ThinSkin writes
"Slashdot readers may recall Loyd Case's series of articles illustrating his experiences after switching to solar power for his family home. Loyd shared his one month update, a six month update, and now finally concludes his series after one year of solar power. Despite the $38,000 initial cost for the setup, Loyd is very optimistic after a $3,000 savings in one year, meaning that in about 12 years he will break even — though he suspects ten years is a better estimate considering other factors. Other reasons such as feeling 'green,' increasing the property value of his house, and the 'spousal acceptance factor' all support Loyd's decision on why he'd do it all over again if he had to." The article is spread annoyingly over multiple pages, like everything at the site, and the
print version omits the graphs.
Return on investment (Score:5, Insightful)
ROE is a much better way of calculating economics than "payback time," by the way
Re: (Score:3, Insightful)
A little off topic: If I went to any business today and promised them a 10 year ROI, they would laugh. In this economic climate 1-2 year ROI seems to what they are willing to risk.
A ten year ROI? (Score:3, Funny)
I don't think return on investment is measured in the units you think it is measured in.
Re:A ten year ROI? (Score:5, Insightful)
Exactly.
It means Return ON Investment.
Not Return OF Investment.
No money will be saved on this scheme until AFTER 10 or 12 years.
However even this is optimistic, because what is eventually returned on this investment will be worth far less than an equivalent amount today.
Further, maintenance costs will start to accrue well before that, and replacement parts will be needed for stuff that was obsolete the day it was installed, and may not even be available then.
There may be better equipment and cheaper equipment then. But more likely the failing part will be some obscure little piece requiring the replacement of some expensive big piece.
This is the risk of buying into a developing technology. The payoff is a long way down the road. Usually beyond the next generational change in the technology.
Still, it takes people like Loyd to go out there and do it with what is available, because we can't wait for the perfect solution or we would all still be living in Caves.
Parent
Re:A ten year ROI? (Score:4, Informative)
I'm in a situation where I'm not looking for ROI - I'm off-grid, and getting the mains connected has been quoted at AUD$33,000 PLUS tree-clearing costs. My latest upgrade (new 1320ah battery bank, 6x165w panels, regulator, frames & installation) cost AUD$23,000. It was subsidised at 50% so we only paid AUD$11,500, but even if it wasn't, it's still cheaper than getting the mains on.
Parent
SOLAR PANELS ARE CHEAP AND EASY TO REPLACE!! (Score:4, Interesting)
All I keep seeing around here is the depreciating power generation of solar panels... blah blah blahh...
It takes maybe an hour of your time, and ~$100-200/panel to replace 20 panels.
If in 15 years, he buys new panels, with better efficiency, for 4k, and an hours worth of his time, he's just reset his investment with a MUCH better payoff. The cabeling, and inverter will not fail that fast. The inspection won't change for a replacement. There'll be virtually 0 costs.
I have 600w of grid tied, net & production metered solar on my house. The coolest part? I did it for almost nothing. Bought everything on E-bay. Hardest part was complying with code, which looking back was really just a mere nuisance.
This isn't rocket science. If you pay someone to do it, they have to charge a ton because they are
1. Licensed electricions,
2. It's a business
3. they require certain bonds and insurances.
If you do it yourself (can you understand parallel & series circuits and do you know how to count, add, multiply, etc volts, amps & watts? you're qualified!) to your own house, you can get a system for MUCH less than 50K. bonus as your ROI is better, even better is that it makes more extreme lattitudes viable.
It's not ton's of $, but it does keep the house cool.
Parent
Re:SOLAR PANELS ARE CHEAP AND EASY TO REPLACE!! (Score:4, Interesting)
Parent
Re:Return on investment (Score:5, Insightful)
Parent
Re:Return on investment (Score:5, Informative)
I spent $78k (with no loan, so no extra payback) putting solar panels on my house late last year. My highest bill (August last year) was ~$1000 and I was averaging ~$700/month over the year; my May bill this year was $49. I estimate payback for my system to be ~10 years or so. There's a few things to consider if you're thinking of doing it yourself:
We use a lot of electricity. This is a nice, green way to offset that and still have the toys I like (heated swimming pool, air-conditioning, pond in the back yard, server-room in the garage,...). Example: last month (1st May -> 31st May), the power production (I have the monitoring system all set up :) was 1,260 kWH. That matches nicely with our average 40 kWH/day with air-conditioning on. And if it's not being soaked up by your solar panels, it's just warming the roof and causing your air-con to go into overdrive... :)
:)
The payback calculation is pretty easy. Maintenance is essentially zero, so total cost including permits, installation, etc. was ($78k - $2k - $15k) = $61k. Savings per year are ~$6000. Payback in ~10 years, assuming electricity costs are static (unlikely) and after that it's all gravy
Simon
Parent
Re:Return on investment (Score:5, Funny)
It's called "we want electricity but we're going to protest any time someone wants to build something that produces electricity in our state because we're so super environmentally friendly that we'd rather drag power from halfway across the country from an ancient, smog and carbon spewing coal plant losing tons of power to transfer loss rather than build clean energy production in our own back yard".
