Solar panels

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Incendiary
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Solar panels

Post by Incendiary » Mon Jul 10, 2017 8:28 pm

For those of you who have looked into solar panels, how did you decide if it was worth doing or not? I'm talking from a purely economic perspective, not factoring in environmental concerns. The installer told us a break even period of nine years, but looking at the electric bills it seems more like 15 years. And that doesn't take into account TVM. I'm wondering what I'm missing.

Thesaints
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Re: Solar panels

Post by Thesaints » Mon Jul 10, 2017 8:31 pm

We considered that our electric bill may be 60/70 bucks a month at its highest, therefore even if solar panels could bring it to zero it wouldn't be worth the hassle.

sschullo
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Re: Solar panels

Post by sschullo » Mon Jul 10, 2017 8:42 pm

Here is my data I collected after 8 years using solar (96 months). Edison is one of the most expensive electric companies in the country. My bill averaged about $210.00 per month before solar. Most expensive months here in the desert is during the summer when it would go up to close to $400.00 per month. After solar, it dropped to about $30.00 average per month, but last year I got my first refund check for $175.00. I was gone for part of the summer, and did not use my AC.

Image


2017 cost for my solar has dropped to about half of the 2008 $33,000 price tag, and the newest panels produce more energy than they did 8 years ago.

If your bill is less than $100 a month, forget solar, unless you want to do it strictly for political purposes, and the right thing to do for the environment. And you will still save money, only it will take longer to get a 100% ROI.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

squirm
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Re: Solar panels

Post by squirm » Mon Jul 10, 2017 9:01 pm

Who is you provider and what are the rates, that's really is what is needed. You're consumption will help too.

squirm
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Re: Solar panels

Post by squirm » Mon Jul 10, 2017 9:03 pm

Btw, you're consumption might be a moving target. We use more power more since I have solar but we're not baking anymore. Just make sure you have done the easy things like adding insulation, etc first.

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DiscoBunny1979
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Re: Solar panels

Post by DiscoBunny1979 » Mon Jul 10, 2017 9:25 pm

I live in Southern CA and have Edison :-(

Purchased Solar Panels 2 years ago and so far very happy. To me, the Math was simple

Got an estimate from Edison in terms of going on their "level pay" plan whereas each month would be the same amount. The result in asking was that they wanted $350.00 a month. My highest bill in summer had been $720.00 in August.

Cost of System to "max out my roof" cost @ $1,000 per panel for 40 panels or @ $40,000 plus cost of Inverter.

So, with an average utility usage cost of 350 x 12 x 10 years = $42,000. Ironically, the cost of the system cost $42,000. Financing was through a credit union @ 2.9% pushing the total cost closer to $50,000. However, the tax credit allowed for $12,000 in tax credits which offset almost immediately the financing interest.

I would also like to state that the credit union allowed for a one time adjustment to payment schedule by putting additional money toward the loan, during the first year, essentially a free refinancing option, which was opted for and therefore after the 1 year, the $42,000 loan went down to $30,000 (paying down $12,000) and the monthly payment went from $350 (ironically the same as our average monthly Edison Bill) to $250.00 a month until the loan is paid (now in 8 years).

In my opinion, it was well worth getting the panels . . . just have to know that one is actually paying in advance for one's own production of energy. If one is planning to sell their home shortly after getting panels, it's also not a good thing to get the panels. One has to realize that many lenders will not loan on houses with 'leased' panels . . .

hightower
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Re: Solar panels

Post by hightower » Mon Jul 10, 2017 9:43 pm

They usually design the system to break even at 8 or 9 years. Prices are getting cheaper and cheaper every year. Now is a great time to buy. If we were going to be staying at our current house we would have already installed a system. We're definitely going with a lot of solar on our next house and eventually plan to be off grid with batteries.

GuyFromGeorgia
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Re: Solar panels

Post by GuyFromGeorgia » Mon Jul 10, 2017 9:47 pm

I did the math a couple years ago and came up with a 8-10 year breakeven point. That was assuming that I would pay cash and isn't taking into consideration opportunity costs (what the money could be doing in the stock market, etc). I would have pulled the trigger if it were 5-6 years. I cannot guarantee I'll be in this same house in 10 years. Seems like a big payment to save a couple hundred a month. Don't get me started on the new windows discussion.....

Point
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Re: Solar panels

Post by Point » Mon Jul 10, 2017 9:50 pm

We put in panels almost 3 years ago. I calculated the payoff would be around 4 years. Our Elec bill was averaging $350/ month. The installation gives us a surplus each year that we are using more of as we go along. SCE only gives about 75$ a year in surplus production rebate.

The key was to purchase, not lease. All the leases we looked at favored the solar companies. We paid outright, did not finance.

Our view is that we locked in pricing to avoid rates climbing. And the panels have performed flawlessly. We went with a 27 panel solar world 270 array, and 27 microinverters. Given the design of our house and panel projections we are getting as much as we can out of the system.

