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Zoidberg, are you sure about your comments? I ask because we have some friends who built a solar house. That is, they are still connected to PNM, but use their solar panels to produce all of their electricity (and more) when then sun is shining and use PNM at night. During the day, the panels produce more than they use and their electric meter actually runs backwards. At night, of course, the meter runs forward and measures usage.
They have an all electric house (not sure if this a PNM requirement). They estimate that it cost them $30-35,000 more for the solar setup then the same house without it (to go completely solar, that is with a battery system, would have cost another $20-25,000). Their electric bills average about $20-25/month, ranging from near zero to $35-40 in the winter. They would have gone with gas heat otherwise, so it's tough to do a accurate payback calculation, but I susupect it's a lot longer than most folks would want.
The prices and programs are changing so quickly (and significantly) that I believe it's very possible that their solar system would have a payback of 30 years and their neighbors could have a payback of 3 with identical sizes and specifications, simply depending on when they got in.
What I meant was that in youir calculation of the value of
the stream of income, you counted the 468 kWh twice.
Yes. Your house gets 2 meters. 1 measures how much electricity your panels generate, say 500kwh/mo. The electric company pays you for this.
Your other meter is connected to your house, the grid and your solar panels and measures your net electric use. You are billed based on this. If it started the month at 500 and ended at 500, you'd owe nothing and you'd get a check for what your panels generated.
You get to count the 468 twice because there are two incentives layered on top of each other that amounts to $0.23 per kwh, $0.12 from your generation and the $0.11 from the net metering.
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If your solar panels generate 468 kWh, you can't say I make make money from not using 468 kWh and selling the exact same electricity to PNM. It's just physics, you can't sell what you just used in your big screen TV.
It all goes through the meters before it goes to your big screen TV. The physics works out just fine.
Solar panels -> REC meter $0.12/kWh -> Use meter ($0.11)/Net kWh -> your big screen TV.
The main problem with the calculation though is that it is assuming the 12K is still there in the ROI calculation. If I put 12K into a saving account I get Interest - taxes and I still have the 12K.
And if you pay that $12k to the electric company over 10 years you still don't have the 12k. Then there's also the option of financing the solar panels, which could also result in net savings.
And if you pay that $12k to the electric company over 10 years you still don't have the 12k. Then there's also the option of financing the solar panels, which could also result in net savings.
Well in one case you will pay 12K now and in 10 years you will have 6K (i.e. you pay nothing for electricity and collect 600 a year from the electric company).
In the other case you keep 12K and over 10 years pay $600 a year in electricity and end up with 6K.
So what I said is true, after 10 years you break even. Every year after 10 years is profit, but it is bogus to say you get a 20% ROI or something like that.
If you keep it for 11 years, it still makes $1200 a year, and you haven't paid anything for maintenance and the actual panels are worthless, your return will be about 1%. If you apply the same assumptions until 20 years you have made 5%
For comparison it looks like 20 year treasury bills are running at 4.37%.
Well in one case you will pay 12K now and in 10 years you will have 6K (i.e. you pay nothing for electricity and collect 600 a year from the electric company).
In the other case you keep 12K and over 10 years pay $600 a year in electricity and end up with 6K.
If you use 12,000kWh/year and your system generates 6,000kWh/year you basically break even. You don't pay the electric company and they don't pay you.
Cash flow: +$1,200/year. After 10 years, you have $12,000. $6,000 from the electric company and $6,000 from savings.
If you use 12,000kWh/year and you just buy it from the electric company you pay $1,200.
Cash flow: -$1,200/year. After 10 years, you have $0. And that doesn't take inflation in electric prices into account.
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So what I said is true, after 10 years you break even. Every year after 10 years is profit, but it is bogus to say you get a 20% ROI or something like that.
Only if you assume your panels are worth $0 at the end of 10 years. They might or might not be.
I even ran some numbers in a spreadsheet.
Scenario 1: start with $12k, just pay your electric bill $100/mo. Remainder is invested at 5% compounded monthly. After 10 years you have $4,235 and no solar panels.
Scenario 2: start with $12k, buy solar panels. Save $100/mo on your electric bill, which you invest at 5% compounded monthly. After 10 years you have $15,528, and solar panels.
Your doing fuzzy math (funky math?) and adding the $100/month too many times into your calculation
Either your cash flow without solar panels is N and you cash flow with solar panels is (N+100)/month
OR
Your cash flow with solar panels is N and your cash flow without solar panels is (N-100)/month
Right now you are saying if you have solar panels your cash flow is increased by $1200 a year (which makes sense), but if you don't have solar panels your cash flow is decreased by $1200, which isn't true, if you don't get solar panels your cash flow stays the same.
