Thursday, February 3, 2011

Electricity Cost Savings Example over the Life of a Home Solar Panel System

As you may know from my previous post Sarah and I installed a 2.7kW solar panel system on our home last year. The system is warranted for 30 years (which is written in the contract). Our total out-of-pocket cost for the system (after utility rebates, and state and federal tax credits) was $9,030. I have run the numbers to show the actual cost savings of our system.

This year our panels displace $70 per month in electricity, or $840 per year
Next year: $74.20 per month or $890.40 per year
Year 2: $78.65 per month or $943.80 per year
Year 3: $83.37 per month or $1000.40 per year
Year 4: $88.37 per month or $1060.44 per year
Year 5: $93.67 per month or $1124.04 per year
Year 6: $99.29 per month or $1191.48 per year
Year 7: $105.28 per month or $1263.36
Year 8:  $111.60 per month or $1339.20 per year

The payoff period for our solar panels is right around 8 years (a bit less actually).

Now, this is when the real savings begin.

Over the next 22.5 years we will have free electricity. That is, we will have been paid back for our initial investment and, over those 22.5 years, we will displace a lot of money.

Let me get my calculator again…

Utility costs displaced by our solar panel system from years 9-30:

Year 9: $1419.60
Year 10: $1504.75
Year 11: $1,594.24
Year 12: $1,689.90
Year 13: $1791.29
Year 14: $1898.77
Year 15: $2012.70
Year 16: $2133.46
Year 17: $2261.47
Year 18: $2397.16
Year 19: $2540.99
Year 20: $2693.45
Year 21: $2855.06
Year 22: $3026.36
Year 23: $3207.94
Year 24: $3400.42
Year 25: $3604.44
Year 26: $3820.71
Year 27: $4049.95
Year 28: $4292.95
Year 29: $4550.53
Year 30: $4823.56
Total: $63,000

Total electric bill savings after the system payoff (year 7.5) is $63,000…WOW!!!

And, there are solar panel systems out there still going strong after 30 years.

Now, what are the opportunity costs of investing that $9,030? That is, what would happen if you invested that money somewhere else? You could of course invest in local utility (APS) stock, and (if you are lucky) stay neck-and-neck with the rising costs of electricity (ca. 6% annually). You might make a decent return, but that return would be eaten up as your rates increase (as they always will).

Have fun,


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