Production is around 10MWh per year.

hightower
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Re: Solar panels

Post by hightower » Mon Jul 10, 2017 9:51 pm

sschullo wrote: If your bill is less than $100 a month, forget solar, unless you want to do it strictly for political purposes, and the right thing to do for the environment. And you will still save money, only it will take longer to get a 100% ROI.
Why do you say that? 100/month for 35 years at 7% is $141,000. I'd say that's a pretty good return on investment. If you're only paying 100/month that means you'll have a fairly small system and won't cost much to install after tax credits especially. A 4kw system on hour house was quoted at 7k after tax incentives. That's pretty cheap to get to keep an extra 100 bucks a month
Thesaints wrote:We considered that our electric bill may be 60/70 bucks a month at its highest, therefore even if solar panels could bring it to zero it wouldn't be worth the hassle.
What hassle? The solar company gives you an estimate and the system can be installed in 1 day. You don't lift a finger and your electric bill goes away. Take that extra $60/month and invest it and it seems very well worth it to me. That's an additional 85k in your portfolio after 35 years of saving 60/month

Incendiary
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Re: Solar panels

Post by Incendiary » Mon Jul 10, 2017 10:11 pm

Electric bill ranged from $80 something to $120 something, so on average $100 a month.

$17500 is the price for solar panels after taking into account 30% federal tax credit.

System is 11.9 kW.

Does that help?

squirm
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Re: Solar panels

Post by squirm » Mon Jul 10, 2017 10:44 pm

That's too big of a system for those bills. You must be paying very little in electrical rates, which makes the payoff longer. I'm assuing your expsure is mostly southern?
We have a 5kw system.

SCV_Lawyer
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Re: Solar panels

Post by SCV_Lawyer » Mon Jul 10, 2017 11:04 pm

We are in the process of interviewing several installers for solar. We are in SoCal and have Edison. Our average price for electricity for our usage is $0.24/kWh. A 9kW system will run us $27,300 pre tax credit ($3.03/W) and $19,100 after the tax credit. This system will be sufficient to provide all of our annual use (13,600 kWh), albeit we will be buying power in some months while selling power in other months. Our annual bill is about $3,250, so the break-even is less than 6 years. Over 10 years (our expected hold time for this house), our savings should be over $13k, or even more if electricity rates continue to rise.

And this does not include the increase in house value. Some recent studies claim that owned (not leased) solar power systems add $4/W to house value, or in our case, $36k, which is $17k more than we are paying for the system. Even if it adds half that value, the system is 100% covered by house value increase alone. Since the panels are guaranteed to produce no less than 80% of their initial power 25 years out, this increase in home value should be sustained for the long term.

ClaycordJCA
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Re: Solar panels

Post by ClaycordJCA » Mon Jul 10, 2017 11:24 pm

Another factor to consider is that the utility's electricity rates keep rising. My guess is that the solar company's estimate of your projected savings includes anticipated utility rate increases.

Jack FFR1846
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Re: Solar panels

Post by Jack FFR1846 » Tue Jul 11, 2017 6:18 am

Lots to consider and it's very state specific.

Total rate:
Net Metering (you are paid for electricity put back into the grid....don't just assume it is).
State and federal incentives including forward payments.

Massachusetts pays for 20 years of electricity up front, making installation cost $0. Although we don't get much sun, our rates are in the $0.20 range so relatively expensive. Seeing $0.24 in southern CA would make that seem a no brainer with the higher sun time and lack of winter snow cover.
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edge
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Re: Solar panels

Post by edge » Tue Jul 11, 2017 6:21 am

Has anyone here done a quick calc on the Tesla/Solar City roof?

Valuethinker
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Re: Solar panels

Post by Valuethinker » Tue Jul 11, 2017 6:55 am

Incendiary wrote:For those of you who have looked into solar panels, how did you decide if it was worth doing or not? I'm talking from a purely economic perspective, not factoring in environmental concerns. The installer told us a break even period of nine years, but looking at the electric bills it seems more like 15 years. And that doesn't take into account TVM. I'm wondering what I'm missing.
Since the installer has no legal commitment to your payback, you have to do your own due diligence and payback calculation.

In my case (London, England) although the finances were c 8 to 10 year payback and very attractive the actual amount of energy generated was so trivial (850 kwhr pa per peak kw and I have room only for 1.1 kw capacity (5 panels) that I did not do it.

Socal you would get c 1700 kwhr pa I think. My household consumption is 3000 kwhr pa yours would be more like 12 to 15?

To correctly work out your return you have both the annual savings say 7 % on your numbers and you need an estimate of terminal value. You could say 25 years and zero, or you could make an assumption if you sell the house in say 15 years. Say half of cost.

That terminal value is based on the present value to the buyer of the system's future cash flows post purchase. You probably want to assume silicon replacement at 25 years (I did not model the fade in performance but I believe something like 30 per cent, needs to be checked). Inverters at 12.5 years? Or 10?

gr7070
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Re: Solar panels

Post by gr7070 » Tue Jul 11, 2017 6:56 am

I'm curious:

How susceptible are systems to hale damage?

How much increase to homeowners insurance should one expect? I assume they're covered typically??? I assume typical deductible is applicable???

