Chapter eight
The Economics of Solar Photovoltaic Systems
Abstract
This chapter explains the economic advantage of using photovoltaic systems to supplement electrical utility energy demands. Cost savings and payback periods are examined as long-term investments. Electricity rate costs per kilowatt and PV system output are discussed relative to annual household demand. PV system cost factors such as equipment and labor are discussed. Comparisons of utility-provided electricity costs with the cost savings generated by a PV array are tabularized and graphically illustrated.
Payback and break-even cost analysis examples with and without tax credit incentives considering actual system quotations and using single string and microinverters are also graphically depicted. Future worth of savings using SPCAF tables from Chapter 6 are discussed illustrating the long-term investment differences between a solar PV system and a bank savings account.
Keywords
Alternating current; Derating factor; Direct current; Electricity; Energy inflation rate; Internet; Investment; Kilowatt-hour; Labor; National Renewable Energy Laboratory; North American Board of Certified Energy Practitioners (NABCEP); NREL; Payback; Photovoltaic; PTC/CEC output; PV array; PVWatts; Rebate; Savings; Tax credits; Utility; WarrantyThis chapter explains and illustrates the economic advantage of using solar energy to supplement your electric utility energy demands. In particular, examples of cost savings and payback periods for photovoltaic (PV) systems will be reviewed as potential investments. In the case of evaluating PV systems versus a solar domestic hot water (DHW) system, it is not a matter of determining comparative costs of several energy sources, such as oil, natural gas, propane, or electricity, to meet the necessary energy requirements. Rather, it is a matter of determining the comparative cost of one energy source, electricity, from your power utility company and using a PV energy system to reduce the cost of that energy purchased. In essence, a PV system generates individual residential power, supplementing all of your electrical energy requirements.
Magazine articles printed more than 20 years ago argued the case that solar PV systems would need to achieve a cost of $1.00/W to economically rival conventional power generation in the 1990s and beyond. By early 2006, the average cost per installed Watt for a residential-size PV electric system was between $7.50 and $9.50, including solar PV panels, inverters to convert direct current (DC) to alternating current (AC), collector mounts, and electrical components. By 2012, these costs had been reduced to approximately $4.00–6.00/W installed. To date, despite the failure to achieve that $1.00/W goal, the continually increasing costs of energy and the return of federal and state tax incentives have made such systems economically viable.
8.1. Cost Factors
The cost of electricity from state to state and from one region to another depends on the generation energy source. Current average retail prices of electricity for each state can be found online using the U.S. Energy Information Administration website at http://www.eia.gov/electricity/monthly. Your actual local electric rates per kilowatt-hour and annual costs can be determined directly from your current monthly electric utility bill. Simply add your 12 monthly bills to determine your yearly expense for electricity. Table 8.1 illustrates that the cost of electricity can escalate quickly with only slight increases in utility rates. As noted in Chapter 6, Section 6.6, the average energy inflation rate over a 10-year period from 2002 was approximately 7.2% annually. Throughout our discussion, we have taken a more conservative approach using 5% as the annual energy inflation factor.
Table 8.1
Annual Cost of Electricity at Various Rates
| Annual Household Electric Demand (kWh) | $0.11/kWh | $0.12/kWh | $0.13/kWh | $0.14/kWh | $0.15/kWh | $0.16/kWh | $0.17/kWh | $0.18/kWh |
| 6000 | $660.00 | $720.00 | $780.00 | $840.00 | $900.00 | $960.00 | $1020.00 | $1080.00 |
| 7000 | $770.00 | $840.00 | $910.00 | $980.00 | $1050.00 | $1120.00 | $1190.00 | $1280.00 |
| 8000 | $880.00 | $960.00 | $1040.00 | $1120.00 | $1200.00 | $1280.00 | $1360.00 | $1440.00 |
| 9000 | $990.00 | $1080.00 | $1170.00 | $1260.00 | $1350.00 | $1440.00 | $1530.00 | $1620.00 |
| 10,000 | $1100.00 | $1200.00 | $1300.00 | $1400.00 | $1500.00 | $1600.00 | $1700.00 | $1800.00 |
The amount of electricity produced by a PV array can be determined by the same methods that were used in determining PV array sizing as summarized in Chapter 5, Section 5.4, Table 5.3. Assume that we are limited by the area available on a roof and that 18 Canadian solar PV modules (Model CS6P-240M) are to be installed on a true south–facing house at a 30-degree roof angle in Portland, Maine, where the number of peak sun hours per Chapter 5, Section 5.4, Table 5.2 is 4.51. Such a system would be considered a 4.32-kilowatt system using the Standard Test Conditions plate rating (Chapter 5, Section 5.3) of each panel, as follows:
In accordance with specifications from Chapter 5, Table 5.1, the PVUSA Test Conditions/California Energy Commission (PTC/CEC) output rating for the Canadian solar module is 212 W for each panel. The total output from this PV array per day therefore would be as follows:
Assuming an 85% efficiency loss factor or derating factor as addressed in Chapter 5, Section 5.4 and assuming the collector orientation and tilt parameters per Chapter 2, Sections 2.4.1 and 2.4.2 respectively, have been met, the actual energy output would be approximately as follows:
The annual cost of supplying that amount of energy for various electricity rates is illustrated in Table 8.2, demonstrating once again that slight increases in utility rates can lead to significant increases in yearly expenses.
