Solar Payback & Opportunity/Other Cost

[njhowie]

Njhowie,
You are the first person, besides me who have mentioned roof integrity as a key factor in not installing solar panels. Our house is 65 years old, and those original pine boards that makeup the roof surely can’t handle the additional load.

Birds of a feather
Great minds think alike

 

[Koolau]

I just wish NW-Bound were here to add to the discussion. He has "lived" this thread. Not to put words in his mouth (and going strictly from poor memory) I'm thinking he suggested he didn't really come out on the investment, but it was a fun hobby, managing his own utility, so to speak.

My SWAG is that you might come out if the planets (and politics and rates and other intangibles) align. BUT it would be a bit of a crap shoot.

I love the idea of solar and I do think it's gonna penetrate deeper into our lives but it's likely not a really good "investment." Hobby comes closer to the reality IMHO but YMMV.

 

[Zathras]

…
Because your calculations give you the answer you like? Ignore that man behind the curtain?

I know you used smiley faces, but I take offense at that.
The buying choice was never purely financial. I would argue no purchase ever is. Financials were not ignored, they just weren’t calculated to the details you wanted.

If my rough calculations gave me an answer I didn’t like, I would choose a different product.

Sure, all factors should be considered, why wouldn't you? But don't double count. I think the earlier post said it was $29,000 after incentives/credits, so his cost is $29,000, it's already accounted for. All others need to be credit/debit as needed.

-ERD50

Ok, I reviewed the last year of data for my system.
The utility data isn’t organized as a balance sheet, so I had to untangle some things to get solar electricity consumed onsite. If anything strikes you as odd, let me know so we can untangle it.
I use my system as it is the basis of my position and I have access to the production and billing data.

I have not yet received December’s bill. Percentages are of the (original cost + expected Inverter replacements - tax rebates collected in first year).

Annual production incentive: 3.7%
Net Metering credits - Bills paid to utility (annual): 1.5%. *
Costs avoided due to solar: (kWh used * $0.13)+($12 service fee*11) = 3.8% **

* May go down slightly once December is added
** May go up slightly once December is added

So on year 7, roughly a 9% ROI.
The annual incentive is for the first 10 years and has been pretty stable. The ROI will obviously go down on year 11.

Again, I realize I am in a very solar friendly environment. We also designed our house with solar in mind.
I get that this doesn’t work as well, if at all for others. I also know people that get better incentives than I do.

I just hold that it isn’t as bad a deal as some make out.

If you feel I missed anything, or have any questions, or if I calculated something wrong, please let me know.

 

[Sunset]

Here is my little solar project at the cabin

I got a solar system to use an e-kooler instead of a regular cooler with a block of ice, because it was a pain to go get ice every 3 days..

Solar Costs: 900+300+80+400 (battery, 4 panels, wire, e-cooler). = $1,680
Solar should last minimum 10 years, so yearly capital cost of $168.

Opportunity cost of Solar is: $1,680 x .05 = $84

Cost of solar per year is $168 + $84 = $252 per year (summer).

Saves cost of Ice every 3 days at $3.00 block : $3 x (60days/ every 3 days) = $60

Ice - solar = 60 - $252 = -$192 is my savings compared to compared to Ice.

Payback is: Never going to happen.

Lifestyle savings: saves me minimum 45 minute round trip every 3 days (rain or shine) = 0.75 x (60/3) = 900 minutes = 15 hours of life.

I pay net -$192/15hrs = $12.80 to save 1 hour of effort

So it's a lifestyle choice for me.

 

[skyking1]

My brother did well on his system in Yakima.
1) really good sun exposure there.
2) very low base meter rate, coupled with middle to high KWH price.
3) high state incentives at that time. Those are long gone.
I'll ask him the particulars. It is paid off and only 10 years old, he did not lay out the cash for it.
Bottom line the state subsidy at that time made it work.
Yes that is one of the standing seam installations I have worked on.
As far as old structures go, that's a 1920 craftsman with 7/12 pitch hand cut rafters and skip sheeted with 1x.