I live in rather conservative Texas, but liberal Austin. Anyone know anything specific about that area w/r to solar?

sschullo
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Re: Solar panels

Post by sschullo » Tue Jul 11, 2017 7:04 am

hightower wrote:
sschullo wrote: If your bill is less than $100 a month, forget solar, unless you want to do it strictly for political purposes, and the right thing to do for the environment. And you will still save money, only it will take longer to get a 100% ROI.
Why do you say that? 100/month for 35 years at 7% is $141,000. I'd say that's a pretty good return on investment. If you're only paying 100/month that means you'll have a fairly small system and won't cost much to install after tax credits especially. A 4kw system on hour house was quoted at 7k after tax incentives. That's pretty cheap to get to keep an extra 100 bucks a month

The OP asked from a "purely economic perspective." I did say to go ahead if you want to help control pollution.

But I can see your analyses if your bill is $100 per month (I should have said under $50). Here is my thinking, first, my 8-year-old panels have only a 25-year warranty. It's going to take 12 years for my system to pay for itself, so I got 2.5 years to go to 2020.

2nd, calculating a return on investment at this point while your 7% is accurate, it doesn't take into account your initial investment. After the system has run its course you don't get your initial investment back (like a cd), it's gone. So the return of 7% you say only counts AFTER you get your investment back to cover the 100% in the initial cost.

So my return actually starts in 2020. My system will be degrading slowly during this time, production decreases and may expire by 2033 (25-year warranty, so the ROI is unknown). Yeah, I agree that's a good investment with 35 years of good production and your bill is $100 per month now. It's a long-term investment.
Last edited by sschullo on Tue Jul 11, 2017 7:08 am, edited 2 times in total.
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Jeff Albertson
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Re: Solar panels

Post by Jeff Albertson » Tue Jul 11, 2017 7:06 am

"Rooftop Solar Dims Under Pressure From Utility Lobbyists"
But the decline has also coincided with a concerted and well-funded lobbying campaign by traditional utilities, which have been working in state capitals across the country to reverse incentives for homeowners to install solar panels.
...
The same group of investor-owned utilities is now poised to sway solar policy at the federal level. Brian McCormack, a former top executive at the Edison institute, is Energy Secretary Rick Perry’s chief of staff. The Energy Department did not make Mr. McCormack available for an interview.

In April, Mr. Perry ordered an examination of how renewable energy may be hurting conventional sources like coal, oil and natural gas, a study that environmentalists worry could upend federal policies that have fostered the rapid spread of solar and wind power.

Charged with spearheading the study, due this summer, is Mr. McCormack.

“There’s no doubt these utilities are out to kill rooftop solar, and they’re succeeding,” said David Pomerantz, executive director of the Energy and Policy Institute, a renewable energy advocacy group. “They’re now driving the agenda.”
https://www.nytimes.com/2017/07/08/clim ... .html?_r=0

tech_arch
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Re: Solar panels

Post by tech_arch » Tue Jul 11, 2017 9:38 am

Incendiary wrote:Electric bill ranged from $80 something to $120 something, so on average $100 a month.

$17500 is the price for solar panels after taking into account 30% federal tax credit.

System is 11.9 kW.

Does that help?
That sounds overly large. Our system is 9kW and our average monthly usage is ~1600kWh. Breakeven for us should be in around 9 years, with current tiered rates of $0.1106/kWh for the first 1000 and $0.1306/kWh afterward. Their payback math assumed annual increases to the cost of electricity, while my analysis assumed worst-case stagnant rates. We also have net metering and no state/local subsidies, only the federal tax credit.

There's a pretty good calculator called PVWatts that I saw in a different solar thread. You might want to run the numbers through there to get an unbiased opinion on expected production.

squirm
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Re: Solar panels

Post by squirm » Tue Jul 11, 2017 10:45 am

Much of this depends on your rates and your schedule. If you're hit with tiers and peak and super peak rates the payoff is much faster because you're selling at those rates. If you're on a low flat rate, solar probably isn't the solution, unless you can get a super cheap install.

arsenalfan
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Re: Solar panels

Post by arsenalfan » Tue Jul 11, 2017 10:53 am

Annual electric bill = $1800 after changing everything to LED, getting rid of vampires, etc.
12kW System after tax credit = $24k
RoI = 13 years.
1 year in we generate 125% of our electric needs.

This doesn't include the SREC in our state - which are highly unpredictable/unreliable going forward IMHO.
It was a new 30yr asphalt shingle roof.

Basically it was a combo of room in the budget & green factor. We'll be in home ~15 years

Now looking at upgrading old cars to Volt & Hybrid Pacifica and installing L2 chargers in the garages

Thesaints
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Re: Solar panels

Post by Thesaints » Tue Jul 11, 2017 11:18 am

hightower wrote: What hassle? The solar company gives you an estimate and the system can be installed in 1 day. You don't lift a finger and your electric bill goes away. Take that extra $60/month and invest it and it seems very well worth it to me. That's an additional 85k in your portfolio after 35 years of saving 60/month
If I skip dessert when eating out a couple of times I save $60, plus health advantage. I'm always quite skeptical of these long term projections of small savings. In the end, the roof looks uglier and stuff may accumulate between panel and roof surface.

