Solar Green Power – Should you install a Photo Voltaic (PV) module in your house?




A couple of factors need to be considered to help decide whether it makes sense to install a PV solar panel:
  • Are you really going greener by doing so?
  • Does it make economic sense and if not, should you still go for it?

In most cases, the answer to the first question will be in the affirmative. However, there are areas where the local utility actively discourages use of solar PV panels. Their motivation is three-fold:
  • It may be prohibitively expensive in certain areas when compared with the rate the utility charges, especially in areas where sunlight is a premium. This has the unsavory effect of the utility reimbursing you only a small portion of the cost encountered to “sell” the excess power you generated back to the grid – a no-win situation,
  • The local utility may already have a green power strategy in place that is more cost-effective and greener than residential PV panels, and
  • Local utilities may not participate in state rebate programs making you ineligible for state sponsored buyback rebates.

The second question requires playing with a bunch of numbers in order to arrive at an informed decision. Knowing the numbers for each of the following is key to that measure:

a) Your yearly energy usage in Kilowatt-hours (KWh). This can be obtained from your utility bill.
b) The cost per KWh the utility charges for your electricity. This can also be obtained from your utility bill. The calculation can get a little tricky if the rate is tiered. Dividing the total amount you paid the utility in the last year by the Kilowatt-hours used will be ample for most cases.
c) Expected output in KWh per installed Kilowatt-peak (KWp). Your local utility website or the PV installers should be able to provide this information.
d) Cost per installed Kilowatt-peak from a PV installer in your neighborhood. Ensure that the installer does not take into consideration the federal and state rebates.
e) The size of the PV system needed to meet all your electricity needs. Dividing the number from (a) above by the number in (c) gives you this number in KWp.
f) The dollar value of the federal and state rebates you may be eligible for.
g) Interest rate and the associated closing costs for a loan to fund the amount.


The following example using fictional numbers looks at how to use the above information to get to a cost estimate for any home:

a) Yearly Electricity Consumption: 3,200 KWh.
b) Cost/KWh: 13¢
c) Expected output per Kilowatt-peak: 1600KWh.
d) Cost per installed Kilowatt-peak: $9000
e) Size of the PV system: (a)/(c) = 2 KWp.
f) Total cost before rebates: (e)*(d) = $18000.
g) Total rebates ($2.8 per KWp State + $2K Federal) = $7600.
h) Total cost after rebates: (f)-(g) = $10,400.
i) Interest rate for a Home Equity Loan for $10,400: 8%.
j) Amortized cost/month of the loan over the expected life (assumes 25 years which is the standard warranty period) of the PV panel (Hint: Use an online amortization schedule calculator): $80.27.
k) Cost/KWh: (j)*12/(a) = 30¢.

The cost of solar panels in this example came out twice as expensive as the local utility rate. But, after the 25th year in operation, the power is virtually free till the solar panel reaches its end of life. Though from a peripheral point of view it might not make economic sense to install solar panels per the example cited, it might still be worthwhile to consider paying more especially if the utility is not using renewable sources to generate power. The cost will deviate from the number cited above, as the effect of the federal rebate is reduced if energy consumption is higher.

Here are several links to get educated on residential solar panels:

  1. Portal to the world of solar energy.
  2. Google Solar Panel Project (the picture on the side is of GooglePlex).
  3. Solar Electric Power Association.
  4. Wiki entry on Solar Cells.
  5. Vote Solar.
01/2015 Update: Solar panel costs have come down tremendously over the last five years. Also, other intriguing options have become available as well. One very cost-effective option that helps reduce the higher marginal energy rates is a hybrid option whereby household lighting needs are met using DC LED light bulbs (much more affordable compared to AC LED bulbs that have the AC-to-DC conversion circuitry inside them)  connected to a low-power low-cost battery (a small 30AH battery can satisfy eight 10W LED bulbs easily) which in-turn is charged from a low-power low-cost solar panel. The overall cost of installation could be as low as one-tenth compared to a larger setup hooked up to existing AC wiring.


