Payback time?

[bob-n]

How do you calculate the time required to recover your invested cost in PV?

I just got a quote for home rooftop PV without storage. The company said that they calculate between 7 and 9 years to pay back. I did the math myself with rosy assumptions and got >12 years.

My assumptions were:

• The PV system reduces my electric bill to just the standard base charge;
• The standard base charge doesn't change with netmetering; (*)
• No change in electric rates over time;
• No interest on my money if not invested in PV; (*)
• No change in homeowner's insurance cost; (*)
• No maintenance costs; and
• No REC payback (it's not offered where I live).

The items marked (*) seem like rosy assumptions. Today, banks are issuing 4% one-year CDs, but I didn't factor that in.

I found a website that shows nation-wide electric rates having gone up 2.5% per year over the past 25 years, but also predicts virtually flat electric rates for the future 25 years. I have no idea if the people behind these websites are reputable, but no one can predict the future. Also, "national" statistics don't represent my specific location.

https://www.statista.com/statistics/201714/growth-in-us-residential-electricity-prices-since-2000/

https://www.statista.com/statistics/630136/projection-of-electricity-prices-in-the-us/

Thank you for your thoughts.

[azdave]

One thing that could affect the ROI is the monthly connection fee (base charge). Around here, it will soon be going from $21 a month to $32 a month and affects everyone with a meter but is increasing at a higher percentage for those who have residential solar because "we don't pay out fair share" for grid maintenance.

[Mike 134]

Your calculations of +12 years are likely more accurate than the rosy picture the salesman paint. Conservatively speaking the money you spend on solar would have doubled if left in a S&P500 index fund in 9 years. Would you spend more than that on electric without the solar?

[J.P.M.]

Since you're asking for opinions or thoughts:

Your assumptions may be rosy or pessimistic depending on many factors primarily revolving around how accurately they describe your local electric situation including your power provider's rate structure and any interface and/or policies of that provider with and a residential PV system.

At this time, as in the past and probably the future, the financial viability of residential PV is anyone's guess and largely based on assumptions about the future. What that means is anyone who suggests that the future viability of residential PV can be predicted with any certainty is either a fool, a conman, or both.

From what I've seen after screwing around in solar energy for over half a century, and IMO only, most folks, even though the information is readily available for a few mouse clicks, remain absolutely ignorant of the realities of solar process economics but then get pissed when some wiseass like me points it out to them.

FWIW, if only to get some feel for the minefield that awaits those who rush headlong into the question of whether or not residential PV makes financial sense for them, one starting point, if only a toe dip into why solar process economics is more complicated than using the back of an envelope as a calc sheet, is the see chap. 6 of "Solar Power Your Home for Dummies". It's online as a free PDF. For more detail, root around on the NREL website for titles dealing with residential solar process economics and such.

As a general statement, at this time it appears that residential PV's future is most not as rosy as it was in the past and also fraught with more uncertainty than in the past.

For now, if you want to save money on energy bills, put your money and efforts into greater conservation efforts, and in the meantime get familiar with the time value of money.

[bob-n]

azdave Mike 134 J.P.M.
Thank you all for your helpful comments.

Dave is right. It's amazing how much the connect-fee will affect the payback. We're all paying it every month even if we reduce our net usage to zero. I haven't yet been able to speak with the utility to find out what they charge for monthly netmetering vs monthly conventional, but it is probably higher. At the risk of stating the obvious, utilities don't seem to encourage home solar.

Mike makes a good point that I can do even better than bank CD rates.

J.P.M. brings up many good questions. I don't know the exact terms of the particular utility, but from what I can tell, this particular regional rate structure charges exactly net. In other words, they don't separate distribution from generation in the net-metering calculation. I need to confirm this as well as base fees.

J.P.M. also brings up the question on assumptions. That was the main reason for my post. I was hoping to hear what others are assuming. The comment "the financial viability of residential PV is anyone's guess" confirms my fears that forecasting payback that far out is virtually impossible.

[darkskies]

My install gave an estimate of 7.5 years, with an estimated system cost, a projected production, costs in our area, estimating net credits (much more than what I get per yer), and assuming like a 2.5% increase in rates per year.

In reality, my system initially wasn't get that production level (until they up-sized the inverter), and it took a while for the battery to be added (which wasn't in the estimates - it helps with savings, but adds a lot to cost).

I made an app that takes several things into consideration...

• Net system cost after credits/rebased.
• Actual production, consumption, import, export, and RECs received.
• Uses the monthly rates from utility (including admin fee) so that can calculate savings/costs.
• Calculate the cost if I didn't have solar, comparing that to the actual savings and RECs to determine total savings.

I'm projecting 12.5 years (and that is including the final cost of the system with battery).'I suspect it'll lower some, as for a few years we were not producing what we produce now (no battery and smaller inverter), so production is higher now, and I suspect rates will continue to increase.

For sure, the installers are very optimistic.

Given the way markets have been, I think it would be far better to invest the money instead, but to me that more of an trade-off analysis of investment (buy solar or invest) vs a ROI calculation (how long will solar PV take to pay off).

For me, it was more of the security of having power when there are outages, along with the subjective feeling that I don't have an electric bill.

[J.P.M.]

For me, it was more of the security of having power when there are outages, along with the subjective feeling that I don't have an electric bill.

Emotion always causes more problems than logic.