Cruise
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Re: Solar panels

Post by Cruise » Tue Jul 11, 2017 12:24 pm

When I bought my system, my state and federal governments gave generous tax advantages to those who could afford to front such systems (welfare for the rich, you might call it.)

So my ~$42,000 system got something like ~$28,000 in tax benefits. With my monthly electrical use, the system paid itself in full during year 4.

bigdav160
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Re: Solar panels

Post by bigdav160 » Tue Jul 11, 2017 12:48 pm

Did the calculation via the PVWatts link above and it seems a 10kw system would take nearly 20 years to payback in my locale. :oops:

So it's not a universally good idea.

Big Dog
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Re: Solar panels

Post by Big Dog » Tue Jul 11, 2017 1:27 pm

Yeah, I agree that's a good investment with 35 years of good production and your bill is $100 per month now. It's a long-term investment.
And don't forget, the Edison bill does not go to zero, unless you go completely off grid. They will still charge you a monthly hook-up fee ($10-$15?), so the true savings is not $100/mo. And, as noted, one needs to factor in degradation of the panels. Perhaps ~0.5% per year? Eventually, they will all need to be replaced. Then of course, there is the value of net-metering, which may/could change in 10+ years.

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TimeRunner
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Re: Solar panels

Post by TimeRunner » Tue Jul 11, 2017 1:37 pm

By the time it makes sense for us to go off-grid, there will probably be a "grid exit fee". :annoyed
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tech_arch
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Re: Solar panels

Post by tech_arch » Tue Jul 11, 2017 1:40 pm

Big Dog wrote: And don't forget, the Edison bill does not go to zero, unless you go completely off grid. They will still charge you a monthly hook-up fee ($10-$15?), so the true savings is not $100/mo. And, as noted, one needs to factor in degradation of the panels. Perhaps ~0.5% per year? Eventually, they will all need to be replaced. Then of course, there is the value of net-metering, which may/could change in 10+ years.
Here in Florida you have to be on the grid (very few exceptions.) My utility also charges a $20/month customer fee. YMMV.

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dodecahedron
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Re: Solar panels

Post by dodecahedron » Tue Jul 11, 2017 2:04 pm

Last year, my total electric bill was about $1,500 and the local power company recently requested a 20% rate increase for next year, which they subsequently lowered to a 17.5% increase.

Since my roof is not suitable for solar (slate roof, highly shaded by tall trees), I have been looking into a solar farm arrangement (also called community distributed solar) so nothing goes on my property but I still get "metering credits." They offer a 5-year deal which is a PPA ("Power Purchase Agreement") allowing me to buy up to the amount of electricity I consumed last year for a fixed fee of $90.70/month for the next five years. The tax credits and state incentive payments would go to the developer not to me. The developer applied early enough that I would be grandfathered into 100% net metering credits.

Even if the public utility commission does not grant ANY rate increase to the utility, I would save over $400 each year for 5 years. The only upfront cost is a $110 deposit to get on the waiting list (facility expects to be built later this year). The contract says I can cancel at any time.

They also offer a 20-year prepay PPA where I could prepay for 20 years for $18,674.25. This would seem to lock in even more savings but I have to wonder what would happen if the sponsor went bankrupt and was unable to maintain the facility (e.g., inverters needing replacement, wind damage, etc.) I'd like to "age in place" here but I am 63 and who knows what life events may transpire. Contract is transferable but there could be innovations making possible some far lower cost energy at that point. (Could envision a time when solar is so efficient that a strategically placed gazebo could have enough tiles to power my home and advances in battery storage technology could make net metering irrelevant.)

squirm
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Re: Solar panels

Post by squirm » Tue Jul 11, 2017 4:38 pm

dodecahedron wrote:Last year, my total electric bill was about $1,500 and the local power company recently requested a 20% rate increase for next year, which they subsequently lowered to a 17.5% increase.

Since my roof is not suitable for solar (slate roof, highly shaded by tall trees), I have been looking into a solar farm arrangement (also called community distributed solar) so nothing goes on my property but I still get "metering credits." They offer a 5-year deal which is a PPA ("Power Purchase Agreement") allowing me to buy up to the amount of electricity I consumed last year for a fixed fee of $90.70/month for the next five years. The tax credits and state incentive payments would go to the developer not to me. The developer applied early enough that I would be grandfathered into 100% net metering credits.

Even if the public utility commission does not grant ANY rate increase to the utility, I would save over $400 each year for 5 years. The only upfront cost is a $110 deposit to get on the waiting list (facility expects to be built later this year). The contract says I can cancel at any time.

They also offer a 20-year prepay PPA where I could prepay for 20 years for $18,674.25. This would seem to lock in even more savings but I have to wonder what would happen if the sponsor went bankrupt and was unable to maintain the facility (e.g., inverters needing replacement, wind damage, etc.) I'd like to "age in place" here but I am 63 and who knows what life events may transpire. Contract is transferable but there could be innovations making possible some far lower cost energy at that point. (Could envision a time when solar is so efficient that a strategically placed gazebo could have enough tiles to power my home and advances in battery storage technology could make net metering irrelevant.)
But aren't you hit with the transmission charges which in some cases offsets any savings from power production?

