Solar Energy – More Affordable Than You Think!
Kelly Jennings and Fritz Hubig
When looking to make large purchases, most people focus on the sticker price. This has been one of the greatest challenges to overcome when trying to pitch green energy to individuals. But, what about all of the positives that come with such investments? Despite the seemingly hefty upfront cost, solar energy can provide big pay-offs even for the common homeowner for less money than you think. Between saving money on energy costs, tax subsidies, and increases in property value, an investment in photovoltaic (PV) solar energy can pay for itself in one to two years. And best of all, the sun isn’t going anywhere any time soon, so let’s put it to work!
The actual size of your rooftop PV System will depend upon available roof space, your annual electric energy consumption, and other factors. Let’s consider the example of a 3-kilowatt system. The gross cost will be about $ $20,628. BUT, that’s not the whole story! Given current tax incentives and credits, it would cost you much less. The DC cash incentive (money DC gives to you) for the system in our example is $6,426 (after taxes), in addition to the Federal Tax Credit, which would be roughly $6,188. This is $12,614 you are now able to apply to the gross cost of your system, bringing the total cost to you down to $8,014. Now let’s take this one step further…
There are two companies trading in Solar Renewable Energy Credits (SREC) in the District. Each company offers you either a one-time upfront payment or you can enter a 5-year contract that pays you per kilowatt hour. To further lower the initial cost of your system, you could accept the one-time upfront payment, which would knock off an additional $5,552 from the remaining balance of $8,014 from our example. This would reduce the total cost of your system to only $2,462! Within the first few years of using your own electricity and not having to pay for utilities, this will recoup the remaining the upfront cost. This small investment not only helps produce renewable energy and save you money, it can also significantly increase the property value of your home. Now all that’s left to do is to sit back and wait for your new Photovoltaic System to start making you money.
With this example energy system, it is estimated that in the first year, one would save $559. With these savings, the simple payback is a little more than 3 years. As they say, a penny saved is a penny earned, and with all the money you’ll save not paying a utility company for electricity, you’ll earn plenty of them! Not a bad investment after all!
To help his fellow citizens and Capitol Hill Solar Coop members, Andy Kerr from the Larch Company (www.andykerr.net) has produced a spreadsheet entitled “The Financial Value of Residential Photovoltaic Power System Washington DC Version 1.8 Public.xls.”
By inputing the following variables/values:
• Size of Photovoltaic System (watts)
• Cost of Electricity Electricity ($/kWh)
• Your Last 12 Months Electric Use (kWh)
• Projected Non-Inflation-Adjusted Average Annual Electric Rate
• Solar Renewable Energy Credit Contract Value ($/kWh)
• Solar Renewable Energy Credit (SREC) Contract Length (years)
• Your Projected Average Annual Inflation Rate
• Your Projected Rate of Return for an Alternative Investment (%)
• Your Income Tax Rate
• Gross Capital Cost of Photovoltaic Power System
• Inverter Type
• Possible Year 16 Inverter Replacement Cost
The spreadsheet will project both internal rate of return (return on investment) and net present value of your prospective photovoltaic system (either a 10-year or 25-year investment horizon), as well as a estimate of increase property value of your home. Andy developed his spreadsheet to help him make choices in installing his 4th photovoltaic installation. He is graciously sharing his spreadsheet with fellow Washington, DC homeowners.
Each user’s results will vary, but most prospective “customer-generators” (as PEPCO calls Solar PV customers) can expect a 10-15% tax-free return on investment. It all depends on the values you enter.
To get more information, please contact Fritz Hubig fritz@greenDCrealty.com or call (202) 552-0553.