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Costs just don't add up, am I looking at this correctly?

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  • Costs just don't add up, am I looking at this correctly?

    So we had a guy come out and we were quoted a 12.6KW system for ~$3.45/W. LG panels, SolarEdge inverter, seems like decent hardware from what I've read. But, after I do the math it's still hard to justify. His tool says 12.5 year backpack but that doesn't take into consideration lost opportunity. This system would cost about $27k after tax rebates not counting SREC which I'm not even sure I'd get because it ends very soon. Ignoring the srec if I put that $27k in a 10 year bond it would earn about $7.5k over 10 years so in my mind that needs to be added to the payoff. At a savings of $100/month (what the panels would save me on my electric bill) that's another 6 years to pay that back on top of the 12.5 so we're approaching 20 year pay off. Is this right or am I missing something? With a payoff of that long my kids will be grown and gone and we'll be ready to downsize the house. I have to be missing something...

  • #2
    You're not missing anything. $27,000 with $100/month return and no access to the original capital would be a bad investment. You have cheap electricity - solar is not going to be cost effective.

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    • #3
      Originally posted by philips View Post
      You're not missing anything. $27,000 with $100/month return and no access to the original capital would be a bad investment. You have cheap electricity - solar is not going to be cost effective.
      We pay $0.165/kWH, doesn't feel cheap.

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      • #4
        Is $100 your total monthly electricity bill? If so, then even with cheap electricity rates it seems like the installer is grossly oversizing the system that you need. It's possible that you can offset your entire electricity bill with a much smaller system, though without knowing your location or other details such as shading it's impossible to determine. Have you done any of your own calculations to determine your total annual electricity consumption, and what size solar system would be able to cover that consumption?

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        • #5
          We use about 12,500 kWh year according to our bill but our house is facing E-W so it's not ideal. That and he put down 30% shade to be safe which is probably high. They would install 35 panels giving us 12,600 W which would cover about 86% of our bill. We don't have net metering either so that hurts.

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          • #6
            No you used your head and did homework and figured out the economics do not work. At the end of your break even point you have nothing to show for it. Invest the same dollars and you will quadruple or better. Those are things you are not suppose to discover and why they do not teach economics and math in school anymore.
            MSEE, PE

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            • #7
              In that case, it definitely doesn't make much financial sense to go with solar. Having more ideal orientation and less shade certainly makes a big difference. The system in our home is a little more than half the size of the one you were quoted, but South facing, with negligible shading, and it will produce about 11,000kWh annually for us. Our payback period will be less than 6 years.

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              • #8
                Man, just researching the parts and it appears it's almost a 100% mark up on how much it cost. I might have to look into doing this DYI which would save me $20k, then the math might work out. I wish there was a way I could prop these up so they would be south facing, who cares what the neighbors think.

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                • #9
                  Originally posted by RyanDe View Post
                  We use about 12,500 kWh year according to our bill but our house is facing E-W so it's not ideal. We don't have net metering either so that hurts.
                  E-W facing panels can work well with a string inverter system. ButI don't see how this
                  could work without net metering. Bruce Roe

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                  • #10
                    Missing something ? Well, Yes and no.

                    The yes part: You need to educate yourself in the details of life cycle economics and costing with all the ways to figure economic figures of merit, assign estimates for future potentials, tax considerations, salvage values, operating costs, debt service cost,future energy costs and options, alternate investment considerations and a host of other factors.

                    also check LCOE (Levelized Cost Of Energy) analyis as is another way to do it.

                    Or, see chap. 11 (Solar Process Economics) of Duffie & Beckman.

                    Or, see "SAM" from NREL, particularly the economic references.

                    No, because the peddler is selling you a bill of goods.

                    Caveat Emptor.

                    Simply put, spending $27K to save $1,200/yr, pretty much regardless of any reasonable future energy cost escalation seems like a poor investment risk.

                    Also, more education (and cheap) buy and read "Solar Power Your Home for Dummies". a good primer. ~ $20 at bookstores/Amazon.

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                    • #11
                      Well, I'd say you're almost right. While you're right to take into consideration interest lost, you should also consider, not just a straight savings per year, but that money re-invested and interest earned off of it. It's not going to be that whole $7.5k, but it's going to be a chunk of it. And the money saved beyond that, and it's returns, and where is the long term cross-over point.

                      But that's not even what has me scratching my head. If you're $100/mo and it's $27K is your out of pocket post tax credit, how does that come out to a 12.5yr payoff? Is he using SREC's in his calculations. Even with a 3% average increase in rates -> $18,860 at 12.5yrs in utility rates. By my calculations it's 18.5yr payback if only ultities (and with an average 3% per year increase in rates) are considered and investment opportunities missed are not taken into consideration.

                      It sounds like you're $0.10/kWh rate. There's no way I'd go Solar given current pricing with those rates available (i.e. when I lived in TX there's no way I would have gone Solar at today's prices)
                      Last edited by TAZ427; 06-29-2018, 01:04 PM.

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                      • #12
                        Sometimes economics is not the prime motivating factor. Going "green" can bestow certain social benefits not quantifiable nor justifiable.

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                        • #13
                          Originally posted by DanS26 View Post
                          Sometimes economics is not the prime motivating factor. Going "green" can bestow certain social benefits not quantifiable nor justifiable.
                          That gets us into a different debate...

                          But since the question posed was with regards to ROI timeline being stated by the installer vs real ROI from a financial perspective, that's where the discussion was.

                          I had the other debate last weekend with my brother in law who's a geophysical engineer (i.e. oil and gas explorer.) It was actually a very cordial discussion, he correct some of my areas of ignorance and I correct some of his. And that's the way it should be between two engineers over a few beers.

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