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dodecahedron
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Re: Solar panels

Post by dodecahedron » Tue Jul 11, 2017 8:27 pm

squirm wrote:
dodecahedron wrote:Last year, my total electric bill was about $1,500 and the local power company recently requested a 20% rate increase for next year, which they subsequently lowered to a 17.5% increase.

Since my roof is not suitable for solar (slate roof, highly shaded by tall trees), I have been looking into a solar farm arrangement (also called community distributed solar) so nothing goes on my property but I still get "metering credits." They offer a 5-year deal which is a PPA ("Power Purchase Agreement") allowing me to buy up to the amount of electricity I consumed last year for a fixed fee of $90.70/month for the next five years. The tax credits and state incentive payments would go to the developer not to me. The developer applied early enough that I would be grandfathered into 100% net metering credits.

Even if the public utility commission does not grant ANY rate increase to the utility, I would save over $400 each year for 5 years. The only upfront cost is a $110 deposit to get on the waiting list (facility expects to be built later this year). The contract says I can cancel at any time.

They also offer a 20-year prepay PPA where I could prepay for 20 years for $18,674.25. This would seem to lock in even more savings but I have to wonder what would happen if the sponsor went bankrupt and was unable to maintain the facility (e.g., inverters needing replacement, wind damage, etc.) I'd like to "age in place" here but I am 63 and who knows what life events may transpire. Contract is transferable but there could be innovations making possible some far lower cost energy at that point. (Could envision a time when solar is so efficient that a strategically placed gazebo could have enough tiles to power my home and advances in battery storage technology could make net metering irrelevant.)
But aren't you hit with the transmission charges which in some cases offsets any savings from power production?
No, net metering actually wipes out BOTH the supply charges AND the transmission charges. The only thing it doesn't wipe out is the $17/month fixed connection fee. Basically net metering wipes out any kWH-related charges.

Valuethinker
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Re: Solar panels

Post by Valuethinker » Wed Jul 12, 2017 10:05 am

Thesaints wrote:
hightower wrote: What hassle? The solar company gives you an estimate and the system can be installed in 1 day. You don't lift a finger and your electric bill goes away. Take that extra $60/month and invest it and it seems very well worth it to me. That's an additional 85k in your portfolio after 35 years of saving 60/month
If I skip dessert when eating out a couple of times I save $60, plus health advantage. I'm always quite skeptical of these long term projections of small savings. In the end, the roof looks uglier and stuff may accumulate between panel and roof surface.

Could you explain how skipping desserts twice a month save sixty dollars?

Or did you mean you eat out 12 Times a month and at 5 dollars a dessert saves you $60?

Of course you Will have to avoid dessert for 35 years to get like for like?

Historically food prices have fallen in real terms, electricity at the retail level I do not believe that it has? Other than the one offs from deregulation in the 1990s? Restaurant meals in General have probably risen faster than inflation (but pArt of that is trading up).

Where I live no one thinks the roof looks uglier. Shiny panels cover black synthetic slate. Solar panels are seen as sign of being modern or clever.

Dont see why things would get caught behind them?

squirm
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Re: Solar panels

Post by squirm » Wed Jul 12, 2017 10:26 am

dodecahedron wrote:
squirm wrote:
dodecahedron wrote:Last year, my total electric bill was about $1,500 and the local power company recently requested a 20% rate increase for next year, which they subsequently lowered to a 17.5% increase.

Since my roof is not suitable for solar (slate roof, highly shaded by tall trees), I have been looking into a solar farm arrangement (also called community distributed solar) so nothing goes on my property but I still get "metering credits." They offer a 5-year deal which is a PPA ("Power Purchase Agreement") allowing me to buy up to the amount of electricity I consumed last year for a fixed fee of $90.70/month for the next five years. The tax credits and state incentive payments would go to the developer not to me. The developer applied early enough that I would be grandfathered into 100% net metering credits.

Even if the public utility commission does not grant ANY rate increase to the utility, I would save over $400 each year for 5 years. The only upfront cost is a $110 deposit to get on the waiting list (facility expects to be built later this year). The contract says I can cancel at any time.

They also offer a 20-year prepay PPA where I could prepay for 20 years for $18,674.25. This would seem to lock in even more savings but I have to wonder what would happen if the sponsor went bankrupt and was unable to maintain the facility (e.g., inverters needing replacement, wind damage, etc.) I'd like to "age in place" here but I am 63 and who knows what life events may transpire. Contract is transferable but there could be innovations making possible some far lower cost energy at that point. (Could envision a time when solar is so efficient that a strategically placed gazebo could have enough tiles to power my home and advances in battery storage technology could make net metering irrelevant.)
But aren't you hit with the transmission charges which in some cases offsets any savings from power production?
No, net metering actually wipes out BOTH the supply charges AND the transmission charges. The only thing it doesn't wipe out is the $17/month fixed connection fee. Basically net metering wipes out any kWH-related charges.
Yes, I'm on net metering myself, however those with a ppa can still be hit with transmission charges.

squirm
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Re: Solar panels

Post by squirm » Wed Jul 12, 2017 10:31 am

How do you project out 35 years? I do data projections and even 20 years is difficult to forecast with any type of realistic accuracy.