 

[ERD50]

... I have not yet received December’s bill. Percentages are of the (original cost + expected Inverter replacements - tax rebates collected in first year).

Annual production incentive: 3.7%
Net Metering credits - Bills paid to utility (annual): 1.5%. *
Costs avoided due to solar: (kWh used * $0.13)+($12 service fee*11) = 3.8% **

* May go down slightly once December is added
** May go up slightly once December is added

So on year 7, roughly a 9% ROI.
The annual incentive is for the first 10 years and has been pretty stable. The ROI will obviously go down on year 11. ...

If you feel I missed anything, or have any questions, or if I calculated something wrong, please let me know.

I'm trying to take a crack at the numbers. Just checking, is both the 3.7% and the 1.5% annual for only the first 10 years? Or just the 3.7% (labeled 'incentive')?

And the base cost for your %'s - just to be clear, you are saying you are using your "out of pocket" cost (total cost minus rebates, plus inverter costs)? How are the inverter costs estimated, over the life of the system (30 years? other?). That might work best as an annual budgeted expense for the calculations? Say for example, for an average 10 year life, 10% of the total inverter cost as an ongoing annual expense?

I know you used smiley faces, but I take offense at that.
The buying choice was never purely financial. I would argue no purchase ever is. Financials were not ignored, they just weren’t calculated to the details you wanted. ...

No offense intended - it's human nature that if we are looking for a certain outcome, and our calculation supports it, we may stop questioning it. That's why it's always good to get an outside view that might see things we may miss ourselves.

And as I said earlier, I often see opportunity cost ignored in saving calcs, but it affects our bank statement, no two ways about it. Ignoring it gives us a false view.

-ERD50

 

[Zathras]

I'm trying to take a crack at the numbers. Just checking, is both the 3.7% and the 1.5% annual for only the first 10 years? Or just the 3.7% (labeled 'incentive')?

The 3.7% is the only one that ends at 10 years.

And the base cost for your %'s - just to be clear, you are saying you are using your "out of pocket" cost (total cost minus rebates, plus inverter costs)? How are the inverter costs estimated, over the life of the system (30 years? other?). That might work best as an annual budgeted expense for the calculations? Say for example, for an average 10 year life, 10% of the total inverter cost as an ongoing annual expense?

Yes, the base cost was my out of pocket costs + expected inverter costs - lump sum rebates paid in the first year. I figure counting the 30% rebate as gains didn’t make much sense and would heavily skew the results. It seemed more reasonable to deduct the rebates from the initial cost.

Someone else earlier posted using annualized costs. Seems a cleaner way to do it.
However, with changes happening mid-lifespan (inverters are free while under warranty, one of the incentives ends at 10 years, etc) I am not sure if that is the better option here??

No offense intended - it's human nature that if we are looking for a certain outcome, and our calculation supports it, we may stop questioning it. That's why it's always good to get an outside view that might see things we may miss ourselves.

And as I said earlier, I often see opportunity cost ignored in saving calcs, but it affects our bank statement, no two ways about it. Ignoring it gives us a false view.

-ERD50

Thank you, I appreciate that. Perhaps I was having a bad day.
I don’t think people that don’t mention ignore it. I didn’t ignore it, I just didn’t pull out the full accounting handbook.
My rough numbers were close enough for me.

At some level, I believe anyone, with any purchase, considers ‘what else could I do with this money’. At its fundamentals, that is what opportunity costs are. They just have no actual calculations behind them.

 

[RobLJ]

We had panels installed in September of 2018 and production has been over the estimated production with very little degeneration. The estimate for "pay-back" (ignoring opportunity cost, etc, etc, etc, etc) was 9 years and we are on schedule for that. I'm ignoring the extra panels for the PHEV and the EV, which have pretty much paid for themselves next year.
We do pay about 1/2 of old electric bill from mid November through February which is the low production period. We have a generous net metering (81% of retail) agreement that includes a fixed cost rate, so that helps a great deal.

Another factor was that I was sitting on quite a bit of cash (more than we spent on the panels) earning .l% in the brokerage. Admittedly I could have invested that cash. And decarbonizing was indeed as much of a factor in our decision as the pay-back, so there is that.

