Solar payback assumptions

[sensij]

Wait until the tax credit goes - then see what happens.

Yes! I agree. Without the tax credit, and with the assumptions otherwise unchanged, the NPV is negative until year 23 with a 6% discount rate. With an 8% rate, the NPV is negative well beyond the expected system life. In that environment, it is rational to size only for the high marginal cost electricity (IE, tier 3/4).

[russ]

Wait until the tax credit goes - then see what happens.

[sensij]

I agree from a pure economic sense that more people should have solar on their roof. But like most things in life, there're many more factors, some personal, some external. I hope Russ's 95% is a just figure of speech not actual statistics. In my community of about 35 homes, about a third have swimming pools, ACs, many have yard lighting that burn all night. But only 2 have solar installed so far including me. Personally I don't think it's a money issue. Maybe some need to sell in 5-6 years and don't know how it will all play out, some may not have the best orientation, some may be too lazy to go through the calculation etc.. In other parts of the country, where electricity is cheaper and climate is less ideal for solar, the economics may even work against solar at the current price point. For the lucky ones that have the means, conditions and the time frame to benefit economically, it's a no brainer. There's very few things on earth that will save you money and good for the environment at the same time.

Sure, in other parts of the country the payback calculations will be different. However, in SDG&E areas, which is what that 95% comment was directed towards, I think solar penetration would be higher than 5% when "looking at it clearly". Whether people have the means or not to purchase outright is part of it of course, but it seems there are some experienced and knowledgeable members of this forum who believe that solar doesn't make economic sense even under the assumptions I've made, and that it requires a huckster making ridiculous assumptions to come up with a positive NPV. Even steering people towards only replacing the high marginal cost electricity (tier 3/4, all those A/C's, pools, and 24 hour halogens) seems questionable to me... yeah, the payback is faster and the IRR is higher, but that by itself doesn't invalidate the reasoning that shows low cost electricity in San Diego is still worth replacing with solar.

Really, I'm honestly trying to understand why some believe the average homeowner in San Diego, with Tier 2 usage, should not see going solar as economically beneficial. If I've misunderstood the advice given in other threads, or am making bad assumptions, please set me straight.

[thejq]

I agree from a pure economic sense that more people should have solar on their roof. But like most things in life, there're many more factors, some personal, some external. I hope Russ's 95% is a just figure of speech not actual statistics. In my community of about 35 homes, about a third have swimming pools, ACs, many have yard lighting that burn all night. But only 2 have solar installed so far including me. Personally I don't think it's a money issue. Maybe some need to sell in 5-6 years and don't know how it will all play out, some may not have the best orientation, some may be too lazy to go through the calculation etc.. In other parts of the country, where electricity is cheaper and climate is less ideal for solar, the economics may even work against solar at the current price point. For the lucky ones that have the means, conditions and the time frame to benefit economically, it's a no brainer. There's very few things on earth that will save you money and good for the environment at the same time.

[russ]

Let's say the house is sold after 5 years... with a 6% discount rate, a 10 panel system would need to add about $6500 to the sale price of the house to break even. Is that unreasonable, on homes that typically sell for $400k or more?

Granted, if the system is not purchased outright, and instead financed, leased, etc, the payback numbers fall off a cliff. Is that why you think 95% of the population should not be interested if they are looking at it clearly? Are there costs or assumptions that I'm missing?

That 400k home would cost less in most of the states.

If the buyer has an understanding of solar it may help a sale or if the prospective buyer is against solar it will hurt - who knows - just one more wild card added in

Most systems are not bought outright and most people will move every few years

Many people live in apartments, condos or other places where solar won't fly

Many people with their own home don't have a roof with a good orientation or shade problems.

Most people don't have the cash to buy.

Solar is a very small bit player in the electricity generation scheme - it probably will not improve that position for many years to come.

[nomadh]

I don't think he said they shouldn't be interested. Just that they won't be. Lots of us SHOULD do or be lots of things but......... Sorry. Got to go. No time to think.

[sensij]

For the higher tiers maybe - 95% of the public have little interest or no chance if you step back and look at the solar PV concept clearly.

I'm struggling to understand this comment. Even without getting into the more complicated models, I look at it from the perspective of NPV. Assumptions:

1) Marginal price of a kWh is $0.17 (typical for a lot of San Diego in low tier usage?), and increases with inflation.
2) Inflation = 2.5%
3) Marginal price of a panel is $770 (assume 275 W panel for $4.00 / W, less 30% rebate)
4) 275 W panel will produce 440 kWh annually out of the box, and decrease 0.5% / yr

With a discount rate of 8%, NPV is positive after 17 years.
With a discount rate of 6%, NPV is positive after 14 years.

Let's say the house is sold after 5 years... with a 6% discount rate, a 10 panel system would need to add about $6500 to the sale price of the house to break even. Is that unreasonable, on homes that typically sell for $400k or more?

Granted, if the system is not purchased outright, and instead financed, leased, etc, the payback numbers fall off a cliff. Is that why you think 95% of the population should not be interested if they are looking at it clearly? Are there costs or assumptions that I'm missing?