Instead of manually calculating the power output from a specific number of PV modules as illustrated, you can determine the output of a specified PV module array with an online Grid Data calculator provided by the National Renewable Energy Laboratory (NREL). The PVWatts™ Grid Data Calculator is available at the Renewable Resource Data Center on the NREL website (www.nrel.gov/rredc). For example, if you go to the NREL website and enter a DC rating of 4.32 kWh, with a derating or efficiency loss factor of 0.85, an array type as fixed tilt at 30°, and a true south–facing site at 180°, you will receive an annual energy result of 5643 kWh/year. This result corresponds fairly closely with the manual calculation of 5336 kWh derived earlier. Either one of these methods will provide you an approximate output based on your particular situation. Because links to various online website calculators can change over time, however, manual calculations always can be performed without computer and Internet assistance.
8.2. Equipment and Labor Costs
Just like solar DHW systems, equipment and installation costs are the two major cost factors for PV systems. By 2012, prices of solar PV modules actually dropped significantly to roughly $2/W for the PV module itself and $4/W for installation, inverter, and wiring costs. The only potential component replacement during an anticipated 25-year life of a solar PV system is the replacement of an inverter. Based on estimates from the Department of Energy Solar Energy Technologies Program, replacement costs of inverters average approximately $300/kW over a 10-year period. These costs are subject to change as the cost of inverters continues to decline as demand increases and technology advances. Some manufacturers already provide a 15-plus-year warranty for inverters with a fail period after the first 20 plus years.
PV systems provide a way to reduce fossil fuel energy consumption while locking in your electric rate below the electrical grid average for a duration of 25 years plus. During that time period, most manufacturers specify an output panel degradation drop at 0.5–1.0% per year with most panels guaranteed not to drop below 80% in 25 years. Keep in mind that if a systematic degradation initiates warranty claims against a large number of collector manufacturers, solvency can become a concern. A company that has made promises it cannot keep could go bankrupt within that time period, nullifying their warranty. Do not despair, however, because some manufacturers insure their warranties with a separate insurance company in case of insolvency. So check with the dealer or installer and ask about the manufacturer and their guarantee of a product warranty.
Unlike solar DHW systems, there are relatively no additional costs for operation or maintenance of a PV system. Depending on the number of PV modules, the overall costs of PV systems normally are greater than solar hot water systems because the manufacturing costs of the modules and electrical inverters are more expensive. This results in a longer return on investment. Although PV module prices have decreased over the past few years, the cost of labor for installation of the modules, wiring, and DC inverters have not. Cost savings are greater, however, over the same period because the demand and use of household electricity is greater than the energy demand for hot water, there are less system losses, there are no additional monthly costs for operation or maintenance, and there is a greater percentage of use. As a result, PV solar energy systems may have only a slightly longer payback period than solar DHW systems.
8.3. Comparative Analysis—Electric Utility versus Solar PV
Table 8.3 illustrates a comparison of utility-provided electricity costs with the cost savings generated by a PV array producing an estimated 5336 kilowatts per year. This table assumes a 5% electricity inflation factor and a 1% module output degradation factor for each year over a 20-year period to provide a conservative savings estimate. The table does not include the additional cost of an inverter should one happen to fail during the 20-year period.
