Costs and Benefits

I'll be the first to admit that at retail prices with no incentives, residential solar is not yet affordable.  However, what makes it affordable, or actually even slightly profitable, is a 30% tax credit.  I essentially am paying 30% less for my system, with the remainder being paid by taxpayers in general.  (You're welcome.)

My 10KW system cost me $34,900 installed. (Yes, that's $3.49 per Watt for those of you tracking prices.)  This was a "turnkey" installation. I didn't need to do any permits, buy any equipment, or do anything at all... the installer took care of all that.  That will net me a $10,470 tax credit.

However, I was able to completely finance this installation with a "solar loan".  I have a 15-year FHA "Home Improvement Loan" (tax deductible) for the first $25000, plus an add-on "same-as-cash" loan for the balance (plus fees, etc.) which I need to pay off within 18 months.  Of course, the plan is to pay it off with the 30% tax credit.

Here's the math for costs incurred before my system was activated January 5:

Loan application fee: $100
December loan payment: $229.16

December Savings:
Tax savings from deductible interest: $42.29

January Costs:
Loan payment: $229.16
January Savings:
Reduced electric bill (1.09MWh * $0.05227) = $56.97
Tax savings from deductible interest: $42.16

Running total of costs: $558.32
Running total of savings: $141.43

(Monthly savings are not expected to exceed costs until June when summer peak rates kick in, getting ahead by September.)

A prediction for February:
Reduced electric bill (3.95 * 28 * 10 = 1.105 MWh) = $57.77
Tax savings from deductible interest: $42.03

Irradiance

The amount of solar power you can generate depends on a few factors.  Most important are latitude (affecting the angle of sun and length of daylight) and the orientation of the panels.  Since I live in the Northern Hemisphere, it is best for my panels to be angled toward south (technically, south-southwest but the difference is minimal). For optimal year-round generation, the angle of the panels could be changed seasonally (steeper angles in winter when the sun is lower, and flatter angles in the summer when it is higher).  However, the expense of installing adjustable angle panels was not worth the difference, especially when my roof angle favored summer generation and my time-of-use rates made the summer generation the most lucrative to my pocketbook.

The technical term for this potential power is "irradiance".  It essentially equates to an equivalent number of hours of direct sunlight on the panels, making further calculations easy without the need for more complex math.

You can find a multitude of irradiance calculators on the internet, some giving you data down to the day based on exact latitude and other factors.  (It's just spherical trigonometry and math equations, but then you have to factor in average cloud cover, etc.)  I chose to get monthly predictions using the calculator at Solar Electricity Handbook, entering data for my city, and southerly roof orientation.   Unfortunately most of the 17 degree "best angle" on my roof is already taken up by a solar-thermal pool heater so I had to use a flatter 6 degree angle for 65% of my panels.  I used the calculator interpolating between the "best summer performance" 21 degree angle and "flat" to conservatively predict the performance assuming all my panels were at 6 degrees.   The "best summer" actually isn't the best for my latitude, however.  12.5 degrees is apparently appropriate for my 36 degree latitude, so I figure I'm doing pretty good within a few degrees on either side of that number.

My system went "live" on Jan 5.  The irradiance figure I arrived at for my installation, for January, was 3.19.  Multiplying the by my system size (10 kW) and the number of generating days (27) my calculations predict 861 kWh of energy.  Actual generation from the installed power meter?  1.09 MWh (exceeded prediction by 27%).  Looks like I'm generating at least as well as my model predicted, maybe better.

Solar Math

I have been toying with the idea of residential solar power for the past five years, but the prices were too high and the payback was too low.  Until recently.  Late last year prices had dropped enough to get my attention, and the proposal given me by a solar salesman looked tempting.  After several evenings poring over the internet to get independent data and creating a spreadsheet to predict my own savings, I decided it was worth it.

One problem I found in my research was that there was a lot of predictions and payback calculations from those interested in selling solar, but not too many detailed cost-benefit reports from users.  I decided to start this blog to record the calculations and predictions I made, as well as actual costs I am paying, and actual savings I am receiving.  

I'll get into more detail in later posts, but I wanted to highlight a few points here.  First, solar generation and savings are not constant over the year.  I'll generate more power in the summer due to both the length of day and angle of the sun.  Plus, it will be worth more to me during the peak summer days when I am paying "time of use" rates.  However, my costs are constant over the year due to monthly payments on the loan I took out to finance the installation.  Accordingly, I expect my costs to exceed my savings for the first five months of the year, but I hope to earn enough between June and September to more than make up the difference.  Annually, I expect about $2320 in direct savings (reduced electricity bills).  My loan payments are $229.16/month totaling about $2750.  But that includes about $1780 in tax-deductible interest in the 28% tax bracket, giving me about $500 of tax savings and lowering my annual costs to $2250, which is $70 less than I am saving... just based on generation.  But in addition to the utility savings, I will be earning "carbon credits" that I can sell (worth approximately $100 per month.)  Plus if I ever sell my house, the appraised value should be higher (some sources say as much as the cost of installation!)

Will I actually realize these profits?  Time will tell.  Follow along this year as I see if my calculations match reality!