I was talking to Peter, a friend of minewho lives in San Diego, who was finally considering solar now that theeconomy seemed to be back on track.
We established that he had a roof that was in good shape with plentyof golden San Diego sunlight shining upon it and facing South West, andthat he had an electric bill that averaged around $1440 a year or $120 a month. Pete got a quote back from our new solargroup purchasing partners at One Block Off the Grid (1bog). (Theseguys pre-negotiated a hugely discounted deal for everyone in San Diego who signs upthrough their program. I’ve written about the type of savings here fortheir San Antonio, Texas program. New Jersey savings? Forget about it. )
Anyway, the numbers looked good, but Pete wasn’t sure whether to gowith a small, medium, or large solar system. That is, when 1bog givesits solar estimates through its solarcalculator, it gives consumers three choices for estimates.
For Peter in San Diego with a $120/month averaged electric bill,his choices were:
|Size||Upfront Costs||Net price after all incentives||Years to Payback||Offsets % of Electric Bill|
|Small 13 Panels|
(2600 Watts DC)
|Med. 20 Panels|
(4000 Watt DC)
|Large 27 Panels|
(5400 Watt DC)
So, on first glance, Pete was thinking let’s go for the smallestsize, because this is the lowest upfront cost. I could see how that wasattractive, but there are several factors that Pete was missing:
1) The small system only offsets 61% ofPete’s electric costs. So, almost 40% is still subject to utility ratehikes, which everyone knows is going to go up over the life of his 25years or more of solar. (Yes, solar lasts 25 years, often longer.)
2) Based on a 6% annual utility rateincrease per year, the small system pays for itself in 7.2 years. But in just another year—or year and half for the largest system—Peter canstill get paid back for his solar investment and have up to 97% of electricity costs covered. That leaves a measly 3%left to the whims for San Diego Gas & Electric rate increases.
3) Regarding the initial up front costs:If you’re talking about a home equity loan paid over 30 years at 8%interest, Pete’s monthly loan payment is going to be about $60/month for the small solar system. For the medium, around $95/month. For thelargest, it’s going to be about $130/month.
Now, Pete was saying that $130/month is more than his currentelectric bill, but then I reminded him about the payback time period: In around 9 years, his electricity is going to be 97% free and 97% rateincrease-free, for the next 17 years, except for the inverter replacement cost in 12 to 15 years.
Of course, the inverter replacement costs are chump change comparedto the long term savings: Over 25 years, according to the 1bog quote,Pete’s going to save about $70,000 with the largest system, and around$45,000 with the smallest. Big difference. And we didn’t even go intothe expected home value increase thanks to the solar, or other bonus incentives, likeSRECs.
The point here is that as Americans, we have to think more longterm. I know it’s always tempting to go for the lower upfrontcosts, and any solar is better than no solar, especially for theenvironment. But if you look at all the numbers when you get a quotefrom 1bogor anyone else, you’ll see that a little more upfront costs pays youback a huge dividend in the long run.
If you want to see your very own, free,nobody-will-call-unless-you-ask-for-it, solar quote from 1bog in SanDiego or your city, try their solarcalculator. As for Pete, I think he’s going for the medium package.79% free electricity ain’t bad either.