The economics of rooftop solar …

After waiting and watching for at least 4 years, we finally made the decision to go solar. Here are the details behind the decisions …

The first step was to estimate our annual power usage. A review of bills over the last 12 months reveal that number to be 18,842 KW-hours.

The lowest average cost of electricity if we were to renew for another 24 months was 12.5 cents / Kwh. So our estimated annual electric bill would be $2,355.

The PV system:

Our system consists of 40 south facing panels. These are 335 Watt LG panels (LG335N1C-A5) so the system size comes to 13.4KW. Using, we estimate the production of such a system. The results after plugging in our numbers were as follows:

The Cost and Return:

The final negotiated cost was $31,500. After the 30% federal tax rebate, our out of pocket cost would be $31,500*0.7 = $22,050

So our investment of $22,050 is generating power valued at $2,457. The simple rate of return works out to be 11.14%. However, note that this is an after tax rate of return as it is a reduction in expense. So in order to compare it to a taxable investment in the market, we can look at it a couple of ways:

using our average tax rate of 25%, the pre tax yield is 14.85%
using our marginal tax rate of 37%, the pre tax yield is 17.68%

In either case, it appears to be an excellent ‘assured’ investment rate of return for the foreseeable future. If we reduce our gasoline expense by adding an electric car, the rate of return will rise further.

So we are excited about getting rooftop solar! We will see how the install progresses and if the returns are what they appear to be on paper. Stay tuned!

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