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[digg-me]As you may know, we’ve embarked on a project to stop being energy mongers and put our lifestyles on a kilowatt diet.  Not that we have a deep desire to live like cave dwellers, but our house does use about twice the energy that it should and we have goals of eventually moving to the countryside where we can live off renewable energy.  My initial thought is that our source of energy would be solar panels tied to a rechargeable battery bank where power would then run through an inverter to power all the standard 120 appliances.  Depending on where we live, possible wind or hydro electric could be used for backup.  What I wouldn’t give for a 4 season creek running through our future property! I digress…

I’ve read many articles on solar installations, but while I think that the technology is there to live a comfortable life, I am still a bit leery about the prospects of unplugging from the grid.  So why not do a dress rehearsal while we still have grid power and don’t need to depend on solar panels for 100 percent of our power?  Let’s face it, if we went cold turkey and transitioned today, that first dark night after using too much battery would be quiet - very quiet.  I’d rather learn my lessons while I can still fail over to the grid power. 

Sizing up a home Solar Panel Power Plant

I’ll be the first to admit that I have little to no clue when it comes to solar.  Don’t get me wrong, I have done a lot of research and am pretty good with wiring, but when it comes to installing grid-tied solar panels, well, that’s a different story.  I decided to put some numbers to what it would take to run our house on solar panels given our current energy demand.  Currently our house is consuming an alarming 18,160 kilowatt hours (kWH) of power each year.  Yes, we need to cut this a bunch, but let’s look at what it would take to power this house if we didn’t make any changes.   

According to the Arizona Solar Center, Arizona has on average 6 peak hours of sunshine per day.  If you want to find the average peak sunshine in your area, check the Sun Isolation tables.    

6 hours peak sunshine per day times 365 days per year nets out to around 2,190 hours of peak sunlight.  Sure there will be additional power from the non peak light, but I tend to design conservatively, so let’s just stick to the peak hours for our calculations.  If the world was a perfect place, we would be able to simply divide our kilowatt hours (18,160) by the number of peak hours of sunshine per year (2,190.)  This would mean that to power my small house with its current power consumption, it would take roughly a 8.3 kilowatt system!  To put this into perspective, the system required to power this load would cost around $45,000 and the solar panels would cover more than 570 square feet.    

But, the world is not a perfect place and there are certain losses in efficiency between the solar panels and the power grid.  Depending on your equipment, this can add up to 20%, but averages out to be more in the 15% range.  So our wonderful 8.3 kilowatt system will actually only be sending 7.055 kilowatts to the grid.  So to accommodate the current power demand of our house, we would need to supersize the solar array by 15% to a whopping 9.5 kilowatts.   This boosts the price up to nearly $57,000 and 850 square feet of solar panels.  Certainly a nice system if you have extra cash and the need, but our plan is to cut our power consumption as much as possible before tackling the solar panel installation.  By putting our home on a diet first, we will save thousands when the time comes to install solar.    

According to the Nexus Energy Survey, homes like ours typically consume about 9,000 kWH of power each year.  This puts us at roughly double the average, so I know that we can make some significant progress.  Let’s pretend for a minute and fast forward to the end of the year.  The final bill comes and we determine that our total energy reduction from the prior year was 20%.  This puts us at a more respectable 14,528 kWH which nets out to a 7.8 kilowatt solar array accounting for efficiency losses. This grid-tied solar system would cost roughly $43,000 which means the 20 percent reduction in power use would save about $14,000 in system costs or 25%.     

Let’s sharpen our pencil a bit and assume we are going to cut power consumption by 30%.  This should be attainable with new appliances and awareness to sources of wasted power.  This would get our usage down to 12,712 kilowatt hours per year - 5,448 kWH less than where we started.  This means that to power our full house, we would need to install enough solar panels to produce 6.7 kilowatts of power and would carry an initial expense of around $40,000 (assuming you did much of the installation yourself.)

Understanding Solar Rebates and Tax Credits

Let’s work on that $40,000 price tag for a minute.  Currently there are some pretty enticing rebates and tax credits available for solar power.   For example, in the state of Arizona, we have three different discounts that we can take advantage of:

• Utility Cash Rebate ($3 per DC Watt)
• State Tax Credit ($1,000)
• Federal Tax Credit ($2,000)

Take a closer look at these rebates and credits for residential solar installations.  Using my example system above (6.7kW), this would equal 6,700 DC watts and would net out to a utility credit of $20,100.  This means the $40,000 solar power plant will now cost only $19,900.  Factor in the State and Federal credits, and it cuts the price to $16,900 (after you file your taxes and assuming you paid at least $3,000 in taxes.)  What a bargain!

It’s Payback Time

So let’s say we head to our local solar retailer and plop down the $16,900 to install solar panels and go green.  How long would it take to realize a return on this investment?  There are a couple factors to look at when determining your ROI for installed renewable energy:

First, the cost of power should be scrutinized because like gasoline, it aint getting any cheaper.  Most sources assume that energy will carry about a 5% annual inflation rate.  Currently the cost of a kilowatt hour is hovering at just over $.105 (ten and a half cents).  This means the 12,712 kWH of power that we estimate using this year would cost around $1355.00 total for the year.  Factor in inflation and fast forward 15 years and the cost of this same power will nearly double to $2682!  With that said, a benefit of solar is that your cost of power production stays a constant zero.  Sure there is upkeep and the occasional repair, but for the most part you can plan on banking the money that you would have otherwise paid to your power company.  In my example, this comes out to a whopping total of $90.024.40 over 30 years and the system pays for itself after the 9^th year!   Now I know it’s rare that anyone stays in one place for that length of time, so you really need factor this into your scenario before making up your mind.   However, it also leads me to my second point; your home is worth more with solar panel.        

Studies show that houses with renewable energy systems sell for a premium of approximately 20 times the yearly energy bill. So if you currently spend $1000 a year on power; the value of your house would be approximately $20,000 more than an identical house without renewable energy.  Typically, the increased value to your home is nearly equal to the initial installation cost.  Moreover, in Arizona you don’t pay property tax on the increase in value, but double check how this works in your state.  In addition, there is no sales tax for Renewable Energy purchases in Arizona. 

Also keep in mind that energy inflation rate.  If we estimate that annual power will cost us $2682 in 15 years, this means the value of our home will have increased by $53,640.  Certainly a nice bump!

Conclusion

As I look back across this article and reflect on what we’ve covered, I’m sure you are left with many of the same questions that are swirling around in my head today.  This is an educational process for me and as I learn more about the benefits of “going green,” I will keep passing the interesting points on to you.  Keep in mind that the numbers above are pure speculation based on an Excel spreadsheet and my crystal ball, so pencil out your own numbers before dropping the green to go green.  Hopefully you can see enough potential to explore the financial possibilities of installing solar panels on your home.  I’m sure it doesn’t make financial sense in all situations, so I would really like hearing some comments from people who have run their own numbers and drawn conclusions.

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