If your solar system doesn't pay off within ten years it's probably better to take other measures.

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StealthWealth
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Re: Solar panels

Post by StealthWealth » Wed Jul 12, 2017 4:36 pm

I am a huge advocate for solar but do encourage people to do their own math. Unfortunately some installers show a much more attractive payback by including an overly aggressive "inflation" rate for traditional power costs. I do not think this is good for the industry as a whole but the public is by-and-large pretty oblivious to their utility bill and the various components. There can be quite a lot of subtlety as some places have time-of-use pricing or pricing based on peak demand over the course of the year. Things like this increase the value of solar but aren't always included on back-of-the-envelope calculations.

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Re: Solar panels

Post by acanthurus » Wed Jul 12, 2017 9:32 pm

Removed
Last edited by acanthurus on Tue Oct 31, 2017 5:48 pm, edited 1 time in total.

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dodecahedron
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Re: Solar panels

Post by dodecahedron » Wed Jul 12, 2017 11:29 pm

squirm wrote: Yes, I'm on net metering myself, however those with a ppa can still be hit with transmission charges.
That may be the policy in other states, but apparently not in NY. I have seen actual bills for customers with PPAs and their net metering offsets both the supply and transmission charges, leaving only the fixed connection fee to be paid.

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Re: Solar panels

Post by tech_arch » Thu Jul 13, 2017 8:26 am

dodecahedron wrote: No, net metering actually wipes out BOTH the supply charges AND the transmission charges. The only thing it doesn't wipe out is the $17/month fixed connection fee. Basically net metering wipes out any kWH-related charges.
My utility does net metering, but the buyback rate is lower than my purchase rate. I also don't have a separate line item for transmission charges; it's just customer fee, usage, franchise fee, municipal tax, and a 2.5% gross receipt tax (no idea what actually means.)

Note: we own our panels, no PPA.

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 9:57 am

acanthurus wrote:I built a quick model in excel and did a DCF for a system in my area vs. paying for electricity from the utility company and investing the cost of the system with a 5% nominal return.

The payoff period was 26 years. I was estimating a 25 year life for the system, which is generous given our weather. When payoff periods starting getting that long, your model assumptions begin to make a huge difference and the dispersion of results you get with small changes in assumptions can be quite large. I think natural gas prices will stay low for a long time, but "long time" in the energy world is 3-5 years, not 26, so electrical cost assumptions are a semi-educated WAG at best. And a solar panel lasting 25 years in my climate... not going to happen either. Too many unknowns, which means the risk of it not paying off is quite high.

Now if there was a 50% difference in the NPV in favor of solar over the life of the system, with reasonable assumptions, then yeah, I'd start thinking about it.

When you say you did a dcf, what discount rate did you use?

The 2 opportunities are not of equivalent risk so they would normally use different discount rates.

What terminal value assumption did you use for the solar system? What Inflation rate for electricity prices?

When you say 26 year payoff, simple payback assumes no discounting of cash flows. Is that really what you meant? That implies you did not do a Dcf model?

What climate do you live in that a 25 year lifetime assumption was invalid? Japan has hot summers and well sub zero winters, plus torrential rains. They have 25 year life systems still functioning, I believe?

There is really only one (2) ways to do a dcf on this project. You either determine a discount rate (real or nominal), project the cash flows and a terminal value (could be zero or a decommissioning cost) and discount back to see if Npv greater than zero.

Beware the excel npv function assumes first cash flow (investment cost usually) is at start of year zero. Every other finance reference assumes end of year zero. Better to use xnpv or (better) use the discounting factor on each cash flow.

OR do the above and run an internal rate of return on it (remembering include the starting cash flow ie the outflow). Compare that irr to your required return (again do this all in real terms or all in nominal terms).

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 10:08 am

squirm wrote:How do you project out 35 years? I do data projections and even 20 years is difficult to forecast with any type of realistic accuracy.

If your solar system doesn't pay off within ten years it's probably better to take other measures.
It's not too bad in this respect. The capital costs are known, and you can make reasonable assumptions 're cost and timing of inverter replacement. The panel life can be estimated and there are known metrics for performance degradation. You can run your model until panels are very likely to need replacement (30 years?).

Over to the revenues. Harder. You can assume electricity rates grow at Inflation. Or you can assume they stay constant in nominal terms. Neither is particularly aggressive in terms of overstating present value.

A niggle. Daytime electricity prices (wholesale) could well be zero in 30 years as renewable electricity floods the grid. Wind and nuclear penetration have meant that nighttime prices can be negative ( excess generation).

However Transmission and Distribution charges will likely rise and probably faster than inflation.

Another issue is that advantageous electricity pricing arrangements for home solar owners may be retrospectively revoked. THAT one has to take a view on.

