Did PV solar power just become affordable?

[Pengwuino]

Have you done the math taking out a home equity loan to pay for the panels, and seeing that the money you save on electric pays for the cost of the loan?

In other words, it my understanding is right, there's no financial reason to not buy as many panels as you can with the loan you qualify for - you come out ahead.

Oh the math was done with 100% upfront full payment, no loans and it still came out to about 12 years. I think my first crack at the costs were using $.14/kwh which resulted in 20 years of payback... but I didnt know our costs were at $.21 instead. To complicate things even moreso, the $.21/kwh i used to calculate hte 12 years is a summer 300+% baseline cost. I could make an even more realistic prediction if i considered the lower energy use and lower energy prices associated with the winter months since we are working with a tiered system (it would make the payback date be even more then 12 years).

There is definitely a financial reason why you shouldn't buy as many as you can. Theres a maximum that you can reasonably buy to make financial sense. Say you consume 75kwh per day in the summer months but only 40kwh per day in the winter months. It becomes a backwards proposition financially if you purchase more panels then are necessary to produce over 40 kwh in a day. Anymore panels and you start having diminishing returns.

What I think a lot of people here are saying that I am not sure that your catching onto is the fact that say, $50,000 (ESPECIALLY if its free money, ie. not from a loan) can go a whole lot farther in other forms of investment. I think hypatia made this point in another thread where we compared solar power with say, a 5% bond and the panels showed horrible returns after 20 or so years compared to the bond.

At this point, i think i want to think more about solar panels as an investment because its starting to only make sense to talk about solar panels as a cost-saving measure instead of as an investment measure.

 

[hitssquad]

$2000 per installed watt-month heuristic

We're looking at a $500/month electricity bill and we're looking at enough panels simply to supplement, not to eliminate (or else we're talking about upwards of $100,000).

~$500/month at a rate of ~$.20/kwh would be ~2,500 kwh/month. Using my rule of thumb of $2,000 per installed kwh-month of capacity, making your house grid independent with a solar homepower system would cost ~$5 million up front.

 

[hitssquad]

Moneychimp calculates the interest on your homepower investment

30 years of 5% interest/opportunity-cost for the above $5 million installed cost would be $17,406,143.44 for interest compounded daily or $16,609,711.88 for interest compounded yearly.
moneychimp.com/calculator/compound_interest_calculator.htm

 

[Pengwuino]

~$500/month at a rate of ~$.20/kwh would be ~2,500 kwh/month. Using my rule of thumb of $2,000 per installed watt-month of capacity, making your house grid independent with a solar homepower system would cost ~$5 million up front.

Whoa that can't be right...

 

[hitssquad]

Correction for decimal point error

Whoa that can't be right...

Sorry. Off by decimal point error.

http://www.homepower.com/files/featured/108_36.pdf

Good Life System Costs:
Total $8,633

That system provides ~30 kwh per month. Installed cost is $287.77 per month-kwh. Rounding down to $200 per month-kwh for a larger system (assuming economies of scale) gives $500,000 for a system adequate for your 2,500 kwh/month house. Interest/opportunity-cost on your system would be one tenth that quoted above.

 

[Pengwuino]

That still sounds way off and i can't follow the math at all.

 

[loseyourname]

30 years of 5% interest/opportunity-cost for the above $5 million installed cost would be $17,406,143.44 for interest compounded daily or $16,609,711.88 for interest compounded yearly.
moneychimp.com/calculator/compound_interest_calculator.htm

When you say this calculation includes opportunity cost, does that mean that this calculator tells you how much you actually pay for the system plus the money you could have made investing elsewhere? If so, what kind of investment is it considering?

 

[hitssquad]

That still sounds way off and i can't follow the math at all.

Installed cost for the Nearing Institute system is $8,633. It provides 30 kwh of electricity per month. $8,633 divided by 30 = $287.77. I truncated that to $200 for a larger system that would probably benefit from economies of scale.

So, the rule of thumb for larger solar homepower systems is $200 per installed kwh-month.

 

[Ivan Seeking]

Yet the world's leading homepower evangelism site says that it is impossible to make money with homepower.
http://www.homepower.com

Can you show us some numbers, Hypatia?

Could you provide a specific quote and link to what you just said? Just linking to homepower doesn't help much.

 

[hitssquad]

A new rule of thumb - 5% opportunity cost for 30 years = 3 times principal

When you say this calculation includes opportunity cost

It is interest or opportunity cost at an arbitrary 5% discount rate. If you borrow it from a bank, it is interest. If you borrow it from yourself, it is opportunity cost.

does that mean that this calculator tells you how much you actually pay for the system plus the money you could have made investing elsewhere?

I subtracted the cost of the system from the result provided at Moneychimp so the figures I provided are just the 5% interest out to 30 years. For a $500,000 system cost, Moneychimp says that compounded annually that would reap interest+principal of $2,160,971.19 after 30 years in an investment yielding 5% annual interest. Subtracting the $500,000 system cost from that leaves $1,660,971.19 of pure interest.