Table 8.3
Example of Utility-Provided Electricity Costs at $0.16/kWh (from Table 8.2) Compared with Cost Savings of 5336 kW Generated by a PV Array
| Years | Cost of Utility-Provided Electricity at 5% per year Energy Inflation | Solar PV Module Losses at 1% Output Degradation per year | Savings Realized from Solar PV versus Electric Utility | |||
| (1) Yearly | (2) Cumulative | (3) Yearly | (4) Cumulative | (5) Yearly (1) – (3) | (6) Cumulative (2) – (4) | |
| 1 | $853.76 | $853.76 | $8.54 | $8.54 | $845.22 | $845.22 |
| 2 | $896.45 | $1750.21 | $17.93 | $26.47 | $878.52 | $1723.74 |
| 3 | $941.27 | $2691.48 | $28.24 | $54.71 | $913.03 | $2636.77 |
| 4 | $988.33 | $3679.81 | $39.53 | $94.24 | $948.80 | $3585.57 |
| 5 | $1037.75 | $4717.56 | $51.89 | $146.13 | $985.86 | $4571.43 |
| 6 | $1089.64 | $5807.20 | $65.38 | $211.51 | $1024.26 | $5595.69 |
| 7 | $1144.12 | $6951.32 | $80.09 | $291.60 | $1064.03 | $6659.72 |
| 8 | $1201.33 | $8152.65 | $96.11 | $387.71 | $1105.22 | $7764.94 |
| 9 | $1261.39 | $9414.04 | $113.53 | $501.24 | $1147.86 | $8912.80 |
| 10 | $1324.46 | $10,738.50 | $132.45 | $633.69 | $1192.01 | $10,104.81 |
| 11 | $1390.69 | $12,129.19 | $152.98 | $786.67 | $1237.71 | $11,342.52 |
| 12 | $1460.22 | $13,589.41 | $175.23 | $961.90 | $1284.99 | $12,627.51 |
| 13 | $1533.23 | $15,122.64 | $199.32 | $1161.22 | $1333.91 | $13,961.42 |
| 14 | $1609.89 | $16,732.53 | $225.38 | $1386.60 | $1384.51 | $15,345.93 |
| 15 | $1690.39 | $18,422.91 | $253.56 | $1640.16 | $1436.83 | $16,782.75 |
| 16 | $1774.91 | $20,197.82 | $283.99 | $1924.15 | $1490.92 | $18,273.67 |
| 17 | $1863.65 | $22,061.47 | $316.82 | $2240.97 | $1546.83 | $19,820.50 |
| 18 | $1956.83 | $24,018.30 | $352.23 | $2593.20 | $1604.60 | $21,425.10 |
| 19 | $2054.68 | $26,072.98 | $390.39 | $2983.59 | $1664.29 | $23,089.39 |
| 20 | $2157.41 | $28,230.39 | $431.48 | $3415.07 | $1725.93 | $24,815.32 |
| Total | $28,230.39 | Total | $3415.07 | Total | $24,815.32 | |
Table 8.3 is graphically illustrated in Figure 8.1 and shows the cost of electricity over a 20-year time period to be $28,230.39 at $0.16/kWh with an energy inflation rate of 5%. The actual savings is reduced by $3415.07 due to a PV module output reduction for each year over 20 years, resulting in an actual cumulative energy savings of $24,815.32.
As discussed in Chapter 5, a PV array can be established using either a single “string inverter” for a series of PV modules or individual “microinverters” for each PV module depending on shading issues at the site. Shading conditions or a defect or failure of one or more PV modules could shut down an entire “string” of modules if there is insufficient power to supply a single “string inverter.” We therefore shall examine the cost and payback of three different inverter configurations based on two rows of nine PV modules as shown in the rendering of Figure 8.2.
Because of potential shading problems and possible residual snow conditions in certain regions that could cover the bottom row of PV modules, three types of PV system scenarios should be considered. Some solar dealers or installers will provide a price separation for components and labor. Other dealers include both factors as a total package installed. We will compare actual cost quotations (prepared April, 2012) for three examples of DC to AC inverter combinations.
Example 1: 18 PV modules using microinverters for all 18 modules
Example 2: One single “string inverter” for all 18 PV modules
Example 3: Two “string inverters” with one inverter for each string of nine PV modules
8.3.1. Example 1: Configuration with Microinverters
Equipment
This sample quotation proposes a 4.32-kilowatt grid-tied array coupled with Enphase Energy Microinverters utilizing the following components:
• Eighteen 240 W Canadian solar PV panels
• Eighteen Enphase M-210 microinverters
• Lifetime subscription to Enphase Enlighten monitoring system
• IronRidge aluminum flush roof mounting system
• All hardware, disconnects, cable, and labor to provide code-compliant North American Board of Certified Energy Practitioners (NABCEP)–certified installation
Performance
Collectors will be flush mounted on the south-facing roof on an IronRidge aluminum mounting system and the total array area will be approximately 312 square feet. The system will produce approximately 5336 Kwh of clean, renewable electricity annually and roughly offset 7182 lb of carbon-dioxide emissions annually. Whenever sun shines on the solar PV modules, DC electricity will be generated. The DC electricity from each PV module is converted to AC electricity by the individual Enphase inverters, affixed to the underside of each module. The advantage of microinverters is that the output of the rest of the array is not affected if a portion of panels is shaded. The AC electricity that is created by the inverters then will feed directly into the building’s load center. Any loads operating while the sun is shining will be fed directly by the solar electricity. The local utility company will record the amount of electricity that is fed into the grid. If there is more electricity generated by the sun than being used in the house, the second meter will record the amount, creating credit on the next utility bill. The surplus in electricity can be “banked” from month to month for up to one year.