We had a leak last December which concerned me, but the roof guy said the extreme snow and ice last year cracked a few of the tiles, which let in moisture and it had nothing to do with the solar panels. But roof problems are one of the potential issues.

If I were not pretty confident of staying in a house for 10 years or more, I would not consider solar, as a personal viewpoint. And I would make sure I have a relatively new, good roof.

I guess the last info is that while the inverter malfunctioned after only 3 years, it was under a 10 year warranty and was replaced relatively quickly. The new version has been rock solid. The EV charger is built into the inverter. That saved money in installation, but it might be better to have a separate charger, in retrospect, although the charger has worked flawlessly. I am planning on having to replace the inverter in 10 years or so, however.

Just to give the voice of experience here.

 

[Koolau]

Here is my little solar project at the cabin

I got a solar system to use an e-kooler instead of a regular cooler with a block of ice, because it was a pain to go get ice every 3 days..

Solar Costs: 900+300+80+400 (battery, 4 panels, wire, e-cooler). = $1,680
Solar should last minimum 10 years, so yearly capital cost of $168.

Opportunity cost of Solar is: $1,680 x .05 = $84

Cost of solar per year is $168 + $84 = $252 per year (summer).

Saves cost of Ice every 3 days at $3.00 block : $3 x (60days/ every 3 days) = $60

Ice - solar = 60 - $252 = -$192 is my savings compared to compared to Ice.

Payback is: Never going to happen.

Lifestyle savings: saves me minimum 45 minute round trip every 3 days (rain or shine) = 0.75 x (60/3) = 900 minutes = 15 hours of life.

I pay net -$192/15hrs = $12.80 to save 1 hour of effort

So it's a lifestyle choice for me.

Another cost you may be saving with your solar system is the miles driven to get ice. I think driving costs are something like $0.60 per mile now. That might bring you a bit closer to break-even. Cheers and YMMV.

 

[dheb]

Njhowie,
You are the first person, besides me who have mentioned roof integrity as a key factor in not installing solar panels. Our house is 65 years old, and those original pine boards that makeup the roof surely can’t handle the additional load.

If your roof can handle an inch of snow, it can certainly handle solar panels, which weigh much, much less.

 

[earlysignoff]

I installed my Tesla solar panels in Nov 2022. My roof was around 17 years old and I would have replaced it around 20 years any how. Tesla inspected the roof and said that the roof needs to be replaced before panel instal. I changed the roof. My cost for 26 panels, 10.4 MW capacity Plus a Powerwall +came to $19.5 K after federal and SREC credits. Tesla discounts the SREC credits you get for 15 years and gives it you on day one as a reduction to cost of panels. This way if I sell the house before 15 years, I am not losing out on the SREC credits. My annual electric bill used to be around $1,800. Post instal, I have not been paying any electric bill since Feb 2023. I live in NE and my state provides a 100% net metering credit for energy returned to the grid. During the first year, I have a credit of 1,000Kwh in the energy company for which I will get some money. Houses in my area with solar panels have recorded some accretion in the sale price , between 2 to 4%. I did not factor opportunity cost in my analysis. The powerwall back up has worked well in case of disruptions. Some neighbor envy though! The receipt of SREC credits in advance was a big plus for the decision to go for the panels. Tesla panels were also cheaper by around $10K compared to other solar panel providers.

 

[earlysignoff]

Also, the home insurance cost came down slightly after the solar instal. My insurance company said that having the panels in a way improves the life of the roof too! During the first year , I did not have any maintenance issue on the Tesla panels. So far so good!

 

[catii]

Depends where you are, of course, & the cost of electricity. Our 10.4 kWh system was installed back in November 2010, & hit parity 5 years 8 months later, thanks to our $485 monthly electric bill. We're still generating 81.8% of that power, with an $18 monthly bill, for the connect charge alone. YMMV, of course.

 

[earlysignoff]

I believe that the cost of electricity is never going to come down and solar probably makes sense. I currently have a 100% solar offset and all my consumption is through solar.