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 10:15 am

Thesaints wrote:We considered that our electric bill may be 60/70 bucks a month at its highest, therefore even if solar panels could bring it to zero it wouldn't be worth the hassle.
If the average USRetail electricity price is 10 cents a kwhr (Doe eia. would have an exact number in their web pages) then 700 kWhr in worst month?

That means you either live in a very mild climate OR you have pretty efficient home fabric and air conditioning?

Average US household use is something like 12k kwhr pa so that's impressively low peak consumption for a summer month.

Or do you simply have a over low retail electricity price e.g. 8 cents per kwhr? That would usually mean you live in the Southeast or Pacific Northwest?

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 10:18 am

StealthWealth wrote:I am a huge advocate for solar but do encourage people to do their own math. Unfortunately some installers show a much more attractive payback by including an overly aggressive "inflation" rate for traditional power costs. I do not think this is good for the industry as a whole but the public is by-and-large pretty oblivious to their utility bill and the various components. There can be quite a lot of subtlety as some places have time-of-use pricing or pricing based on peak demand over the course of the year. Things like this increase the value of solar but aren't always included on back-of-the-envelope calculations.
This is it. Caveat emptor.

I don't like solar panel leading for similar reasons. And who does the liability fall on If the system underperformed?

There's too much room for hucksterism in the current arrangements.

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Re: Solar panels

Post by TimeRunner » Thu Jul 13, 2017 10:20 am

Valuethinker wrote:A niggle. Daytime electricity prices (wholesale) could well be zero in 30 years as renewable electricity floods the grid. Wind and nuclear penetration have meant that nighttime prices can be negative ( excess generation).

However Transmission and Distribution charges will likely rise and probably faster than inflation.
It may end up looking like our local water bill, where about 90% of the monthly charge is for infrastructure, meter fee, delivery charges, state water bond financing, etc...regardless of how much water is used. I envision that when the option to go off-grid becomes cost-effective, regulation will step in to preserve the grid by continuing to split the costs among all property owners. As mentioned upthread, there may not even be a choice to go off-grid. It has to be paid for somehow.
"What'd ya expect in an opera, a happy ending?" -Bugs Bunny. "You gotta fight for your right to party!" -Beastie Boys

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Re: Solar panels

Post by deanbrew » Thu Jul 13, 2017 10:31 am

Valuethinker wrote:Over to the revenues. Harder. You can assume electricity rates grow at Inflation. Or you can assume they stay constant in nominal terms. Neither is particularly aggressive in terms of overstating present value.

A niggle. Daytime electricity prices (wholesale) could well be zero in 30 years as renewable electricity floods the grid. Wind and nuclear penetration have meant that nighttime prices can be negative ( excess generation).

However Transmission and Distribution charges will likely rise and probably faster than inflation.

Another issue is that advantageous electricity pricing arrangements for home solar owners may be retrospectively revoked. THAT one has to take a view on.
These were part of my thoughts, as well. Note that I haven't done any research or analysis, as I don't plan on being in my home for more than a few years, so I don't want the upfront cost of solar. But I do wonder as more and more are installed, how will the electricity providers react? It seems obvious that they will want to increase the monthly connection fee and decrease the per/KW payment for power generated by customer solar panels. Unless you can truly go off the grid with your own battery storage, it seems to me that the power companies will still want to generate income from each customer, especially as their per-customer net usage goes down. So, I think projections are likely to prove overly optimistic, depending on assumptions.

It's happening with municipal water/sewer systems. They beg people to use less water and then raise connection fees, minimum charges and per-gallon rates because customers aren't using enough water.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 11:48 am

TimeRunner wrote:
Valuethinker wrote:A niggle. Daytime electricity prices (wholesale) could well be zero in 30 years as renewable electricity floods the grid. Wind and nuclear penetration have meant that nighttime prices can be negative ( excess generation).

However Transmission and Distribution charges will likely rise and probably faster than inflation.
It may end up looking like our local water bill, where about 90% of the monthly charge is for infrastructure, meter fee, delivery charges, state water bond financing, etc...regardless of how much water is used. I envision that when the option to go off-grid becomes cost-effective, regulation will step in to preserve the grid by continuing to split the costs among all property owners. As mentioned upthread, there may not even be a choice to go off-grid. It has to be paid for somehow.
And Professor Dieter Helm, of Aurora Advisers, and a respected energy economist at Oxford University, has written the layman's guide to this "utility of the future":

Burn Out: the end game for fossil fuels

https://www.amazon.com/Burn-Out-Endgame ... 0300225628

Despite the title, much of the book is about the impact of the new energy production technologies on countries (one big section) and on companies (the last section) both oil companies and utilities.

It is, endlessly, provocative and stimulating. Really made me think about where we are going. His proposed analogy is the broadband analogy. You pay your broadband company for 24/7 access and maximum capacity (speed) NOT for how much data you upload & download.

There will be a charge for that-- the system infrastructure and reliability is valuable and has to be paid for. However it's a very different world from charging per units of use.