Californomics - not for the feint of heart, the light of wallet, or the comprehending of basic math.
Parent
Re: (Score:3, Insightful)
...as long as the investment itself dosn't depreciate in value.
which in this case it surely will. In fact the way technological things change in general I would assume that his solar-power setting would have pretty much depreciated to some small fraction of 38k.
PS: I don't disapprove of this guy spending 38k on solar powering of his house even a tiny bit, but I think it is quite interesting to evaluate this stuff as parent suggested-
Re:Return on investment (Score:5, Insightful)
Ah, what? He's not reselling the damn thing, he is making money off of it every month. So what if it depreciates, we were never measuring the value of the thing over time anyway. Though I'm guessing many of the components will not depreciate much, just the batteries and photovoltaics. Having his house set up to run off of photovoltaics will let him easily take advantage of whatever advances come along in module and energy storage. The power modules will last at least 30 years. See, he would never be reselling the thing independent of his house. The thing is a part of the house now, and the entire house will continue to appreciate. As people become more interested in solar, a house with solar already in place will appreciate faster.
Funny how so many people seem to want to find fault with solar energy, and use incomplete reasoning to look at only the possible negative consequences without looking at all the positives. Why do you think some people have such an irrational hatred of solar energy? I think the hippies are to blame. Nobody likes them, and they never fight back when you blame them, so I am going to go with definitely the hippies fault.
Parent
Re:Return on investment (Score:5, Interesting)
The system wouldn't just lose $760/year in value, it would also lose 2% in efficiency per year, which means that if he saved $3,000 the first year, he could expect to save only $2,940 the second, and so on (all else - electricity usage, cost of electricity, etc - being equal). The revenue stream then looks like this (over 10 years):
Year 0: Cost of $38400.
Year 1: Benefit of $3,000.
Year 2: Benefit of $2,940.
Year 3: Benefit of $2,880.
Year 4: Benefit of $2,820.
Year 5: Benefit of $2,760.
Year 6: Benefit of $2,700.
Year 7: Benefit of $2,640.
Year 8: Benefit of $2,580.
Year 9: Benefit of $2,520.
Year 10: Benefit of $2,460.
Value of system after 10 years: $30,400.
Plugging these numbers into the IRR formula gives you a 5.7% return per year.
If we make a slightly different assumption that the decreased output is geometric (not arithmetic) and still use the idea that the depreciated value equals the original cost times the current efficiency, then you can show that D + R = 7.9%, where D = depreciation rate and R = rate of return. So if you assume D = 2%, then R = 5.9%. But if D = 4%, then R = 3.9%, which is not great.
Doesn't sound to me like an obvious win for solar power. On the other hand, it's not an obvious money sink, either, so that's good. I'm sure things will continue to improve.
Would be interesting to see a subsidy-free comparison of both methods of electricity generation, but that's pretty hard. You can easily handle the consumer tax breaks, but how much do the producer's tax incentives affect the cost? And how much of his local coal/natural gas/hydro/nuclear generation is subsidized?
Parent
Re:Return on investment (Score:5, Informative)
It is an obvious win, because you are failing to compound the savings.
He can invest the savings on electricity each year and substantially increase his ROR.
The IRR formula does NOT account for the potential re-investment of interim cash flows.
Parent
Re:Return on investment (Score:4, Informative)
" Despite the $38,000 initial cost for the setup, Loyd is very optimistic after a $3,000 savings in one year, meaning that in about 12 years"
Might want to look up the lifespan of solar cells.
"Cost of Solar Panels ...
Solar panels have an effective lifespan of about 20 to 25 years, and their value and wattage output decrease steadily over time. The solar cell that has
www.solarpanelinfo.com/solar-panels/solar-panel-cost.php "
I have them too, but to be rigorous one needs to take their lifespan into consideration.
Parent
Re:Return on investment (Score:5, Informative)
Parent
Re:Return on investment (Score:5, Informative)
With the exception of the part where you said their output decreases over time, that's simply not true. Most of the current generation of solar panels guarantee a minimum of 80-85% output after 25-30 years, depending on manufacturer. That's in the warranty for the panels. If they fall below that level within 25-30 years, you get new panels. The effective lifespan before they produce no power at all is probably 100+ years, though most people would replace them with more efficient panels well before that time....
