My Solar Panel Economics Keep on Crushing It

My Solar Panel Economics Keep On Crushing It

Hello everyone! I hope you are doing wonderful today. Another year is in the books and the solar panel economics keeps rolling. We are well on our way to making our money back, we love not having a monthly electricity bill anymore, we are doing amazing things for the environment, but one thing did change pretty drastically in 2017!

Oh, I almost forgot…remember the total solar eclipse back on August 21, 2017? Well keep reading to see the fascinating impact on my panels!

Background

It has been a while since I updated everyone on my solar panels so a bit of background info is in order. I bought my panels back in 2015. They were hooked up and running in late November so on a full year comparison basis I have 2016 and 2017.

Energy Generation

Energy generation is straight cash, homey! I’m loving the sunny days all the more and the gloomy days less and less. But month over month the solar generation has remained fairly steady.

Solar Panel Economics

This chart clearly shows that the summer months are for peak generation, but let me share a few fun facts. First, and probably most obvious, is that the panels generate more energy when the days are longer and there is more sunlight.

But I have two slight nuances to share.

First, is that the summer months also benefit from the sun being more directly overhead. This demonstrates the importance of living further south and closer to the equator. Slightly detracting from that benefit is the efficiency of the panels though. And that’s the second nuance, the panels are most efficient in the moderate Fall and Spring temperatures. The panels don’t convert as much sun to energy in strong heat.

That’s why there isn’t as much of a difference as I would have expected from March through October. But there is a much more clearly defined drop-off in November through February!

Sunlight = Money

Energy is cheap in North Carolina which actually makes the return on investment profile less significant. Think about it, if you live in the Northeast where it may cost 20 cents or more per kWh, the benefit of solar provides a bigger opportunity for cost savings. The same kWh is “stretched” further.

So unfortunately North Carolina has some of the cheapest electricity in the country at approximately 10 cents per kWh. This makes the math simple though. In 2016 I generated 6,043 kWH and 5,898 in 2017 which equates to roughly $604.30 and $589.80, respectively.

My panels cost upfront about $18,816. Huge investment huh?! Well thankfully I didn’t actually drop that much…I had the benefit of the generous State and Federal tax credits which picked up all but about $8K!

My return on investment could be calculated to be ~7.5% using round numbers (~$600 / $8,000). But I think that is actually conservative because the value of the panels in terms of resale (if/when I sell the house) will be more in line with the $18K upfront cost (resale value of solar panels is extensively documented via comparable sales).

Not too shabby, but maybe not compared to the opportunity cost of investing in the market based on my 2016 investment performance and 2017 investment performance. Oh well…

Energy Usage

How about the behavioral change that solar panels has brought on? I should point out that North Carolina doesn’t allow for credits to carry over from one month to another indefinitely. They do carryover, but every year on May 31 the utility company resets any carryover balance to 0. This keeps folks from putting far too many panels on their roof than they actually need and therefore you can’t send your utility company a bill for the extra power generated and put onto their grid! J

We knew the May 31 cutoff was coming in 2016, but we didn’t fully appreciate how much energy we were generating in April and May that we wouldn’t be using and therefore at risk of losing. That first year we got burned pretty good, losing around 900 kWh of energy which would be valued at approximately $90. Ouch!

In 2017 we got smart! We’re done getting bent over by the energy company so we made sure to use plenty of energy before the cutoff (let’s just say the house was at a comfortable temperature…). Can you tell by our energy usage chart below? No kWh credits lost in 2017!

A Total Eclipse

Last, but not least, I thought it would be fun to touch on the solar eclipse! We live in Charlotte which was almost directly along the path across the US that the eclipse was running. We had 98% coverage of the sun at 2:41 PM on August 21, 2017. This date is actually easy for me to remember as that is when I started my new gig

The nice things about my SunPower solar panels is the sweet app it comes with which allows me to check on my panels in real-time. Yes, by the minute energy generation if I am so inclined! So take a look at what happened during the eclipse…but for safety wear the special solar eclipse glasses..:) Crazy huh?!

Green and More Green

Sorry, did I say the eclipse was the last thing I was going to cover. Well how could I forget about the environmental impact of solar panels?! I’m saving green and more green! Since installation in late November 2015, I have certainly made a pretty good impact on reducing my carbon footprint. The lifetime savings in the chart below are BIG and it has only been just over two years! Just think the good these panels will bring over the 50+ year life! It’s a good feeling to make a solid financial investment in solar panels, but also an investment in the environment!

Final Word

You’re thinking “seriously, I thought the eclipse was the last thing…”!! Well the final word today goes to a recent headline I saw on how North Carolina residential electricity rates will be going up 6.2% this year (just like every other year…). This equates to over $60 for the average household annual utility expense! So glad I don’t have to worry about it…!! Solar for the win! And that’s the final word.

Thanks for taking a look!

The Green Swan

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21 Comments

  1. This is great stuff! I’m also planning to install solar panels on our house in the next few years (energy is quite expensive here, around 0.23c in USD). Unfortunately in the Netherlands the amount of sunshine is not that optimal plus our roof also not faces the south. I hope the efficiency will improve further meanwhile.