Vis a vis water the reason to charge for water is that if you waste water, there is a finite supply available for a given cost. You don't pay anything like the marginal cost of additional capacity beyond a certain level (likely) but once the water supply capacity of an area exceeds x, then the cost of obtaining additional potable water via desalination, recycling sewage water (fiercely resisted politically, but it works as a technology), or piping it from another watershed can be truly vast.

That's rather similar to the position of electricity now, but not in the future. Time of use will still matter, but as storage gets cheaper, less so. Storage, in technological terms, looks rather like solar did 25 years ago implying there is lots to go for.

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 11:55 am

deanbrew wrote:
Valuethinker wrote:Over to the revenues. Harder. You can assume electricity rates grow at Inflation. Or you can assume they stay constant in nominal terms. Neither is particularly aggressive in terms of overstating present value.

A niggle. Daytime electricity prices (wholesale) could well be zero in 30 years as renewable electricity floods the grid. Wind and nuclear penetration have meant that nighttime prices can be negative ( excess generation).

However Transmission and Distribution charges will likely rise and probably faster than inflation.

Another issue is that advantageous electricity pricing arrangements for home solar owners may be retrospectively revoked. THAT one has to take a view on.
These were part of my thoughts, as well. Note that I haven't done any research or analysis, as I don't plan on being in my home for more than a few years, so I don't want the upfront cost of solar. But I do wonder as more and more are installed, how will the electricity providers react? It seems obvious that they will want to increase the monthly connection fee and decrease the per/KW payment for power generated by customer solar panels. Unless you can truly go off the grid with your own battery storage, it seems to me that the power companies will still want to generate income from each customer, especially as their per-customer net usage goes down. So, I think projections are likely to prove overly optimistic, depending on assumptions.
See my reference to Dieter Helm, previous post. He takes you through that. Yes the incumbents will resist-- they always do. Telephone companies resisted wireless, mainframes resisted micros, desktop software cos like MSFT resisted the internet (remember the browser wars between Netscape and MSFT?). But in the long run, the incumbents will adapt or die.
It's happening with municipal water/sewer systems. They beg people to use less water and then raise connection fees, minimum charges and per-gallon rates because customers aren't using enough water.
OK. See my previous post, as well. Just read Charles Fishman's book about water which was a great read (he also wrote a great one about WalMart). There is a fixed cost to a water system, and if your charging algorithm is units of use, and that goes down, then your charge per unit goes up OR your fixed charges go up.

However there's also a system capacity issue. Electricity in the age of solar will be essentially free at the marginal cost-- zero cost of production. Storage won't be free, but it will be a lot cheaper. The grid itself will need maintenance and upgrade-- that won't be free.

Water? If you are Las Vegas there is a finite amount of water you can have. Even if you are prepared to spend *billions* you may not be able to get additional water-- there may be no existing resource that you can tap, at any price- -and if there is, it will cost billions to get it to LV. So you have to make the consumption of more water painful enough (marginal price has to equal marginal cost) to compel efficient, value adding uses.

It should be noted that LV has probably made more progress in reducing water consumption than any other significant American metropolis. Atlanta, say, or most of California, is far behind. The problem is the population of LV is still growing, and its economic growth is hotels & leisure, and that depends upon enough water.

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Re: Solar panels

Post by squirm » Thu Jul 13, 2017 12:33 pm

Valuethinker wrote:
squirm wrote:How do you project out 35 years? I do data projections and even 20 years is difficult to forecast with any type of realistic accuracy.

If your solar system doesn't pay off within ten years it's probably better to take other measures.
It's not too bad in this respect. The capital costs are known, and you can make reasonable assumptions 're cost and timing of inverter replacement. The panel life can be estimated and there are known metrics for performance degradation. You can run your model until panels are very likely to need replacement (30 years?).

Over to the revenues. Harder. You can assume electricity rates grow at Inflation. Or you can assume they stay constant in nominal terms. Neither is particularly aggressive in terms of overstating present value.

A niggle. Daytime electricity prices (wholesale) could well be zero in 30 years as renewable electricity floods the grid. Wind and nuclear penetration have meant that nighttime prices can be negative ( excess generation).

However Transmission and Distribution charges will likely rise and probably faster than inflation.

Another issue is that advantageous electricity pricing arrangements for home solar owners may be retrospectively revoked. THAT one has to take a view on.
Yeah, nem is already changing in some states, when more solar is installed peak and part peak times are reduced or changed.

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Re: Solar panels

Post by bighatnohorse » Thu Jul 13, 2017 12:49 pm

I was having some roof repair done on my Arizona house and asked the roofer if he thought the roof would support solar panels.
He did.
But he also mentioned that when the roof needs to be replaced, the solar panels needed to be removed first.
- A hidden cost.

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Re: Solar panels

Post by Valuethinker » Thu Jul 13, 2017 2:39 pm

bighatnohorse wrote:I was having some roof repair done on my Arizona house and asked the roofer if he thought the roof would support solar panels.
He did.
But he also mentioned that when the roof needs to be replaced, the solar panels needed to be removed first.
- A hidden cost.

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