldn’t calculate without talking to vendor directly.
The last third of the calculator contains the results that I want to focus on. We pay some of the highest energy prices in the country and the cost of that energy is going to be at least $30,000 over the next 21 years… the calculator’s expected life of the solar panels.
It’s worth noting that Mr. Electricity does not adjust the cost of electricity for inflation. He doesn’t do this on purpose… it balances the opportunity cost lost in paying for solar. After all, I could take the money and put it in the stock market for 21 years and make it grow, right? Still there’s something really refreshing knowing that solar would protect me from electricity inflation for 2-3 decades.
The end result is that with this calculator, I’d pay around $13,000 and break even at year 9. I’d have the state grant and federal tax credit to thank for effectively cutting the cost of solar in half.
You’d take $17,000 in your pocket, right? Me too.
However, this was just an internet calculator. It doesn’t take into account the type of solar panels I’d get, the efficiency of my roof (whether it faces south and has an optimal pitch) and what the sun is really like in New England.
So what do the local vendors say about my specific situation? While I was at a conference a couple of weeks ago, one vendor came to my house to do some tests. My roof faces south and while the pitch is far from perfect (I’m used to hearing this, but not with roofs) it is still a great candidate for solar.
Here are some of the charts they sent me in an email proposal.
The above image shows the spike of electricity usage in the summer. This is normal in New England, due to the need for air conditioning. (Side note: Maybe I need to start working at the library?) The winter months obviously don’t produce a ton of power, but I think this next chart gives a better view:
I’d essentially have a bill to pay in September through March (I’m not going to count the $1 in August), but I’d receive solar credits by selling back my excess power to the grid in other months. The credits that I earn in spring and early summer will subsidize much of those winter months. This is called net metering in solar circles.
Finally there’s the solar payback graph:
This looks pretty close to my estimate using Mr. Electricity’s calculator. One thing of note is the year one bump of due to the Federal tax credit. At the 21 year mark it would save ~$20,000, remarkably close to Mr. Electricity’s calculator.
I know they’ll be less efficient over time, but it is easy to see that the longer they last, the better the payoff. At the 30 year mark it looks to save almost $40,000.
These panels are guaranteed to be 80% efficient through 25 years and also to only lose 0.7% efficiency per year. While I need to read the fine print on the warranty and claims, if true, I can expect savings past 25 years. It’s not like the product is timed to die right after the warranty expires a quarter decade down the road, right? Even if they are 50% or 60% after 30 years, it
Finally, there are several financing options available. A bank they deal with says that their best rate is around 4.99%. Another bank I looked at has the same rate. The bank I have my mortgage with has a special 2.99% rate they are pushing on Home Equity Line of Credit (HELOCs). I have contacted them and set up an appointment for later this week. I think when they hear that I’m putting the money towards an investment that pays for itself, they’ll have little difficulty in extending the line of credit.
After receiving this proposal, I had a meeting with the solar vendor. We made some changes to the proposal that I’m really excited about. That will be post for a little later this week.