 

[skyking1]

If your roof can handle an inch of snow, it can certainly handle solar panels, which weigh much, much less.

solar installations are in the 2~4 pounds per square foot.
The panel weight is ~2.5 pounds and the remainder is rails, if any.
Fluffy light snow is 0.26 pounds for an inch.
Wet heavy snow is 1.66 pounds for an inch.

 

[RobLJ]

solar installations are in the 2~4 pounds per square foot.
The panel weight is ~2.5 pounds and the remainder is rails, if any.
Fluffy light snow is 0.26 pounds for an inch.
Wet heavy snow is 1.66 pounds for an inch.

Yea, my concern was more the integrity of our roof shingles, which is cement tiles, about 10 years old when we put on the solar. I would replace asphalt shingles that were more than 8-10 years old, probably before solar. It has been very stable--so far at least--, and we get 50-70 mph winds when the Sierra storms come over the Pass. I can hear wind coming around the double window panes in the master bedroom when the gusts are big, although that's not all that common. 3-4 times last year. We are up on a bluff and not much protected from Westerly storms, which are the most common. A hill protects us from the Northern storms. I talked to the installer about my concerns.

 

[skyking1]

If you have a spot for it, ground mounts are less expensive and better overall. Most people don't have the room or don't want to look at them out in the yard.

 

[GaryInCO]

As some of us have pointed out before, residential roofs are seldom at the proper angle and exposure to maximize output.

It turns out that's MUCH less of an issue than I thought.

I just installed solar on my house last month, so I've been watching the reported generation stats.

I have panels facing SW and SE. The December sunrise is "behind" the SW-facing panels, so the sun doesn't hit them until a while after sunrise. Just as the sun peeks over the edge of the SW panels, the SE panels are getting very close to perfect-perpendicular sun.

A few weeks ago I noted the power generated by individual panels in the 20 minutes after the sun crested over the edge of the SW-facing panels. I was very surprised to see that the SW panels (with sun shining parallel to the surface of the panels) generated half as much power as the SE panels (with directly-overhead sun).

That tells me that roof orientation is much less of a concern than I thought. A non-optimal orientation or angle might cut your production by 10 or 20%. Big whoop. It's still very practical.

 

[RobLJ]

Standing seam metal roofs are the only way I'd do rooftop solar. I have installed 6 of these roofs over the last 15 years, and they are 50 year roofs. That is the paint warranty, and the coatings below the paint are still going to protect the metal.

They make this nifty clip that grabs the rib without penetration. S5! has been making this clip to put on snow guards for many years as well as solar.

No rails no extra weight in many installs.
I will pre-install home runs of conduit to the gable end soffits and get it inspected for the solar. That is not much of a cost to have that in place.

When we were in the Alps hiking the Mount Blanc Trail this summer, we saw a lot of metal roofs with this. About a 1/4 to a 1/3 had solar clipped on. I was very curious.

 

[RobLJ]

When we were in the Alps hiking the Mount Blanc Trail this summer, we saw a lot of metal roofs with this. About a 1/4 to a 1/3 had solar clipped on. I was very curious.

Well, this was in Courmayer and Les Housches and La Fouly and Champex. The smaller villages had less, although there were some solar even there. (None of the above are large towns, by the way.)

 

[Zathras]

When we were in the Alps hiking the Mount Blanc Trail this summer, we saw a lot of metal roofs with this. About a 1/4 to a 1/3 had solar clipped on. I was very curious.

Our panels are installed this way.
We love it, very solid connection, no roof penetrations.

 

[GaryInCO]

You are the first person, besides me who have mentioned roof integrity as a key factor in not installing solar panels. Our house is 65 years old, and those original pine boards that makeup the roof surely can’t handle the additional load.

My system uses 74"x41" panels. Each panel weighs 48.5lbs; figure maybe 5lbs of mounting hardware. So that's about 53 lbs per 21 square feet. Call it 2.5 lbs per square foot.

If your roof can't handle that, you'd better not let anyone walk on it, since it's apparently made of tissue paper. Your 150-250 lbs in less than 1 square ft would punch right through.