8.3.2. Example 2: Configuration with One String Inverter
Equipment
This sample quotation proposes a 4.32-kilowatt grid-tied array coupled with one single Solectria inverter for two rows of 9 PV modules utilizing the following components:
• Eighteen 240 Watt Canadian solar PV panels
• One Solectria PVI4000 grid-tied inverter
• IronRidge aluminum flush roof mounting system
• All hardware, disconnects, cable, and labor to provide code-compliant NABCEP-certified installation
Performance
Collectors will be flush mounted on the south facing roof on an IronRidge aluminum mounting system and the total array area will be approximately 312 square feet. The system will produce approximately 5336 kWh of clean, renewable electricity annually and roughly offset 7182 lb of carbon dioxide emissions annually. Whenever sun shines on the solar PV modules, DC electricity will be generated. The DC electricity will be cabled in conduit to the inverter in the basement. The inverter, which converts direct current to AC, then will feed directly into the electric panel. The local utility company will record the amount of electricity that is fed into the grid. If there is more electricity generated by the sun than being used in the house, the second meter will record the amount, creating credit on the next utility bill. The surplus in electricity can be “banked” from month to month for up to 1 year.
8.3.3. Example 3: Configuration with Two String Inverters
Equipment
This sample quotation proposes a 4.32-kilowatt grid-tied array coupled with two coupled Sunny Boy SMA 2000HF inverters each managing one row of nine PV modules utilizing the following components:
• Eighteen 240 W Canadian solar PV panels
• Two Sunny Boy SMA 2000HF grid-tied inverters
• IronRidge aluminum flush roof mounting system
• All hardware, disconnects, cable, and labor to provide code-compliant NABCEP-certified installation
Performance
The performance for the system in Example 3 is the same as in Example 2.
Using the preceding examples, let’s determine whether the purchase of a PV system is a cost-effective investment for your home.
8.4. Payback Analysis before Tax Credit Incentives
Let’s examine the three preceding example quotations for a PV system, including the cost of equipment and installation charges. Before we consider the savings introduced with the energy tax credits available, we will graphically illustrate the payback and savings of the PV system with respect to the cost of purchasing electricity from your power utility company without any tax credits. Because there is a PV module electrical output degradation as mentioned previously in the amount of 0.5–1% per year, we assume these systems will provide a slightly reduced estimated savings of $24,815.32 over a 20-year period as shown in Figure 8.1 in lieu of the total utility costs of $28,230.39. Unlike a solar DHW system, no operating costs and minimal maintenance programs are required, excluding unexpected defects or damage. Figure 8.3 illustrates a one-time cost (represented as a horizontal line) for each example. The point at which the electricity cost curve crosses each of the PV system examples illustrates the “payback period” (the number of years at which the costs equate with one another) as shown in Figure 8.3. System Example 1 shows a break-even payback period of approximately 16 years, 6 months. System Example 2 shows a break-even payback period of approximately 14 years, 11 months. And system Example 3 shows a break-even payback period of approximately 16 years, 3 months. Without reducing the cost of each system with the available federal and state tax credits, Figure 8.3 illustrates an average break-even payback period of approximately 16 years based on the quotation costs provided. The federal and state tax credits make a very important difference in the payback period.
8.5. Solar Energy Tax Credits
As mentioned in Chapter 6, a 30% federal residential energy tax credit is available through 2016 with no limit toward the cost of a PV system. This tax credit includes all labor and equipment costs and can be carried forward to future tax years if you cannot take the full credit in the year the system was installed. Be sure to check the availability of these tax credits before purchasing a solar energy system to determine your true costs and payback period. As mentioned in Chapter 6, Section 6.4, some of the state tax rebate incentives require PV installers to have a master’s electrician’s license and be NABCEP certified or to work with someone who is NABCEP certified.