    1. Good for you! If your roof faces the south that is ideal. You should be a prime solar generator. You should see if there’s a local solar company/installer who will give you a free estimate and review of how much solar you could generate. That’s what we did here and it was very informative. We are lucky to have a southern facing roof!

  2. This is so awesome!!!

    I can’t wait to have a house – I plan on having my own garden, solar panels, and any other GREEN modifications that are possible.

    Would be great if by then there was some type of water purifiers too, so everything in my house was free for the people in it 🙂

    1. That would be awesome! I wonder if there’s a water purification system you could use with water collected from a rain barrel? I might have to look into that! Thanks.

  3. So inspirational! We live in Southern California and have been thinking of getting solar panels. But we’re hesitating because our roof is older, and we’re thinking of doing an addition in a few years that would change the roofline. But because of this post, I finally sat down to research the rates–average of 15.5 cents for the first 500 kWH and 19.5 cents for the next 500 kWH. That’s farther than I’ve gotten before–thanks!

    1. My roof was also older so I preemptively replaced it. One thing to consider is whether the cost for you to replace or modify your roof will also be applicable to state and federal tax credits. I think ancillary costs like that can be included when necessary to install panels. But it would be worth checking with your CPA and the local solar installer. Best of luck!

  4. Any post that includes a Randy Moss quote is good in my book. We currently live in a townhouse and I don’t think out association would approve for us putting solar panels on the roof, but this is definitely something I’m looking into if we ever move.

    1. Ha! I didn’t even realize that was a Randy Moss quote… But I like it!

      That would be an interesting question for the townhouse association tho. But I wouldn’t put them up necessarily if you didn’t view that as a long term living situation. Might as well wait until a more permanent residence.

  5. WHAT?? Can we talk about this, how do I get solar?? We are in Durham NC, so… I’m thinking similar rates are highly likely. Mostly I’m interested in how we get credits to cover most of the cost, and what “resale” sites you are talking about… does it make the house worth more when you sell, or do you mean you pull the panels back off the house and sell them seperately? Fascinating, thanks a lot for sharing!

    1. Unfortunately for North Carolinians the state didn’t renew its tax credit after it expired in 2015. So only a Federal credit still exists today which changes the economics pretty significantly. Sorry! NC went from one of the most hospitable states for residential solar to average or below average now without the credit!

      I’ve seen estimates that solar panels will increase the home value by 12x the annual utility cost savings. Homes reselling with panels is still relatively in its infancy, but hopefully that’s still an accurate ballpark estimate.

      If there is anything else I can help answer let me know! Best of luck!

  6. My city in VA is currently in talks with Solar City as to how or if they’ll do buy-back. I’m waiting to see what they come up with and if it’ll be worth it. You’re rockin’ it!

    1. Awesome! It’s definitely going more and more mainstream. Hopefully it works out for you. Let me know if you have any questions!

  7. Not to be nit picky but shouldn’t your ROI take into account depreciation of the panels? I mean your assuming they add more then 8k to value of your home now. But if you live there as long as their useful life, say 20 years, the value still drops to 0.

    1. Great question FTF! See Michael’s comment below. He beat me to it and he’s spot on. Very little depreciation with these panels. Plus the annual increase in utility rates of 5% or so acts as a buffer to depreciation and may actually result in a higher return in future years.

  8. Great post, we installed solar in 2010 and helped a few clients do the same. I can add a few things.

    1. Roofing costs cannot be included when claiming the Investment Tax Credit (ITC). This is a high abuse area and the IRS know what install costs should run. Do not risk a tax nightmare to save a few dollars.

    2. Solar PV panels are warrantied for between 20 and 25 years depending on the manufacturer. Panels produced in the 60’s are still generating electricity. Today panels have much better glazing and manufacturing than the 60’s panels. It will be three decades or more before a homeowner will need to worry about depreciation, plenty of time to recoup their investment and make a nice profit.

    3. 2018 is the last year to take the full 30% ITC. Unless changed, starting in 2019 the ITC will be reduced a few percent each year.

    1. That’s awesome Michael! Thanks for the very helpful comment. Along with point number two, another offset to depreciation is the fact that your ROI will improve as utility rates go up because that means your saving more money per KWH.

  9. Hey JW! I’d thought of this for our house, but man, in Minnesota, it really is a slim margin of return. I might reconsider if I get the nerve to do my own installation. We’ll see. Until then, we’re just pretty good about keeping our usage as low as possible. Roughly, $55 a month or so.

    1. Yeah I hear ya, might be worth keeping an eye on though as the panels become more efficient / cheaper to install. Or maybe you wait and grab some Tesla solar roof panels…but those are super expensive right now!

  10. I am late to the party but, you said you turned up the heat to burn your credits that you lose. If you are really doing to for the environment then maybe you should rethink turning up the heat, 50% or more of CA energy comes from fossil fuels. Also solar is going to be and is one of the biggest waste disasters of our time. See articles from Japan that say solar waste is worse than nuclear.

    1. Thanks for the insights, Rick. I’ve thought I’ve been doing fairly good reducing my environmental footprint (including going vegan) but there’s always room for improvement.

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