Weight of the panels is a non-issue. It's just barely possible that gale-force winds might cause a problem, but most panels are mounted nearly flush to the roof. Any wind that damages my panels will rip off all the rest of the shingles. (The ones not protected by the solar panels, that is. )

 

[ERD50]

The 3.7% is the only one that ends at 10 years.

Yes, the base cost was my out of pocket costs + expected inverter costs - lump sum rebates paid in the first year. I figure counting the 30% rebate as gains didn’t make much sense and would heavily skew the results. It seemed more reasonable to deduct the rebates from the initial cost.

Someone else earlier posted using annualized costs. Seems a cleaner way to do it.
However, with changes happening mid-lifespan (inverters are free while under warranty, one of the incentives ends at 10 years, etc) I am not sure if that is the better option here??
...

I finally got back to this. I'll attach a spreadsheet, but to summarize:

Scale your %'s to per $1,000 invested:

Historically, FICalc.app reports ( http://tinyurl.com/yw4d4ayh ) that per $1,000 invested for 30 years (with 3% inflation adj WR) is at a minimum balance of ~$515 (inflation adjusted), and a median of $2,560, with half the cases higher than that median, and an upside of $7,112!

Payback, ignoring residual value but including the 3% SWR from the investment, is ~ 26 years. Note that I don't show the inflation adjusted WR in the spreadsheet, but that would be offset if kWh rates match inflation. Though kWh rates may exceed inflation, but also panels degrade over time - so 'close enough'?

So if the residual value of the panels are near $0 @ 30 years (remove/dispose costs >= remaining value?) per $1,000 invested, even if they are still producing, the savings never seems to be able to exceed the residual value of the $ invested.

-ERD50

 

[Romer]

I have Solar and didn't believe the payback graphs. I did it for other reasons. I also got two large batteries which really have no payback

Solar won't power the house in a blackout without a battery. The Battery will allow the solar energy to power the house and then take over when the sun goes down. I got two large batteries to cover me for two days without thee grid in poor weather. I am concerned about stability of the Grid against Hackers and other causes of a Grid failure. I know, a bit irrational

As far as the Solar System without batteries, I am starting to believe in the payback, although not a factor for me. I haven't paid for electricity in two years. Only the $5 connect to the grid fee. I bank what I produce above needs which covers me during the short and snowy months (Dec-Feb) when I use more than I produce.

Electrical rates also have gone up

I also converted two ACs to Heat Pump, which during the summer uses less electricity to cool and during the winter above 35 deg more electricity, but less gas.

The Heat Pumps have given me enough margin to cover an EV, which we will likely get for DW next year

I don't have the calculation or graph for payback. I look at it as reducing risk and eliminating a component of inflation for the future.

however, here is some data:
- I would be paying $2160 a year for electricity where I am not paying anything but the $60 grid connect fee. I was paying less per year, but electricity has gone up since I installed the panels. I used current rates per kWh. I believe in 2021 I paid $1750 for electricity
-Rates have gone up here charging more during the day for Peak usage until 7PM to discourage high use and AC's running all day during the summer.
-My Solar Panels less Batteries cost $31K
-My Tax Credit at 30% brought the end cost down to $22K

Now that I have two Heat pumps, Gas costs will come down, I don't have that data yet, just the summer AC replacement so far

When we get an EV and run it off the panels, Gas for cars cost will also be reduced.

So I believe there is payback. There isn't for Batteries though, I just wanted the capability

 

[GaryInCO]

I have Solar and didn't believe the payback graphs. I did it for other reasons.

Me too. It feels good to reduce my footprint.

But financially, I don't think of payback. I think of return on investment.

My system cost me about $22k, after IRA credits. My electric bill last year was just about $1800. If I assume my solar system pretty much wipes out my bill (and it should), that's an $1800 return on my $22k investment. That is a GUARANTEED, tax-free, 8% return. And if utility rates go up (nahhh that'd never happen) then my return gets better over time. It's like an ever-increasing COLA'd annuity.

I'm happy with that.