Solar Photovoltaics


The most common question people ask about solar power is how long it takes to pay for itself. The standard answers range from 5 years to 15 years, which seems like quite a large range, but the truth is the range is even larger. Under very common situations solar power systems will pay for themselves immediately, with the owner having never gone out of pocket for anything and on the other hand, in some cases, mainly because of poor site location, a system may take a very long time to pay for itself.

The analysis of the financial return on your investment in solar electric power will depend on many factors, some of which are: site characteristics, current electricity rates, size of the system, financing, projected changes in electricity cost and system maintenance (primarily washing off dirt, removing debris).

As an example a 2000 square foot home with fairly high electric use (air conditioning, pool equipment, spa) in the south bay area of Southern California had an average electric bill of $327.11 in 2006 with an average usage of 1400.42 Kwh/month. In this area approximately that amount of power will be provided by an 8.4 KW solar array. Prices vary based on the current cost of equipment and the physical characteristics of the property, but a good estimate for this system is $30,000 after rebates.

The first question about the economics of a PV system is usually "how long until the system pays for itself?" In this case the simple estimate would be about 8 years. If you simply bought the system with cash, and your usage stayed about the same, and the utilities rates for power didn't change, you could expect to achieve payback in about 8 years and at the end of that time have a system which will provide the homes power for decades to come. This will benefit you whether you live in the home or not as energy efficient improvements have been shown to be very effective at adding value to your home.

Perhaps a more effective way to pay for your PV system would be with a home equity loan. If you can borrow that $30000 at 7% interest payable over 30 years your monthly payment for that loan will only be $200. That means that you will have your PV system installed and the only thing you will notice is that instead of paying an average of $327/month for electricity, you are paying $200/month on the home equity loan. Your actual monthly savings would be approximately $115 as you will still have a hook up charge with the utility for power. If you put that $115 into an account that gives you 5% interest, here's what your $115 a month would look like:`

Of course this is a bit of an oversimplification. There are several other factors which will influence the long term economics of solar, some of them being costs and some of them savings. Rates can change one way or the other. Which is more likely? If electricity rates go up, your saving will be greater. Over the long term the efficiency of the modules decreases slightly. Most models are warrantied to perform at somewhere around 80% after 20-25 years. The panels need to be periodically rinsed off and kept free of debris. The inverter will likely need to be replaced after about 15 years. But, don't forget, after 30 years, having made money rather than paid for the system, there will likely still be an operational system that adds value to your property.