By Robert Silvey
In much of the US, it’s now cheaper to install a solar-electric system than to buy your electricity from the grid. If your house is in the right placeâ€”it gets enough sunshine and it’s in a state that provides a solar rebateâ€”a photovoltaic system is simply a good personal investment. You’re not just reducing your carbon footprint, you’re actually saving moneyâ€”and the resale value of your house is likely to rise by almost exactly the amount you invest, while you get free electricity, year after year.
That was not always the case. In 2001, when I last investigated the feasibility of going solar in Berkeley, it would have cost about $40,000 to install enough PV panels to reduce my PG&E electric bill to zero. So when Dick Cheney said, “Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy,” he was not altogether wrong. It was an expensive choice, however virtuous.
But Cheney is wrong now, at least when it comes to solar power. In California (as in many other statesâ€”here’s a list), you can reduce your carbon footprint and bask in that sense of virtue, and as of 2007 you’ll come out ahead financially too. Well, perhaps not ahead of Cheney, with his oil-gotten gains, but well ahead of where you would have been.
So I’m putting in solar power. Sun Light & Power, a local Berkeley company with 30 years’ experience in alternative energy, is designing and building a PV system with 3.2 peak kilowatts. The total cost is $26,000; the California Public Utility Commission will pay a rebate of $6,000, and I can claim a federal tax credit of $2,000, so the net cost will be $18,000. It’s exciting!
But it is a lot of money, so the next obvious question is how long it will take to recoup that cost. Sun Light estimates that with the energy I save it will take me about 13.5 years, with a return on investment of 9% over the 30-year life of the systemâ€”assuming (improbably) that the cost of electricity will rise no faster than the overall inflation rate.
But that’s the wrong question, because the $18K cost is in fact translatable directly into home equity. It’s an investment, not a sunk cost. As Andrew Black reported to the American Solar Energy Society:
These monetary benefits are financially quantifiable. A solar electric system increases home value by $20,000 for each $1,000 in annual reduced operating costs, according to The Appraisal Institute. A solar electric system compares very favorably with other home improvements in percentage of cost recovered. Often, a solar system can recover much more than 100% of its cost, and this percentage actually increases over time as electric rates rise.
In my case, that is, I invest $18K into the house with a new solar-electric system, and the house is now worth $18K more in resale value. Since my electric bill goes from $900 per year to zero, my immediate return on investment is 5%. When electric rates double, the ROI will be at least 10%â€”and possibly much higher, if the resale value of the PV system increases. (In fact, I am also adding a solar hot-water system, at a net cost of $6K, with a similar projected ROI.)
So here’s the point: Go solar now. There’s no reason to wait for the cost to come down further. Even if you aren’t particularly motivated to save the Earth, you can save some real money. Of course, the Earth would be grateful too.
[Cross-posted at Rubicon]
This is better news than I thought. We’re renting right now, but this has obvious implications for the next time I buy a house (assume the Colorado market ever settles down enough that buying a house seems like a safe idea).
Thanks for the blow-by-blow. I’m guessing a lot of folks didn’t realize this.
This is great news, Robert – and when I can find a decent assistance program through $#$@ VA, I’ll be joining the (I hope) growing numbers leaving the grid.
Thanks for the lucid explanation and helpful links.
Well, the assistance program sounds like a subsidy in disguise. You know, like big oil gets? So include the full cost in your calculations of savings.
Plus, I’m assuming some maintenance is required? How much, how often, that sort of thing?
We had a storm that ripped up walls and blew down trees last night. That happens every year this time. It isn’t called the Cape of Storms for nothing. I’d be worried about my investment here.
But I’m real keen on wind power 😉
Doesn’t South Africa have a lot of uranium to go with a lot of gold, silver, etc.? You guys should be able to export electricity by the terawatts to the rest of the continent. Of course, that assumes that the rest of the continent could afford to buy that much electricity….
One small problem – unless your solar system also includes hefty batteries for those times when the fog rolls in or it’s night, you won’t necessarily go from $900 to $0 per year. Way down, sure, but don’t assume that you’ll always get enough power for your house or extra power to sell back to the grid.
One of the biggest problems here in Colorado is the weather – golf ball-sized hail has been known to destroy solar systems. In addition, when I did the calculations a while back, the cost of getting us to 50% of our power from solar was more like $36k and there were a lot fewer rebates, subsidies, etc. here in Colorado (or at least my part of it) to drop the cost. However, I did just find that XCEL Energy offers a rebate of between $2 and $4.50 per watt for solar systems that are connected to the grid and you’ll get a yearly payment if you happen to generate more power than you used over the course of the year.
I strongly recommend that everyone check out FindSolar.com before taking the plunge. However, seeing as I live in a county that’s not listed (and is only 5 years old or so – I emailed them to correct this oversight), YMMV.
Gavin, it certainly is a subsidy, and there’s no disguise about it. I deduct the subsidy from my cost in calculating my personal ROI, just as big oil does with its much more generous subsidies.
If you mean to say that the state rebate and the federal tax credit are real costs to those entities, I agree. The governments of California and the US have no doubt made their own calculations, which would include questions of general welfare
Brian, I ran my numbers at the FindSolar link you gave, and they were far worse than the actual Sun Light contract. So I’m not sure how reliable the calculator is. I suggest getting an estimate from a real design/build contractor. You may be happily surprised.
Up here in Vermont a whole valley without electricity. Back in the late ’70s the hippies moved in and installed solar power generators at each of their homes. After decades of maintenance, their systems came due for replacement a couple years ago.
Well, the old hippies are now aging baby-boomers that just want the lights on.
So they are throwing out their solar gear and joining their money together to get Green Mountain Power to electrify the valley.
The end of solar power in Vermont
Compadre, doesn’t Green Mountain sell all renewable energy? I seem to remember that they were in California back around the time of the Enron burglary, and they were brokering what they touted as all-green (wind and solar) power for about a 35% premium. If they’re still doing that, this may not be as much of a step backward as it seems, though personally I would still prefer the decentralization of personal rooftops.
Right now it’s a moot point regardless – I can’t afford the initial expense to make it until I get the refund. But I’ll certainly consider solar when I have enough in the bank (or in home equity) to afford it.
Hopefully the fireplace won’t collapse before then….
You’re certainly not alone. This cannot succeed if it is cast merely as an individual responsibility. That’s why we need more governmental assistance to make solar energy take off. The City of Berkeley is developing a plan to pay for solar rooftops and spread the repayment out over many years with a boost in property taxes. That seems like a creative approach. I’m getting the details and will post more soon.
I agree with your Robert. While installing photovoltaics is a large personal investment with a long term break-even time, for governments it makes huge sense. They could mandate solar electricity at the stroke of a pen and within 20 years or so they entire cost would have been offset by reduced consumption, reduced pressure on electricity infrastructure and heaps of kudos regarding meeting any future greenhouse gas emission targets.