Since this is an Albuquerque thread, we should probably update these numbers to PNM's, which will soon have a REC of 26c/kWh, not 12c/kWh.
If you use 12,000kWh/year and your system generates 6,000kWh/year you still make money.
Cash flow: +$960/year (using ralthor's cash flow approach). After 10 years, you have $21,600. $15,600 from PNM and $6,000 from savings.
If you use 12,000kWh/year and just buy it from PNM you pay $1,200.
Cash flow: -$1,200/year. After 10 years, you have $0. And that doesn't take inflation in electric prices into account.
I have no idea why people assume their solar systems become worthless overnight. They're manufacturer guaranteed for 25+ years, and the term with PNM is longer than 10 years. It's a bit like assuming your house will become worthless 10 years after you buy it (in Detroit maybe but not here).
Updated scenarios:
Scenario 1: start with $12k, just pay your electric bill $100/mo. Remainder is invested at 5% compounded monthly. After 10 years you have $4,235 and no solar panels.
Scenario 2: start with $12k, buy solar panels. Save $180/mo on your electric bill, which you invest at 5% compounded monthly. After 10 years you have $27,655, and solar panels.
Here's where it gets ridiculous. Say you have not the best credit. Your house is already on its third mortgage. Your only way to get $12k is to use a combination of credit cards (hereafter referred to as "the plutonium card"), which have a usurous APR of 28.99%.
You STILL make a net $8319 after 10 years, with the plutonium card getting paid off in full after 6.4 years. Those numbers reflect the following boneheaded and/or unfortunate decisions:
*Not finding someone willing to lend you money at better than 28.99%, even after three years of regular payments.
*Not investing the post-payoff money, but rather putting it under your mattress.
After 15 years (why would they stop paying you if it's in the contract?) you can expect to have to replace/repair the inverter (if that costs more than $2k for a system this size by then, I'll be astonished), and even with this inauspicious beginning, you're $17120 further in the black than when you started.
Scenario 2: start with $12k, buy solar panels. ...
After 10 years you have $15,528, and solar panels.
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Originally Posted by Zoidberg
Scenario 2: start with $12k, buy solar panels. ...
After 10 years you have $27,655, and solar panels..
You started with $12k, but spent that on solar panels.
You have to subtract $12k from the $15,528 or the $27,655.
That is, you start investing your savings into a $12k hole.
You can't just ignore the initial investment.
Also note that all of these healthy ROI assumptions depend on getting a subsidy
which is not guaranteed. The only guarantee that I can see is that electricity
rates will go up over those ten years ( as stated by Z ) so your monthly savings
assumptions are probably on the low side for the cost-avoidance part.
After the warranty runs out in ten years or whatever period, the opposite is true.
Some systems will keep going for 10 more years without a failure, others will fail
much sooner. Is the 25 year warranty for everything or just the panels?
What if the manufacturer goes out of business?
Panels on the roof mean that installing them will tend to cause the roof to need
maintenance sooner. Maintenance around the panels is also likely to be more
expensive. This may or may not be a significant cost.
You started with $12k, but spent that on solar panels.
You have to subtract $12k from the $15,528 or the $27,655.
mortimer, if you checked our math a little more closely, you'd see that the $12k had already been subtracted.
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Also note that all of these healthy ROI assumptions depend on getting a subsidy
which is not guaranteed.
mortimer, are you aware of the legal instrument known as a contract? Or are contracts not guaranteed now?
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After the warranty runs out in ten years or whatever period, the opposite is true.
Some systems will keep going for 10 more years without a failure, others will fail
much sooner. Is the 25 year warranty for everything or just the panels?
Just the panels. Inverters typically carry 8-15 year warranties. Racking, well, doesn't tend to fail. There's really not much more to the system in terms of things that fail with time. No moving parts, after all.
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What if the manufacturer goes out of business?
That's why you should probably invest in panels with a name you trust. BP, for instance, is a name I trust. (Oh, too soon, huh?)
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Panels on the roof mean that installing them will tend to cause the roof to need
maintenance sooner. Maintenance around the panels is also likely to be more
expensive. This may or may not be a significant cost.
I'm sure your years of experience as a roofer will lend credibility to that statement. Could you explain to the rest of us how installing something that blocks wind, UV, and rain, on a rooftop increase the urgency of maintenance?
That said, a homeowner would be well-advised to make sure their roof is not due for replacement in 2 years when they put their panels up (unless they schedule their replacement concurrently, which happens often).
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