Parent
Re: (Score:3, Insightful)
Re:Return on investment (Score:5, Insightful)
If that ROE is reasonable, why aren't zillions of commercial solar farms popping up everywhere? Or at least co-located with the wind farms that are being installed?
That 7.8% doesn't factor in the risk. Most of the initial investment is unrecoverable. The 10-12 years for return on the principal is based on many variables, most of which are volatile and unpredictable. The specific technologies are relatively new and bring their own unknowns. He wins big if electricity costs skyrockets and solar/alternate energy tech stagnates. Those are unlikely to both occur. He loses if power gets cheap or solar/alternate energy tech has some rapid advances.
He has essentially exchanged his exposure to energy price fluctuations for host of new risks. The rate of return is pretty decent in today's economy, but not by a huge margin. At 5% or 6%, it wouldn't fly.
At least this means residential solar is nearing viability.
On the other hand, viable residential solar is not good news for the nuclear industry because of the political externalities involved. Large numbers of voters entering the energy generation business will sharply increase the nimby factor.
Parent
Solar panel longevity (Score:4, Insightful)
Industy Standard Warranties (Score:5, Informative)
Most manufacturers guarantee that their panels will give at least 90% of peak power at ten years, and 80% of power at 25 years. Yes, he's saving money.
Parent
Re: (Score:3, Insightful)
Re:Industy Standard Warranties (Score:4, Insightful)
Which is why solar is a good investment in those areas and not where you live.
Parent
No, he's NOT saving money (Score:3, Interesting)
Re:No, he's NOT saving money (Score:5, Insightful)
And what long term investment would that be that reliably makes 5%? If he had invested that $38k in just about any stock or mutual fund in the past year, he'd have lost at least 30% of its value.
Parent
Re:No, he's NOT saving money (Score:5, Insightful)
Also factor in taxes. If you invest and make $1000, you owe taxes on it. If you save $1000 there's no additional taxes as it was already your money.
Parent
Re:No, he's NOT saving money (Score:4, Funny)
This guy, Bernie Madoff, has a sure-fire guaranteed investment strategy that makes WAY more than 5% annually. He hasn't been returning my calls lately though, I'm sure he's just busy...
Parent
Re:No, he's NOT saving money (Score:5, Informative)
The last 70 years or so ago takes you from just after the wall street crash. That's probably not the most representative time frame. If you had invested just before the wall street crash, your investment would still have underperformed compared to a cash investment after all this time.
Parent
Re:No, he's NOT saving money (Score:5, Insightful)
Why people still routinely neglect compound interest I'll never know.
If he takes the $3000 he saves in electricity costs every year and invests that at 5%, he'll have $47,751.38 at the end of 12 years.
With your scenario, he has $68,242 but he will have paid $36,000 in electricity, leaving him with $32,242 if he "cashes out".
Personally, I'd take $47000 over $32000 any day.
Parent
RTFA (Score:5, Insightful)
Futhermore, Wikipedia has this to say about Solar Panels and how efficient they are at a certain time frame:
Solar panels must withstand heat, cold, rain and hail for many years. Many Crystalline silicon module manufacturers offer warranties that guarantee electrical production for 10 years at 90% of rated power output and 25 years at 80%.
http://en.wikipedia.org/wiki/Photovoltaic_module [wikipedia.org]
Parent
Re: (Score:3, Interesting)
I believe the $38,000 cost was for the entire conversion. I doubt replacement panels would cost that much. I think you're right that it would significantly extend the ROI, though. I think 12 years is optimistic.
Bad Math (Score:5, Insightful)
He sums the article up by claiming that his return will be sooner than 12 years based on changes in his electricity usage (like his daughter leaving for college). This is bad math. He would have changed his usage either way, so he can't really count those watts as impacted by his investment in the solar panels. Overall though it seems like he's getting a decent return on his investment.
Re:Bad Math (Score:5, Funny)
His return will be sooner than 12 years based on changes in his electricity usage (like his daughter leaving for college). This is bad math.
He installs big ugly solar panels on his roof, making his daughter decide to go away for college to get away from her dorky dad, which reduces electricity usage. I don't see what the problem is.
Parent
Re: (Score:3, Insightful)
He sums the article up by claiming that his return will be sooner than 12 years based on changes in his electricity usage (like his daughter leaving for college). This is bad math. He would have changed his usage either way, so he can't really count those watts as impacted by his investment in the solar panels.
Or he'll pump the surplus electricity into the grid, and get paid for it. That's ignoring the increasing cost of electricity.
