Let’s start off with an example of a home-owner and his 400kWh/month electric bill. [To put this in perspective, check out your own most recent electric bill – see Electrical Audit for more info].
400kWh/month is about 4,800kWh/year. A simple, roof-mounted solar electric system that can provide 4,800kWh/year will cost about $20,000. With today’s NH rebate ($4,500), and the federal tax credit (30% of the total job, $4,650), the out of pocket cost for this home-owner would be about $10,850.
In NH we pay about $0.16/kWh to our utility provider. At that rate this solar electric system would provide a savings of 4800kWh/year * $0.16 = $768 in the first year. In subsequent years, the savings will be higher based on the cost of electricity which has been going up at about 5%/year over the last decade. So that increase is figured into the rate of return spreadsheet (below).
Solar electric panels have a warranty of 25-30 years. There will be some maintenance needed along the way and probably a new inverter after 12 or 15 years, so those costs are added to the spreadsheet.
Finally, I let excel do the internal rate of return (IRR calculation) at 25 years.
Almost 9% rate of return on this investment! As a comparison, here are some returns you can get from other investments over 10 years or longer (from tiaa-cref.org website):
|Stock Market||6-7% long term; 2.4% between 2000-2010|
|Money Markets||1.8% 10 yrs; 4% since inception|
|Global Equities||3.2% 10 yrs; 6.5% since inception|
|Bonds||5.0% 10 yrs; 6.7% since inception|
|Real Estate||3.8% 10 yrs; 5.6% since inception|
|Bank CD||0.3-1.1%, short term|
Even if you need to take out a home equity loan or refinance your mortgage to get this investment (say at 4%), you are still making a 5% return.
Not only that, but you don’t have to worry about the cost of your new fuel source… it will be 0$ for as long as you live. We will not argue, negotiate, or go to war with other countries to get a larger share of the available solar energy…we will not alter the earth’s air quality or global temperatures by using this energy.
Especially in this turbulent economic time there may not be a safer, more stable place to put away some money.