Sun Energy for YOU! Easy as 1-2-3!

December 3rd, 2014

back array and part of front array bird view

I’ve gone Solar! See my panels?

I was totally surprised this year to discover that payback time for fully installed residential Solar Photovoltaic (PV) systems, is now as low as 3 years. This was fantastic as I could now substantially reduce my carbon footprint while coming out way ahead financially. Sounded like a no-brainer option so I decided to look into it.

Caption

It was quite the obsession, pouring over design minutia and reworking the same calculations to death. I’m actually very pleased with the result – but at what time investment? I can hear my dad’s sweet wisdom right now, “Son, if you had to design these systems for a living, you would STARVE!”

Yes, dad would be absolutely right. But alas, you can benefit from my hundreds of hours of diminishing return – I’ll take you through my design process and give you all my numbers, so in just a few minutes you’ll be fully versed (at least with one example :) OK. Let’s go, step by step…

 

Step 1 – Sizing It Up

My first step was to decide on a system size, measured in terms of power capability in kilowatts (kW). I spent countless hours figuring this out, but in my case it was primarily decided by one factor – the “sweet spot” for tax credits and rebates. These credits and rebates are illustrated in the example below.

straightforward_system

Example showing cost to owner, tax credits, and rebates, for a straightforward installation. Note the “sweet spot” system size at 3.2kW.

In this example, I clearly got the biggest bang for the buck at 3.2kW. Any less than this, and I was leaving “tax credit and rebate opportunity” on the table. Much more than this, and my out of pocket costs (green region) started to skyrocket. So 3.2kW appeared to be the magic number. But I knew based on my electric bill that I could use up to 10kW, so I decided to consider two sizes for quoting, one at 3.2kW and one at 5.0kW. In the end I went with a system very close to 3.2kW because the break I got in $/kW for the larger system was not worth it. I still think it was worth looking at the larger system though, as the price break may have been worth it.

So for my case in Oregon a 3.2kW to 5.0kW system turned out to be a reasonable range to consider. Of course, your case may be different depending on your budget, desire to have a larger system, etc. Also, your power sweet spot will change depending on what state you’re in. You can find the power sweet spot for your own state by looking at the Database of State Incentives for Renewables & Efficiency. OK. We’ve got a good starting point for system size, that can be refined later if needed. Moving on to the next step…

 

Step 2 – Figuring Cost

In my quoting process (in Corvallis, Oregon, 2014), I found that for a typical grid tied 3.2kW system, the rough cost range was $3.75 to $4.30 per Watt depending on whether it was a straightforward or more complex installation. The price per Watt may come down for a larger say 5.0kW system.

IMG_4044

A Straightforward Installation

It’s worth mentioning here what I mean by a “straightforward” vs. “complex” installation. By “straightforward” I mean a situation with an easily accessible, low pitch, south facing roof, with only one array installed, and easy access to the electrical panel.
By “complex” I’m actually talking about my situation (pictures of green house at top of this blog) which was a multi-story house with a high pitch roof having many small sections, and requiring arrays on multiple surfaces at odd configurations.

Below I’ve tabulated the cost, tax credits, and rebates for each of these cases so you can see how these ranges break out. Mouse over the descriptions in the first column of the table, to get more detail.
 

Break down of cost, rebates, and tax credits for a straightforward system, and a more complex one. NOTE – this table uses the Oregon 2014 incentive of $1900/kW. The 2015 incentive drops to $1700/kW so if you want to save ~$600, get your system quoted and a contract signed in 2014.

Straightforward Installation Complex Installation
System Size 3.2kW 3.2kW
Cost per Watt $3.75 $4.30
System Cost $12,000           $13,760          
Total Credits and Rebates $11,200           $11,728          
      Consumers Power Rebate $1,600           $1,600          
      Oregon Tax Credit $6,000           $6,000          
      Federal Tax Credit $3,600           $4,128          
Net Cost to Owner $800           $2,032          
% Paid by Owner 7% 15%

 
 
When I first looked at this breakdown, I was amazed that the cost to owner is such a small fraction of the full system cost – as low as 7% for the Straightforward system, and still very low at only 15% for the Complex system!

There is one catch though, you have to front the cash and get your tax credits and rebates later. For my case, the power company rebate was within a couple of weeks after installation. My Federal tax credits will come in 2015 with my next Federal Tax filing, and State rebates are a maximum of $1,500 per filing over 4 filings, so that will take almost 4 years to get back.

So you do have to think a bit about cash flow. However, several options are available for this, including getting an interest free loan from Seeds for the Sol, special State sponsored loans, or even borrowing from your 401K and paying the interest back to yourself while your solar panels generate power!

I opted for the 401K loan as I considered my solar panels as an investment that provides a long term return. As I get my taxes credits and rebates back, I’ll pay the loan off. And since the state tax credits take 4 years, my plan is to reduce my State tax withholding over the next four years as a way to “even out” the cash flow and get that money flowing back to payoff the loan regularly. OK. Now you have some idea of the cost. Will this thing pay off? Let’s see…

 

Step 3 – Analyzing Benefit

PVWatts - a calculator for computing solar output

PVWatts – a calculator for computing solar output

I spent a lot of time figuring out how much energy I could expect my particular system to generate, and also to determine payback time. Toward the end of the project I learned that there’s a super easy way. Simply use the PVWatts calculator (calculator screen capture shown right) to estimate annual energy production, compute annual savings, and figure out how long it takes to pay back the net cost to owner.


Quite a bit of detail goes into this calculator, including geographic location, panel tilt/orientation, module type, inverter efficiency, and more. Instead of dragging you through every input used in the calculator, for brevity I show the summarized results below. If you are interested in more detail, I do provide all my PVWatts inputs with explanations in my blog PVWatts Model for my Solar Panels.

OK. Bottom line view is that for our examples, the payback range is from under three years to just over six years – pretty good.
 

Payback time and savings for straightforward and complex installation

Straightforward Installation Complex Installation
System Size 3.2kW 3.2kW
Net Cost to Owner $800 $2,032
Est Annual Energy Production 4,025kWh 4,025kWh
Annual Savings @$.082/kWh $330 $330
Payback Time 2yrs 4mo 6yrs 2mo
Net Savings Over 30 Years* $8,008 $6,923

*adjusted back for typical 0.8% loss of original power capacity, each year, for 30 years
 
 
A note that the payback time I computed above is for a customer of Consumers Power which has an extremely low rate for electricity at 8.2 cents per kWh. This is lower than the average in Oregon of 10.7 cents per kWh, so the payback time could be substantially lower that illustrated above, simply because you’ll save even more if you’re paying more than 8.2 cents per kWh today. Any way you slice it, it’s a great deal!

By the way, solar panels don’t have to be ugly. Checkout the view at the front of my house by clicking on the image below. Most folks don’t even notice that I have solar panels, even though they are on the front of my house. In a future blog, I’ll talk about ways to make your panels fit in with your roof, so that they don’t look obtrusive.

front view house

Happy Solar Designing!
Brad

Additional Resources
State and Federal Tax Credit Incentives
Energy Trust of Oregon Rebates
Consumers Power Solar Rebates
Oregon Residential PV Tax Credit Application
Financing Option through Seeds for the Sol

Flyer
If you’d like to share a hard copy of this blog contents with folks, this solar design flyer captures the contents in a compact and easy to follow two page format (print double sided). Feel free to print and distribute.

Comments Welcome!


2 Responses to “Sun Energy for YOU! Easy as 1-2-3!”

  1. bchung Says:

    Hubba Hubba Miss S

  2. Susan Chung Says:

    Hi Bradley!! This is amazing! xox
    Miss S