Re:Bad Math (Score:5, Insightful)
You're forgetting one detail.
Before putting on PV panels, when his daughter leaves, he'd just use less electricity. After adding the PV panels, when his daughter leaves he can sell more electricity to the power company.
Adding your own generating capability means a reduction in usage is also an increase in sales.
Parent
Re:Bad Math (Score:5, Interesting)
Not it isn't.
The risks are different, but this is not without risks.
Panels could prematurely fail, and the provider go out of business leaving him with no warranty.
Price of electricity could fall, greatly extending his ROI.
Interest rates could climb, increasing the opportunity cost of his investment.
Far superior panels could be released next year.
Poor installation could lead to water damage to his house.
The possible risks are numerous, far from a guaranteed ROI.
Parent
Price of certainty. (Score:5, Insightful)
Re:Price of certainty. (Score:5, Insightful)
Parent
Re:Price of certainty. (Score:5, Insightful)
There are 3 types of systems for connecting to the grid:
Off-grid - self explanatory
Hybrid - can use battery power when the grid is out
Sync'd - they must be sync'd so that when the grid is out, the power from the panels is not used..otherwise you'd be trying to feed the grid yourself.
The last is the most common setup since the idea is to conserve electricity usage, not replace the need for the grid. If all the panels in a neighborhood were feeding energy into the, now dark, grid imagine the power company technician trying to work with the wires that are 'live' from the client side. They could shut off power from the distribution source, but it would still live from the residences preventing it from being safe.
I imagine it would be bad to run A/C stuff inverted from a variable DC line as well. If you are trying to run normal household stuff straight off the power output of the panels, as it gets later in the day, you'd start getting your own 'brownouts' in the house wouldn't you? And since this guys setup never produced more power than he needed it was always below demand.
Parent
Re:Price of certainty. (Score:4, Insightful)
I thought when the grid went down that synced panel set ups just cut them selves off from the grid, not that they cut them selves off from powering your home.
Parent
"Spousal acceptance factor" (Score:4, Insightful)
Most of the time, if you care for your family, that's the #1 factor in your decisions. Unless your ambition is one of those short-lived, Hollywood marriages.
SunRun (Score:3, Informative)
Affordable solar for little money down [sunrunhome.com]
If you live in CA, MA, or AZ, and have a roof with decent sun exposure, please check SunRun out.
I've got nothing to do with them; I just think they have a winning method of making the cash flow of solar very attractive.
If anyone is interested in a solar water heater... (Score:4, Interesting)
Overengineered waste of money (Score:3, Interesting)
He could've spent a fraction of that $38K to reduce his power bills to something closer to $100 per month. Better insulation, more energy efficient PSs in his computers, not leaving electronics on 24/7, change out to CF bulbs, and so on -- seriously!
He's going to hit Jevon's Paradox and end up not actually saving anything, IMO.
I'm more in support of community solar (have the HOA do it, or in a park, etc) which is more beneficial and lower cost. Mass solar.
I'm in my 5th year and have statistics (Score:5, Informative)
A lot of good that warranty is going to do... (Score:5, Insightful)
... if the company in question is still around to stand behind it. I get a laugh out of roofers that offer 50 year guarantee on roofs when they know full well they themselves are unlike to be around by then. A lot can happen in 30 years.
Parent
Re:Time value of money (Score:5, Interesting)
At the moment, though, you have to factor in the fact that we're about to hit some mondo inflation due to the money Obama's been printing. So, it's actually a good idea right now to get into things that aren't pegged to the actual dollars. This guy is basically buying his electricity up front before his $40k is worthless.
Parent
Re:Time value of money (Score:5, Interesting)
Except that we're not. Seriously off-topic, but inflation isn't unpredictable. Right now, the double-digit unemployment and positive savings rate we have suggests people are hording their cash, not shopping with abandon.
As soon as any of the indicators go up (these are pretty reliable predictors of activity), the FED simply filters the money out of the banks, rates go up for daily business paper and money is more scarce.
It's been managed this way for 3 decades, and fairly stable since 1983. Check for yourself. [measuringworth.com]
Parent
Re:Energy prices are unstable (Score:5, Informative)
But there's no hard guarantee. Sure there is. Go read up on Peak Oil. Then go read what anybody's doing about it. (Hint: Apart from mostly singular projects like the one in TFA, mostly jack shit.) Electricity prices will go up.
Except for the fact that only around 1.5% of the US electricity generation comes from the use of oil. Take a look here: Net Generation by Energy Source by Type of Producer [doe.gov]. Out of a little more than 4,000,000 MWH of electricity generated, about 65,000 MWH came from petroleum.
Parent
Re: (Score:3, Insightful)