stimating Rooftop Solar Photovoltaic Investment
For those who regard the expense for rooftop PV as an investment that must be evaluated using standard business practice, the Solar Advisor Model (SAM), compiled by DoE (NREL), is available as a no-cost download. System cost metrics are computed from post-design parameters and after incentives are computed. For example, the cost of the system is the bottom-line amount after incentives and tax credits are deducted. The model computes investment payback from the value of produced energy delivered to the investor.
Example Investment in a 1kW installation, using SAM
The Solar Advisor Model considers all pertinent design and investment factors and these are requested by the model before returning numeric results characterizing the investment.
|Date of Install:||July 2013 – Panels manufactured in Washington State, Inverter manufactured in Washington State|
|Location:||Seattle, latitude 47.5 deg N|
|PV Array:||1.0 kW, south facing, 30 deg tilt|
|Energy delivery efficiency:||77%, with performance loss of 0.5% annually|
|Total System Cost at Installation:||$5.71 per watt installed; for a total of $5,710|
|Finance:||15 yr mortgage, 3.3% interest, 2% inflation, 3% discount rate, 28% marginal tax rate|
|Incentives:||Federal, 30% of cost[$5,710 – $1713, for a net total of $3,997]WA Performance Based Incentive, $0.54/kWh, for 8 years|
|Utility Rate:||Puget Sound Energy, 8.49c/kWh, 4% escalation, net metering|
An installation of a 1 kW solar panel rooftop in Western WA is reported by SAM to achieve 100% payback after 6.5 years. Any investment with this payback is returning 15% simple interest annually.
This is not exactly equivalent to a bank savings interest rate or a CD rate, because you can’t withdraw your investment in rooftop hardware and installation labor. On the other hand, your property insurance protects your investment, and this is equivalent to FDIC or NCUA protection.
If you sell your property with the rooftop PV in place, it adds to the value of your property at $5.00/W, amounting to $5,000. Investing $5,700 earns you about $1,000 per year and after 6.5 years you can sell for $5,000. Ref: Lawrence Berkeley National Laboratory study of home values.
NOTE This is like an annuity that refunds itself after it returns all payouts. You don’t find this every day.
Results in Eastern Washington State can be estimated by assuming 1100 kWh per year for a 1 kW installation. The corresponding payback period for Eastern WA, as well as for other states at lower latitudes, is typically less than 5 years.
Consult your financial adviser before making any investment.