As you can see, the interest after 30 years is about three times the principle if we assume 5% interest. That gives us another handy rule of thumb.

If so, what kind of investment is it considering?

It isn't considering any kind of investment in particular. The 5% interest is a somewhat arbitrary number that does not seems to me to be neither unrealistically high nor unrealistically low. 10-year T-bills as of yesterday were at 4.28%. I would assume that most people would spread their investments, though, riskwise, so that their portfolios would typically yield better than a T-bill would.

 

[Pengwuino]

Installed cost for the Nearing Institute system is $8,633. It provides 30 kwh of electricity per month. $8,633 divided by 30 = $287.77. I truncated that to $200 for a larger system that would probably benefit from economies of scale.

So, the rule of thumb for larger solar homepower systems is $200 per installed kwh-month.

But you don't pay for the system every month. Its just $8000 right then and there upfront... not every month.

 

[hitssquad]

Homepower Magazine - subtle implications and straight talk

the world's leading homepower evangelism site says that it is impossible to make money with homepower.

Could you provide a specific quote and link to what you just said? Just linking to homepower doesn't help much.

No.

I heard the founder say it at the very end of a talk he gave at the University of Oregon. It can also be found in articles at the Homepower site.

Similarly, in Sport Compact Car, car modifications are talked about endlessly but once and a while they say what every experienced modder knows: you don't get the same value from your mods that you would get with a factory car with the same specs. The mods destroy the reliability. Since every ecperienced modder knows this, perhaps they don't feel the need to point it out loudly in every artucle of every issue. The subtle implication in most every Sport Compact Car article is the opposite: that modding is a way to beat the system.

If we look at Homepower Magazine, we can see the same kind of dichotomy between the almost continuous subtle implications that homepower fols are beating the system, ocassionaly broken by a little straight talk about the financial realities of homepower and that given those financial realities people should do it instead because it is the right thing to do. It is impossible to make money doing homepower, according to Homepower Magazine, the magazine that wants everyone to do homepower.

 

[hitssquad]

But you don't pay for the system every month. Its just $8000 right then and there upfront... not every month.

$287.77 was the upfront cost divided by the capacity of the system to produce energy per month. It was all paid up front.

 

[Pengwuino]

Yah but that still doesn't make sense hitssquad. If the costs are nearing the millions, how can you ignore the financial aspects?

 

[Pengwuino]

$287.77 is the upfront cost divided by the monthly energy capacity of the system. It is all paid up front.

So where is the $500,000 figure coming from. I am so lost here..

 

[hitssquad]

Which financial aspects were ignored?

 

[Pengwuino]

Which financial aspects were ignored?

Well it sounds like your saying this is a half a million dollar bill. I mean, its great to help the environment, but how can the average person even conceive of a half a million dollar bill. I am just really confused on where this $500,000 figure is coming from.

 

[hitssquad]

So where is the $500,000 figure coming from.

Larger homepower systems can make more energy in a given arbitrary month. Smaller homepower systems are limited to making less energy in a month. Larger systems cost more. I am figuring that for every kwh a system can make in a month, that system will cost $200 up front. Your house uses 2,500 kwh per month. A homepower system that could cover that would cost $200 * 2,500 kwh/month = $500,000.

 

[hitssquad]

Im just really confused on where this $500,000 figure is coming from.

Homepower systems cost money to install (figuring parts cost only here). You said it would cost upwards of $100,000 to install one adequate for your house. I said it would cost $500,000.

 

[Pengwuino]

This can't be right... doesn't anyone else see this as absurd or did i slip into the twilight zone.

 

[hitssquad]

This can't be right... doesn't anyone else see this as absurd or did i slip into the twilight zone.

Similar ratios of system cost to system size are available at the Homepower Magazine site. Find one that is lower than $200 per installed kwh-month and post it here, if you like. Your figure of $100,000 up-front cost works out to $40 per installed kwh-month. That is not so much lower that the $200 figure is in the twilight zone, is it?

 

[Pengwuino]

Wait wait awiatjaklsdjflafjla

I see what's going on here. That $8000 figure is for a house that uses 1kwh a day. Normal residential houses with an air conditioner and washer/dryer are talking about 1kwh an HOUR. I think i understand what's going on here. If you take out the non-scaled equipment (basically everything but the panels and batteries), we're talking about the ability to create roughly .5kwh's per hour for $3500. For a home like mine at 50kwh/day, we're talken about the need to create about 8kwh's per hour (at the equivalency of 6 hours peak-power production which is based on a real-time generation report from a local resident who had his generator hooked up to a website to display his own statistics) which means around $56,000 in panels and not much more then $10,000 extra in batteries and a better inverter

 

[loseyourname]

It is interest or opportunity cost at an arbitrary 5% discount rate. If you borrow it from a bank, it is interest. If you borrow it from yourself, it is opportunity cost.

Cool. Your calculation is saying exactly what I thought it was saying. It's counting the money you could have made by investing elsewhere - at a 5% compound interest rate - in the cost of the system.

