Solar Energy as a Personal Investment
After a couple years of dreaming about it, I’m finally getting solar panels on my roof. I’m excited and I can’t wait to get them up and running. I’ve just signed the construction proposal and contract, so I’ll have to wait a few weeks for permits and interconnection before the panels get installed. I don’t plan on staying at this house for life, so I’ve decided to have the panels installed on the east-facing pitch of the roof — which is the back side of my house. I think they will look great, but I hear some people don’t agree. That way, if a future buyer isn’t as thrilled as I am, they should be at ease knowing that the panels aren’t visible from the street. Though any buyer should be excited about a system will cover almost 75% of the electric bill.
Solar energy seems out of reach for many people, mostly due to the large upfront expense. With snowy winters and many rainy days, Iowa isn’t the best place for huge annual productivity from solar panels. There isn’t a big market for solar energy in Iowa yet, so companies that will lease a system to you with zero money down aren’t big here yet. But that doesn’t mean it isn’t viable. Both the federal government and the state of Iowa offer tax credits right now, so a solar panel system can still make financial sense to help with the environmental case.
After doing my own numbers, I decided that it was a good investment for me. Most sellers/installers promote the payback time along with the current tax credits. For me, a 14 year payback time didn’t sound so appealing, because that seems like forever. I preferred to compare it to my other investments and calculated my personal return on investment (ROI). When I think about it as a 7% ROI, it becomes much more appealing. That’s the ROI for my solar energy system — using the annual electricity bill savings compared to the installation cost. When you add in the expected home value increase, the system will actually pay for itself instantly. My solar energy system should net me $3,000 in value and then keep saving me over $500 in electricity costs every year!
My installer quoted me a 4.2 kW solar energy system using 15 SolarWorld 280 mono black panels, connected to a SolarEdge SE3800 inverter, for a installed price of $14,548. I’m doing well for myself, but that is a lot of money! But, right now there’s a federal tax credit of 30% and the great state of Iowa has a tax credit of 18% … also, no added property tax for 5 years. That will help ease my costs, and makes my net cost $7,564.96. The quoted production for my solar energy system is 4,877 kWh (that’s 73.89% of my current usage, by the way). Over the past 24 months in this house (with 2 people), the average annual electricity usage was 6,600 kWh (this is less than the US average). That equates to about $720 in annual electricity costs (based on total electric bill). Taking a simple average, my average cost per kWh is 10.9 cents — about Iowa’s residential average.
If my system produces its production estimate, my net annual electricity purchased will be 1,723 kWh. Using my current simple average cost (10.9 cents/kWh) that means I’m saving $532.04 per year! These savings compared to the net cost gets me the 7% ROI, or 14.22 year payback period. Lastly, it is estimated by the home industry that for every dollar saved in energy costs, the home value goes up by 20 dollars. According to that logic, adding this system should add $10,640 to my home value. That gives me a net added value of $3,075. Alternatively, the Berkeley Lab ran a study that found the premium value added when selling homes with solar panels — using the lower “Rest of U.S.” value of $3/watt means my system would add $12,600 to my home value. That number gives my house a net added value of $5,036! Either way, the system has paid for itself before it was even turned on.
Finally, a solar energy system helps do your part to make our environment cleaner. I feel great knowing that almost 75% of my electricity use will come from the sun and a large portion of the other 25% will come from wind energy. In Iowa, Mid-American Energy is helping us lead the nation in renewable energy sources and has nearly 40% of their grid fueled by wind energy. My system helps lessen their load and allows them to reduce their use of fossil fuels.
So, if you have the cash saved or the equity in your home, a solar energy system could be a great investment for you. I’ll post another article with some production figures after its up and running for a while.
Originally published by me on August 24, 2015 here, where you can see all the math: http://fish2020.blogspot.com/2015/08/solar-as-investment.html
If you’re curious, my panels will be these: http://www.solarworld-usa.com/~/media/www/files/datasheets/sunmodule-plus/sunmodule-solar-panel-280-mono-black-ds.pdf