Some states also require the performance of an energy audit as a tax incentive rebate prerequisite. As mentioned, a database of state tax incentives for renewable energy is available online at www.dsireusa.org/solar/. The state rebate savings alone could justify the additional costs of professional certified installation compared with a do-it-yourself installation. In addition, it is important that you be aware of the electrical safety standards pertaining to the National Electrical Codes for installation of grid-tied systems. Whether you install a system yourself or have it installed by a certified and licensed dealer, you will save money over a period of time by supplementing with solar energy. In particular, we shall now detail cost savings and projected payback periods for these investments with the addition of tax incentives.
8.6. Payback Analysis with Tax Credit Incentives
With the generous federal tax credits and some state rebates, grid-tied PV systems can be an excellent investment. Now let’s include the federal tax credit into the previous graph of Figure 8.3 to reflect the actual cost of the solar PV system after subtracting the available tax credits from the cost of the system. We also will include a possible state tax credit of $2000, which depends on the location of the proposed system.
Example 1: Configuration with Microinverters
Example 2: Configuration with One String Inverter
Example 3: Configuration with Two String Inverters
Our new graph, Figure 8.4, illustrates the payback period with the added federal and state tax credit incentives.
The payback period realized from savings after federal and state tax credits can be seen in Figure 8.4 to have been reduced to the following number of years for each example:
Example 1: From 16 years, 6 months to 10 years, 5 months (reduction of 6 years, 1 month)
Example 2: From 14 years, 11 months to 9 years, 2 months (reduction of 5 years, 9 months)
Example 3: From 16 years, 3 months to 10 years, 2 months (reduction of 6 years, 1 month)
If future worth of savings (as discussed in Chapter 6, Section 6.1) is considered throughout a 20-year period for each of the yearly savings in Table 8.3, column 5 at a 5% compounded energy inflation rate, the resultant future worth savings can be determined using Chapter 6, Eqn (6.2) and the single payment compound amount factors (SPCAF) in Table 6.1 for each year as follows:
Where:
S = future worth of money,
Table 8.4
Example of Utility-Provided Electricity Costs and Future Worth of Savings Realized
| Years | Cost of Utility-Provided Electricity at 5% per year Energy Inflation | Savings Realized from Solar PV versus Electric Utility at 5% per year Energy Inflation | Future Worth of Savings through 20 years at 5% Compounded Inflation | |||
| (1) Yearly | (2) Cumulative | (3) Yearly | (4) Cumulative | (5) Yearly | (6) Cumulative | |
| 1 | $853.76 | $853.76 | $845.22 | $845.22 | $2242.62 | $2242.62 |
| 2 | $896.45 | $1750.21 | $878.52 | $1723.74 | $2219.93 | $4462.55 |
| 3 | $941.27 | $2691.48 | $913.03 | $2636.77 | $2197.30 | $6659.85 |
| 4 | $988.33 | $3679.81 | $948.80 | $3585.57 | $2174.65 | $8834.50 |
| 5 | $1037.75 | $4717.56 | $985.86 | $4571.43 | $2152.03 | $10,986.53 |
| 6 | $1089.64 | $5807.20 | $1024.26 | $5595.69 | $2129.33 | $13,115.86 |
| 7 | $1144.12 | $6951.32 | $1064.03 | $6659.72 | $2106.67 | $15,222.53 |
| 8 | $1201.33 | $8152.65 | $1105.22 | $7764.94 | $2084.00 | $17,306.53 |
| 9 | $1261.39 | $9414.04 | $1147.86 | $8912.80 | $2061.44 | $19,367.97 |
| 10 | $1324.46 | $10,738.50 | $1192.01 | $10,104.81 | $2038.69 | $21,406.66 |
| 11 | $1390.69 | $12,129.19 | $1237.71 | $11,342.52 | $2016.11 | $23,422.77 |
| 12 | $1460.22 | $13,589.41 | $1284.99 | $12,627.51 | $1993.40 | $25,416.17 |
| 13 | $1533.23 | $15,122.64 | $1333.91 | $13,961.42 | $1970.85 | $27,387.02 |
| 14 | $1609.89 | $16,732.53 | $1384.51 | $15,345.93 | $1948.14 | $29,335.16 |
| 15 | $1690.39 | $18,422.91 | $1436.83 | $16,782.75 | $1925.50 | $31,260.66 |
| 16 | $1774.91 | $20,197.82 | $1490.92 | $18,273.67 | $1902.86 | $33,163.52 |
| 17 | $1863.65 | $22,061.47 | $1546.83 | $19,820.50 | $1880.17 | $35,043.69 |
| 18 | $1956.83 | $24,018.30 | $1604.60 | $21,425.10 | $1857.48 | $36,901.17 |
| 19 | $2054.68 | $26,072.98 | $1664.29 | $23,089.39 | $1834.88 | $38,736.05 |
| 20 | $2157.41 | $28,230.39 | $1725.93 | $24,815.32 | $1812.23 | $40,548.28 |
| Total | $28,230.39 | Total | $24,815.32 | Total | $40,548.28 | |
Developing the future worth of savings from the information previously included in Table 8.3, we have the yearly future worth of savings as shown in Table 8.4.
