Solar Panel is a hot topic these days. It's been on my radar for a while, especially now there is a new solar panel company in town (thanks Instagram for creeping on my google search). My social media channels are filled with green energy advertisements and people rave about how they should limit their carbon footprint (first of all you should be stop driving your F250 pickup to work, Robert, you disgust me).
Here's the basics of my understanding of Solar Panel and its financial impact. I set up a calculation to show you how many years it will take for you to break even, and you can use this to decide whether or not it is worth it to do it now.
1. Figuring out how much kwatt you will need
You can use this estimate tool PVWatts to figure out how many kwatt you need from the solar panel to be completely independent from the utility companies. After entering your zip code, you should be able to see "SOLAR RESOURCE DATA" in the next page. Click on "go to system info" on the right hand side and get more details on your zipcode.
So based on this analysis, it seems to me that I should have at least enough panels to harvest 4 KWatt overall to break-even from the utility companies. Side note: this is actually surprisingly accurate based on my monthly electric bills.
2. How much does it cost to put in solar panels?
Mr. Money Mustache built his systems around $1.08 per watt - which is super cheap. By his dollar per watt ratio, I should be looking at $1.08 * 4,000 watts = $4,320.
But reality check hits me like a giant frying pan on the head. I called one of the local companies here, and they gave me a quote of wapping $21,000 for a 4 kwatt system, claiming that I only have to pay $87 a month and pay it off in 25 years. WOW! Maybe they think I am made of money, or stupid, or BOTH! 25 years of paying the solar company instead of the utility company? Why would I ever do this to myself and dig myself a giant hole in debt?
I followed Mr. Money Mustache's link to a DIY website where you can purchase the solar panel kits and install it yourself. The panels for 4 Kwatt is $6,300 and I am estimating labor cost (of hiring a handyman to install this panel with me) will probably cost me between $500 - $2,000 which brings my dollar per watt close to $1.50.
($6,300 + $500 installation) * 70% (tax break 2019*) = $4,760 / 4,000 watts = $1.19 per watt
($6,300 + $2,000 installation) * 70% (tax break 2019) = $5,810 / 4,000 watts = $1.45 per watt
*There is a tax credit of 30% of the solar credit. IRS form 5695 for residential energy credit. This credit will be phasing out from 2020 onward. Tax credits are "dollar for dollar" off the tax bill you owe to the IRS, so it is correct to be thinking that 30% of the solar installation and material costs per IRS instruction.
3. Break-even point
This is where the important part of calculation comes in to decide whether it is worth it for you.
Cost of the system / annual electricity bill = Break-even years
$5,810 / $908 = ~6.4 years
In the grand scheme of things, this is actually a good number to have. You want the number of years break-even to be as short as possible by lowering the cost of the system (not by increasing your electricity bill!) However, in my situation, I am not planning on staying in this area for more than 3 years, and keeping as rental with solar panels may be hard to maintain. Once this house becomes rental property, the tenant will be responsible for the utilities. Therefore, I would be investing this money into saving someone else's utility bills.
Of course, the house you buy may be a permanent resident of yours. In that case, I think solar panels are a great idea this year considering the tax credit is phasing out.
4. What not to do:
There are other steps to be considered if you decide to make this a DIY project (and it will be cheaper and more rewarding I am sure). Here's more details from MMM on obtaining a permit, and you may need to hire an electrician at the end to connect the power harvested by solar panels back to the city grid.
Overall solar panels are a great way to reduce electricity bills (just electricity, nothing else!). There are many other ways to conduct an audit of electricity usage in a house. By just looking at my electricity bill trend, it is very easy to notice that I have spikes in the summer and winter for using my A/C and Furnace. Having cutting that out, and reducing the time relying on the AC to cool your house in the summer, and furnace to heat up in the winter, this will reduce my annual electric bills by half, alone.
Happy sunbathing :)
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