Rate of Return 1

[WSUgrad]

I have a Solar Panel installation project. The initial cost of the system is $19,000. About 2 months after that, I will receive a credit from the power company for $12,500. About 8 months after that, I will receive $5,700 federal tax credit. Then every month for the next 20 years I will receive payment from the power company averaging about $50/ month.

I would think my rate of return would be (12500+5700+(50*12*20))-19000/19000 = 58%.

Are my calculations correct? I keep thinking it should be more complicated.

 

[VEBill]

I keep thinking it should be more complicated.

It is:

http://en.wikipedia.org/wiki/Time_value_of_money

 

[MiketheEngineer]

I don't know about ROI - but after 16 months it has paid for itself and you start pocketing $50 every month.

Where do I sign up??

 

[IRstuff]

Guaranteed breakeven at 16 months is sweet. Is that in addition to whatever savings on your power bill?

TTFN

FAQ731-376
Chinese prisoner wins Nobel Peace Prize

 

[WSUgrad]

Yes...I will break even at 9 months actually. I already have the panels installed. I live in Michigan and am served by Detroit Edison. If you're interested we can chat about the program.

Basically DTE (detroit edison energy) paid me $2.40 / watt installed.

I have a 5060 watt system installed - so I got paid by them $12,144 and an upfront renewal energy credit. This is a renewal energy credit and not considered income by DTE - NO 1098 issued. Basically this is as opposed to paying me $0.30 / kWh generated (see 2 paragraphs down).

Federal tax credit of 30% of system cost = $5,700.

Then DTE pays me $0.11 / kWh I generate. On average I'll generate 6200 kWh's / year ~ $600/year in credits. This is also not considered income and is not taxable. At least by DTE's interpretation today.

The $0.11 never changes over 20 years, per my contract.

 

[WSUgrad]

To answer IRstuff question:

I get paid for what I generate $0.11/kWh even if I use it!

I also get a credit on my bill for electricity that I generate that I don't use.

On months I use more electricity that I produce, I either eat from my $ credit or Power Credit Balance.

 

[VEBill]

Start with the $19,000
Pick your applicable interest rate
Add 2 months carrying costs on the $19k ($250-ish?)
Subtract the $12,500
Add 8 months carrying costs on the new balance ($500-ish?)
Subtract the $5,700
Left with net investment (at that point in time)
About $1.5k ? (YMMV)
Returns $50/month
About 35% ROI (ballpark, varies with assumptions)

You should also consider risk of delays and how that might impact the return. But from here, it seems like a no-brainer.

Also, presumably the $50/month doesn't wait. It would start immediately upon installation, right? That helps.

 

[WSUgrad]

Example:

I generate 600 kWh this month. = .11 * 600 = $66

I use 600 kWh = 0 from DTE = $-66.00 bill from DTE.

Example 2:

I generate 600 kwh = $66.00

I use 700 kWh = 700-600 = 100 kWh net = 100 * .13 (cost per DTE kWh) = $ 13.00

Net Bill = $66 - $13 = $-53.00

Example 3:

I generate 600 = $66

I use 400 = 600-400 = 200 kWh banked for next month.

Bill = $-66 and also credit for 200 kWh to be used the next time I use more than I generate. The banked power is used up before the $ credits.

 

[VEBill]

About $1.5k gets you $50/month.

Hmmm... x100:

Mortgage your house ($150k), slowly build-up to 100 systems (clawing back the rebates and credits along the way), and ultimately make about $5k a month doing nothing but dusting solar panels.

How much land do you have?

 

[WSUgrad]

Not enough!

My roof is about maxed out. I'm considering adding 8 more panels to what I have now.

http://img809.imageshack.us/i/october201051.jpg/

 

[MacGyverS2000]

Are those mail trucks I see in the background?

Dan - Owner

http://www.Hi-TecDesigns.com

 

[WSUgrad]

Indeed they are. I have a post office in my back yard.

 

[biff44]

I am curious, what happened this last winter? Did they cover up with snow and not work for a few months? Did the snow slide off? Did you have to clean them off?

I am thinking of putting a panel farm on my barn roof, but here in MA I had 3' of snow on the roof for a couple of months this year!

http://www.MaguffinMicrowave.com

Maguffin Microwave wireless design consulting

 

[itsmoked]

Maxed out?!?! I still see lawn.. You should be able to put 25kW of solar trackers out there.

Keith Cress
kcress -

http://www.flaminsystems.com

 

[IRstuff]

That looks to be common area, though.

TTFN

FAQ731-376
Chinese prisoner wins Nobel Peace Prize

 

[WSUgrad]

24.450 KWH July
23.621 KWH August
20.194 KWH September
18.704 KWH October
15.281 KWH November
6.40 KWH December
6.90 KWH January
15.906 KWH February

March will be my highest average month to date. Over the last 5 days, I've averaged over 30 kWh's each day. I'll probably average 28 kWh's this month.

so you can see the effect of snow on the panels in Michigan. We had a lot of snow this year compared to years past. There is a program you can 'google' called PV Watts. It basically lets you chose your region (over the USA) and then select the size of system you want, the azimuth bearing, and the angle (tilt) of the panels. It will estimate how much electricity you will produce. I've out produced the PV Watts estimate every month except January.

http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/

 

[VEBill]

24.450 KWH July
23.621 KWH August
...

These are KWH per day averages for the month?

 

[WSUgrad]

Yes...average per day per month.