Return on Investment to GO SOLAR!

While I’m waiting for the solar panels to be installed I’ve been thinking more about the economics of investing in Solar and what the return on my financed investment will be. Here is some information about the Return on Investment (ROI).

2.9 KW SYSTEM in Albuquerque, New Mexico

System Price $20,738
Fed Tax Credit (30%) -$6,221
NM State Tax Credit (10%) -$2,073
Net Effective Purchase Price $12,444

Assumptions:

My 2008 Electric Bill = $552
5% average yearly increase in utility rates
Annual SREC Credit from PNM = $720
Total Payments on $12,444 over 15 years at 6.25% = $19,200

Data:

Return on Investment (ROI) or Rate of return (ROR) is the ratio of money gained on an investment relative to the amount of money invested.

Return on Investment Information (25 Years)

Gain on Investment $27,749
Investment Term: 25 years
Return on Investment: 144.5%
Simple Annualized ROI 5.8%

Another interesting fact that I learned since going solar was that a recent study shows that the average homeowner gets $10 - $25 dollars for every $1 dollar decrease in utility bills. Thus, after my solar panels are installed and successfully tied to the grid, I should see the value of my home increase by $5,520 to $13,800. If going solar adds $10,000 to the price of my home then the Return on Investment would be as follows.

Gain on Investment $37,749
Investment Term: 25 years
Return on Investment: 196.6%
Simple Annualized ROI 7.9%

It looks like I’ll be getting an annualized 6 to 8% interest rate over 25 years on my decision to go solar. This number includes financing charges! Who knew that going solar could be such an amazing investment –both for my wallet and in our future!

For more information on going solar check out "Dear Solar Fred" at www.solarfred.com Solar Fred is very knowledgeable about the solar industry and has several articles to help you determine if solar is right for you.

Membrane Roof

This is a picture of the "membrane" or "vinyl" roof. The interior section is white and the exterior is tan -to match the side of the house. The white interior will reflect up to 90% of the heat that normally enters the home through the roof. This roof is also 100% recyclable. One of the best features of this roof is that it comes with a 100% lifetime material warranty which means that my roof is covered for as long as I own my home.

Roofing and Solar Mounts

Yesterday the Solar people came out to install the feet for the roof rack. Those go in before the roofers do their part. Now they wait a day or two for the roofers to finish up and seal around the rack feet. You can see the feet in this picture.

Picture of the House and Roof Prep

This is a picture of our home in Albuquerque, New Mexico. We are going solar this week and I'm going to blog the progress. I'll post pictures and information as the job progresses.

Its a 1950 Pueblo Style house (very common in this area) with a flat roof.

We are putting a new membrane roof on too -one that has a lifetime warranty so that we will never have to remove and reinstall the panels. The picture of the roof is where we are going to install the panels. They will face west (to the right in the picture). You can see where the roofers have started the membrane on the sides of the roof. The inside membrane will be white and will refelct 90% of the sun's heat. It is Energy Star rated!

Solar people are coming tomorrow -stay tuned for more pics and updates.

Financing - How did I pay for Solar?

After doing the math, it totally made sense to GO SOLAR. Now where to get the money for the up front costs?

Today I got approved for a Home Equity Loan through my local credit union -YES!

I was fortunate enough to have a good amount of equity in my home and good credit. However, coming to the decision to GO SOLAR was complicated by the fact that my PV Panels will be roof mounted. The problem is that if you roof mount your system on a flat roof like I have, you want to make sure that your roof is in good condition and won't need replacing for a long time. Otherwise, if you need a new roof, I was told that you have to re-install the entire system and I certainly don't want to do that. My roof was already at least 10 years old so I got a quote for a membrane roof with a lifetime warranty from BAC roofing here in Albuquerque. Two of my work colleagues recommended BAC and so we decided to roll the additional cost of the roof into the home equity loan. This added a considerable expense to the project but we were due for a new roof anyway and it didn't make sense to GO SOLAR on an old tar and gravel roof.

Terms for the loan are a 15 year fixed rate at 6.25% with no closing costs. With the $20,738 expense to GO SOLAR and the additional expenses for the new roof my expected monthly payment will be $301 a month.

Yea, I know... this is A LOT more than the $46 average electric bill I was paying, but I'm committed to doing this both for the financial incentives i will incur over the long haul and for the environment. I don't want to finance this thing over 20 or 30 years and there is the added expense for the new roof in there. The bottom line is that I CAN afford this, its a financially sound decision, and its something I'm passionate about. I'm thinking about the satisfaction I'll
get from knowing I'm doing my part to save our planet from global warming and waiting for the day that I can buy a plug-in electic vehicle (PLEV).

You might think I'm crazy now, but in 10 years (2019) when I'm driving to work on pennies a day and powering my home for almost nothing because my PV system has already paid for itself, I'll be glad I did it!

Jimmy Goes Solar

Once I heard that Congress passed the 30% Solar Tax Credit I started seriously thinking about going solar. For years I had dreamed of producing enough clean renewable energy to power my home and vehicle. Finally it looks like this dream is affordable and within my reach.

I'm starting with my home. We own a 1950 Pueblo Style Home in Albuquerque, NM. Its about 1900 sq. feet and we (JimmyMac, Johnny, and Skylar the Coonhound) use about 450 kWh of electricity on average per month.

I contacted a few Solar companies in Albuquerque for an estimate. This is what I'm going with:

I'm getting a 2.9 kW roof mounted Solar Photo Voltaic System installed for $20,738. This system will be grid tied.

* Solar Panels 11,347.00
* Inverter 1,999.00
* Roof Rack 1,182.00
* Installation -Labor 6,000.00
* City permit 60.00
* Utility Interconnection/App Fee 150.00
* New Mex. Sales tax (Solar is exempt) 0.00

So, I'll have to pay this $20,738 up front and then I'll see the tax credits next May -2010. Or I could start reducing my tax witholdings now.

Here is what the tax credits will look like based on the $20,738 cost of the system:

Federal Tax Credit: 30% $6,221
New Mexico Tax Credit: 10% $2,073

Cost of system after tax credits: $12,444

But wait! It gets even better. PNM, my electric company provides a .13 cent renewable energy credit for every kWh I produce -whether I use the energy or sell it back to the company. So, with that in mind look at these numbers:

The average monthlyPNM bill -that will now
be AVOIDED because I have solar. $46.00

The projected monthly Renewable
Energy Credit that PNM will pay me. $60.00

TOTAL $106.00 a monthly benefit.

So .... you might be wondering how long before the system pays for itself? Here are the calculations.

$12,444 (cost of system) / $106 (monthly benefit) = 117.4 months to pay for itself.

117.4 months = 9.78 years and the system pays for itself!

If the PV system lasts 25 years thats roughly 15 years of free clean renewable electricity which will pay me $60 a month. Over 15 years thats $10, 800 dollars in my pocket.
Who says solar isn't affordable?

Stay tuned for more updates on Jimmy goes SOLAR!