At this point, we should determine whether it would be wiser to invest in a solar PV energy system or in a bank savings account. So what is our money worth if we simply put the initial cost of the solar PV system into a savings account? Currently, we are only going to get a taxable 1% interest rate at best and more likely only 0.5% interest for our money in a bank (for rates available in 2012–2013). But, let’s calculate which would be the better investment for each of our inverter combination examples even at a 1% rate of return from a savings account.
Example 1: Configuration with Microinverters
Future worth of $11,308.40 savings (amount banked versus expenditure for a PV system) for 20 years @ 1% compounded interest, | |
Bank (Savings) | |
S20=P (1%—20 SPCAF) = ($11,308.40) × (1.220) | = +$13,796.25 |
Less expense of electricity costs from utility power company (over 20 years) | = −$28,230.39 |
Actual money lost from bank savings of $11,308.40 | = −$14,434.14 |
Solar PV (Investment) | |
Future worth of energy savings for 20 years @ inflation rate of 5% compounded interest (Table 8.4, column 6) total over 20 years | = +$40,548.28 |
Less expense for solar PV equipment and labor installation after federal and state tax credits | = −$11,308.40 |
Actual money saved by installing a solar PV system | = +$29,239.88 |
Example 2: Configuration with One String Inverter
Future worth of $9625.60 savings (amount banked versus expenditure for a PV system) for 20 years @ 1% compounded interest, | |
Bank (Savings) | |
S20 = P (1%—20 SPCAF) = ($9625.60) × (1.220) | = +$11,743.32 |
Less expense of electricity costs from utility power company (over 20 years) | = −$28,230.39 |
Actual money lost from bank savings of $11,308.40 | = −$16,487.07 |
Solar PV (Investment) | |
Future worth of energy savings for 20 years @ inflation rate of 5% compounded interest (Table 8.4, column 6) total over 20 years | = +$40,548.28 |
Less expense for solar PV equipment and labor installation after federal and state tax credits | = −$9625.60 |
Actual money saved by installing a solar PV system | = +$30,922.68 |
Example 3: Configuration with Two String Inverters
Less expense of electricity costs from utility power company (over 20 years) | = −$28,230.39 |
Actual money lost from bank savings of $11,308.40 | = −$14,791.11 |
Solar PV (Investment) | |
Future worth of energy savings for 20 years @ inflation rate of 5% compounded interest (Table 8.4, column 6) total over 20 years | = +$40,548.28 |
Less expense for solar PV equipment and labor installation after federal and state tax credits | = −$11,015.80 |
Actual money saved by installing a solar PV system | = +$29,532.48 |
The savings bank investment in comparison with the three examples of solar PV investment clearly illustrates that the solar investment in supplementing electrical energy demands provides a positive cash savings. The solar investment also provides a better use of cash flow throughout the 20-year period. Considering the future worth of money over 20 years, Example 1 illustrates that purchasing a solar PV system produces a future worth difference of $43,674.02 between the actual money lost from a bank savings investment ($14,434.14) and the actual money saved ($29,239.88) from energy generated. Example 2 produces a $47,409.75 difference and Example 3 produces a $44,323.59 difference. The solar PV system cost, just like the solar DHW cost, is “self-liquidating,” in that once the system cost has been repaid, there are few or no additional costs associated with the remaining years of normal system operation.
Although every solar PV system represents an individual case, an economical evaluation will indicate that solar energy is an excellent application in using the sun’s energy to supply electricity rather than paying escalating electricity costs. The example costs and calculations used throughout this chapter have been conservative. It is assumed that the system is exempt from sales tax and exempt from property tax, which is true in some, but not all states. In many situations (i.e., using $0.16/kWh electrical rates), the return on investment averages less than 10 years.