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How to financially evaluate solar panels?

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  • How to financially evaluate solar panels?

    Hello everyone,

    Thinking of putting solar panels on my roof for about $16k after the Saskatchewan rebates. Payback should be about 12 years. How should I evaluate this financially?

    If I didn't use that money for solar panels I will likely invest using a non-registered wealthsimple account. My registered accounts (RRSP, TFSA, RESP) are maxed out, mortgage will be paid off in 13 months. Is it fair to measure this against a growth investment account, or should it be compared to bonds as the volatility is none except for the risk of some sort of component failure or something.[color=#333333]https://discord.software/[/color] [color=#333333]fetLife[/color] [color=#333333]itunes[/color]


    The geek in me thinks going solar would be cool, just not sure how this ranks from a financial perspective.

    In Saskatchewan they just changed their net metering program from a 2 year contract to a 10 year contract and will pay the retail rate of 14 cents per kWh to net out your electricity bill over a 3 year cycle. Electricity rates aren't going down and a carbon tax is coming next year so the value of solar energy should be increasing.

    Thank you!
    Last edited by david77; 05-30-2019, 10:50 AM.

  • #2
    It really depends over what period of time you do the evaluation.

    Once the panels have paid for themselves, the savings become pure profit, so the longer you go the more profitable.

    For example, if you take a 16K installation, assuming this is cost after 30% tax incentives, it is 22.8 K before incentive, which at current market price would be an array of around 7.5kW that could produce about 11,500kWh per year (depends on panels, location etc...)

    At $0.14 / kWh, and a 3% Year over year tarif increase (biggest unknown variable), using an Excel sheet to plot saving based on panel degradation (depends on panels), you get to a pay off in [COLOR=#000000][FONT=Helvetica][SIZE=13px]approximately [/SIZE][/FONT][/COLOR]10 years.

    If you go 30 years, the system would have saved you a total of about $52,000 that is 325% of the $16k investment, or about 10.8% per year.

    Excel is your friend to run these simulations
    Below is a basic example of such an Excel sheet
    https://1drv.ms/x/s!At3vMAQjaOZLkRn0SC75GozosNHb
    Last edited by scrambler; 05-04-2019, 05:11 PM.

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    • #3
      Some publications that I've found helpful to aid in evaluating the economics of energy efficiency and alternate energy technologies both large and small :

      Short, Packney & Holt : "A Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies", NREL/TP-462-5173.

      For a more specific treatment of solar energy technologies see: Duffy & Beckman: "Solar Engineering of Thermal processes: ISBN # :0-471-51056-4, particularly, chap. 10 : "Solar Process Economics". The book is mostly but not entirely about solar thermal tech. & engineering, but chap. 10 is equally applicable to residential PV and also energy efficiency.

      For comparing alternatives, any decent text on engineering economics will have a treatment of the subject. Most of that is a time value of money/NPV look at different places to make an investment.

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      • #4
        The Harvard Medical School evaluated the life cycle costs of burning coal to produce electricity at between $300 to 500 Billion per year in the USA. That is about $1000 per person per year. Factor that into your analysis and solar becomes very affordable. Of course, few people and especially few utilities want to figure in these indirect costs.

        "Full Cost Accounting for the Life Cycle of Coal"
        BSEE, R11, NABCEP, Chevy BoltEV, >2500kW installed

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        • #5
          Originally posted by david77 View Post
          Hello everyone,

          Thinking of putting solar panels on my roof for about $16k after the Saskatchewan rebates. Payback should be about 12 years. How should I evaluate this financially?
          12 year payback is longer than I would like to see if it were me.

          At that financial return I'd be looking for alternative installer/supplier.

          My registered accounts (RRSP, TFSA, RESP) are maxed out, mortgage will be paid off in 13 months. Is it fair to measure this against a growth investment account, or should it be compared to bonds as the volatility is none except for the risk of some sort of component failure or something.
          I think it should be somewhere above bonds to be worthwhile.
          I don't think it should be measured against growth stocks.
          And if you do, I'd compare "I invest $16k into Solar now and invest the $110 monthly savings into the growth stocks vs. I invest $16k into growth stocks now"





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