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Switching To Solar Power, One Year Later
ThinSkin writes "Slashdot readers may recall Loyd Case's series of articles illustrating his experiences after switching to solar power for his family home. Loyd shared his one month update, a six month update, and now finally concludes his series after one year of solar power. Despite the $38,000 initial cost for the setup, Loyd is very optimistic after a $3,000 savings in one year, meaning that in about 12 years he will break even — though he suspects ten years is a better estimate considering other factors. Other reasons such as feeling 'green,' increasing the property value of his house, and the 'spousal acceptance factor' all support Loyd's decision on why he'd do it all over again if he had to." The article is spread annoyingly over multiple pages, like everything at the site, and the print version omits the graphs.
Why people still routinely neglect compound interesting I'll never know. If he took that $38,000 and put it in a long term investment at a mere 5%, he'd had 68242.54 at the end of 12 years. Yes, it's green, yes, it's cool, but no, he's not saving money.
Open Your Mind. Open Your Source.
Not it isn't.
The risks are different, but this is not without risks.
Panels could prematurely fail, and the provider go out of business leaving him with no warranty.
Price of electricity could fall, greatly extending his ROI.
Interest rates could climb, increasing the opportunity cost of his investment.
Far superior panels could be released next year.
Poor installation could lead to water damage to his house.
The possible risks are numerous, far from a guaranteed ROI.
At the moment, though, you have to factor in the fact that we're about to hit some mondo inflation due to the money Obama's been printing. So, it's actually a good idea right now to get into things that aren't pegged to the actual dollars. This guy is basically buying his electricity up front before his $40k is worthless.
Can you be Even More Awesome?!
I've written a blog on my solar water heater which covers about the same year period as Loyd's solar panels about 100 miles north of Sunnyvale. Loyd's story is very useful to me as I've been debating if solar panels would improve the efficiency of the solar water heater. I'm still not sure this was a wise financial investment, but I do like how I get free hot water when the sun is out and the hot water never runs out (like with a tankless). Anyway, for those interested in solar water heating: http://suburbiasolarwaterheating.blogspot.com/
The system wouldn't just lose $760/year in value, it would also lose 2% in efficiency per year, which means that if he saved $3,000 the first year, he could expect to save only $2,940 the second, and so on (all else - electricity usage, cost of electricity, etc - being equal). The revenue stream then looks like this (over 10 years):
Year 0: Cost of $38400.
Year 1: Benefit of $3,000.
Year 2: Benefit of $2,940.
Year 3: Benefit of $2,880.
Year 4: Benefit of $2,820.
Year 5: Benefit of $2,760.
Year 6: Benefit of $2,700.
Year 7: Benefit of $2,640.
Year 8: Benefit of $2,580.
Year 9: Benefit of $2,520.
Year 10: Benefit of $2,460.
Value of system after 10 years: $30,400.
Plugging these numbers into the IRR formula gives you a 5.7% return per year.
If we make a slightly different assumption that the decreased output is geometric (not arithmetic) and still use the idea that the depreciated value equals the original cost times the current efficiency, then you can show that D + R = 7.9%, where D = depreciation rate and R = rate of return. So if you assume D = 2%, then R = 5.9%. But if D = 4%, then R = 3.9%, which is not great.
Doesn't sound to me like an obvious win for solar power. On the other hand, it's not an obvious money sink, either, so that's good. I'm sure things will continue to improve.
Would be interesting to see a subsidy-free comparison of both methods of electricity generation, but that's pretty hard. You can easily handle the consumer tax breaks, but how much do the producer's tax incentives affect the cost? And how much of his local coal/natural gas/hydro/nuclear generation is subsidized?
...following the principles of Heisenburger's Uncertain Cat...
Except that we're not. Seriously off-topic, but inflation isn't unpredictable. Right now, the double-digit unemployment and positive savings rate we have suggests people are hording their cash, not shopping with abandon.
As soon as any of the indicators go up (these are pretty reliable predictors of activity), the FED simply filters the money out of the banks, rates go up for daily business paper and money is more scarce.
It's been managed this way for 3 decades, and fairly stable since 1983. Check for yourself.
All I keep seeing around here is the depreciating power generation of solar panels... blah blah blahh...
It takes maybe an hour of your time, and ~$100-200/panel to replace 20 panels.
If in 15 years, he buys new panels, with better efficiency, for 4k, and an hours worth of his time, he's just reset his investment with a MUCH better payoff. The cabeling, and inverter will not fail that fast. The inspection won't change for a replacement. There'll be virtually 0 costs.
I have 600w of grid tied, net & production metered solar on my house. The coolest part? I did it for almost nothing. Bought everything on E-bay. Hardest part was complying with code, which looking back was really just a mere nuisance.
This isn't rocket science. If you pay someone to do it, they have to charge a ton because they are
1. Licensed electricions,
2. It's a business
3. they require certain bonds and insurances.
If you do it yourself (can you understand parallel & series circuits and do you know how to count, add, multiply, etc volts, amps & watts? you're qualified!) to your own house, you can get a system for MUCH less than 50K. bonus as your ROI is better, even better is that it makes more extreme lattitudes viable.
It's not ton's of $, but it does keep the house cool.
How much is your data worth? Back it up now.