The only real problem I see with this is that you can make the same argument against any $500,000 purchase. In fact, you can say that you should never purchase anything (regardless of the price) aside from what the minimal things you need to survive because that money is better spent investing in something that yields a 5% compound interest rate.

Then again, it seems at this point that Pengwuino is only concerned about how to make the most money. It certainly isn't by installing solar panels in the house. There is one more thing, though. If they're simply taking the money they would have spent on electricity each month and applying that toward mortgage payments for the panel purchase, then the only way they can take that money and apply it toward any other form of investment would be to live without any electricity. That doesn't seem a very feasible option. The real question here should be: If I'm going to spend $500/month on electricity, am I better off paying that money to the local utility provider or paying that money to the bank that gives me a loan to buy and install solar panels. The latter seems the better option. Of course, that's an idealized situation in which you spend the same amount of money either way, when in reality I would imagine you pay less powering your home with electricity from the local provider. That seemed to be his initial question, though: At what point does the price of the local utility become so high that it is feasible to go solar instead?

 

[Pengwuino]

Well its not about making any moeny, its about losing money. I can obviously put $50,000 into an investment that immediately makes a profit but I am wondering if putting a large amount of money like that, or any amount for that matter, will pay itself off in a decent amount because the last thing i want to do is actually lose money on the solar panels or end up breaking even in 20 or 30 years.

Its become more obvious that an investment in bonds or real estate is much smarter because whether or not you pay $50,000 for solar panels or you pay PG&E for electricity, you end up paying large amounts of money over time that you could probably invest with much better returns.

 

[hitssquad]

The utility kwh price breakeven for homepower; negawatts; thin-shell construction

At what point does the price of the local utility become so high that it is feasible to go solar instead?

I very roughly guestimate that the breakeven would be somewhere around $1.00 per kwh.

This would only be for someone who refuses to invest in any energy saving technologies or techniques, though. The cost per kwh saved (also known in the homepower world as the cost per "negawatt") might be a lot cheaper for investing in energy-saving appliances such as front-loading washers or in energy-saving construction such as http://www.monolithic.com/pres/alt-energy/ .

 

[loseyourname]

I very roughly guestimate that the breakeven would be somewhere around $1.00 per kwh.

This would only be for someone who refuses to invest in any energy saving technologies or techniques, though. The cost per kwh saved (also known in the homepower world as the cost per "negawatt") might be a lot cheaper for investing in energy-saving appliances such as front-loading washers or in energy-saving construction such as http://www.monolithic.com/pres/alt-energy/ .

Awesome. You seem to be pretty knowledgeable about this topic. Should the price of solar panels be going down any time soon? Have the prices been pretty stable (adjusting for inflation) since the invention of solar power?

 

[hypatia]

http://http://www.partsonsale.com/
The price of the panels, is and has been dropping for several years.

 

[pattylou]

Its become more obvious that an investment in bonds or real estate is much smarter because whether or not you pay $50,000 for solar panels or you pay PG&E for electricity, you end up paying large amounts of money over time that you could probably invest with much better returns.

Eureka! The best way to make money is to reduce our consumption in the first place.

 

[pattylou]

The real question here should be: If I'm going to spend $500/month on electricity, am I better off paying that money to the local utility provider or paying that money to the bank that gives me a loan to buy and install solar panels. The latter seems the better option. Of course, that's an idealized situation in which you spend the same amount of money either way, when in reality I would imagine you pay less powering your home with electricity from the local provider. That seemed to be his initial question, though: At what point does the price of the local utility become so high that it is feasible to go solar instead?

This is not the case. We paid up front and over the life of the panels will *save* around 10,000 dollars (that *would* have gone to SoCal Edison with traditional energy.)

A friend of ours is getting panels with a home equity loan. He will come out ahead the first year (by about a hundred dollars) and come out further and further ahead every year following - and over the life of the panels will save (if I recall) about 5000 dollars.

So at present, the local utility is so expensive as to make solar worth it.

This *may* only be the case in California, where we have lots of sunshine and solar panel rebates.

 

[hitssquad]

How solar PV panels are rated

So i started calculating and based off this meter this one company has online that shows one of their residential 2.5kw generators (actually 2.5kw so it must be like 10 square feet of panels)

We got our 2.5 kW system installed in February. It's much more than 10 square feet - I think more like 50 but I'd have to measure it and its outside.

Pengwuino meant square meters when he said square feet. Solar panels are rated by multiplying their efficiency at 20 degrees celsius by a standard solar insolation value of 1000 watts per square meter (the maximum that could be expected at the absolute optimum spot on Earth at the absolute optimum time; solar insolation is at best never more than a fraction of that at any point in the continental United States). 25% efficiency * 1000 w/sqm = 250 w/sqm. 10 square meters of 25% efficient panels gives us 2.5kw.

10 square meters = 108 square feet. Your 2.5kw PV array, Pattylou, probably measures more in the neighborhood of 150 to 200 square feet, since consumer-grade solar panels are much less efficient than 25%.