Related Posts:

1. Trina Solar (TSL) - Stock Analysis.
2. LDK Solar (LDK) - Stock Analysis.
3. Solar Manufacturer Comparison (STP, TSL, YGE, CSIQ).
4. Suntech Power Holdings (STP) - Stock Analysis.


Last Updated: 01//2015. 

Labels

401k ( 15 ) Abad Turtle Beach ( 1 ) Abrams Capital Management ( 5 ) Acoustic Electric Guitars ( 1 ) Acoustic Guitars ( 1 ) ACT ( 1 ) Activist ( 4 ) Address Change ( 2 ) Advanced Placement ( 4 ) air asia ( 2 ) airlines ( 2 ) Akre Capital Management ( 18 ) Alex Roepers ( 5 ) AP ( 4 ) apartments ( 2 ) Appaloosa ( 15 ) ARIUS ( 1 ) Arlington Value Capital ( 3 ) Atlantic Investment Management ( 5 ) Ayemenem ( 1 ) Bangalore ( 3 ) Bangkok ( 2 ) Bannerghatta National Park ( 1 ) barbuda ( 2 ) Battery Park ( 1 ) Baupost ( 2 ) Baupost Group ( 17 ) bay area ( 2 ) BDCs ( 3 ) Benjamin Graham ( 2 ) Benjamin Graham Model ( 2 ) Berijam Lake ( 2 ) Berkshire Hathaway ( 35 ) best sites ( 9 ) Bill & Melinda Gates Foundation ( 41 ) Bill Ackman ( 19 ) Bill Gates ( 40 ) Blue Ridge Capital ( 16 ) Blum Capital Partners ( 12 ) books ( 4 ) Boone Pickens ( 2 ) BP Capital Management ( 2 ) Brave Warrior ( 3 ) Brave Warrior Advisors ( 16 ) british honduras ( 2 ) Bruce Berkowitz ( 19 ) Bruce Fund ( 38 ) Camcorders ( 3 ) canada ( 4 ) cancun ( 3 ) CANROYs ( 7 ) Cantillon ( 12 ) carl icahn ( 9 ) Carl Ichan ( 8 ) casino ( 3 ) Casio ( 2 ) CBRE ( 2 ) CEF ( 2 ) Charles Akre ( 15 ) Charlie Munger ( 40 ) Chase Coleman ( 16 ) Chou Associates ( 29 ) Christmas gifts ( 7 ) Christopher H. Browne ( 7 ) Chuck Akre ( 13 ) Cisco ( 2 ) Class Action Settlements ( 2 ) CLEP ( 1 ) Coatue Management ( 28 ) Cochin ( 2 ) coin collecting ( 266 ) collectibles ( 266 ) Consumer Product Reviews ( 29 ) cook islands ( 2 ) coonoor ( 2 ) Covered Calls ( 2 ) credai ( 4 ) Daily Journal ( 37 ) Dalal Street ( 8 ) Dan Loeb ( 10 ) DAT ( 1 ) David Abrams ( 5 ) David Einhorn ( 22 ) David Swensen ( 17 ) David Tepper ( 15 ) David Winters ( 15 ) DCF ( 2 ) Digital Piano ( 3 ) Dinakar Singh ( 20 ) Donald Yacktman ( 10 ) dry bulk shipping ( 2 ) Duquesne ( 34 ) Education ( 37 ) Edward Lampert ( 21 ) Egerton Capital ( 39 ) Egypt ( 3 ) Elementary Education ( 10 ) Elementary School Textbooks ( 5 ) eReaders ( 2 ) Eric Mindich ( 13 ) ESL Investments ( 14 ) ESPP ( 6 ) ETF ( 2 ) ETN ( 2 ) Eton Park ( 13 ) Everyday Musings ( 58 ) Exam Prep ( 7 ) Exiting the rat race - how to? ( 19 ) EXPLORE ( 1 ) Fair Value Estimates ( 4 ) Fairfax Financial ( 4 ) Fairfax Financial Holdings ( 14 ) Fairholme ( 19 ) Fairpointe ( 28 ) Family Office ( 18 ) FD Laddering ( 1 ) Financial Independence ( 93 ) Fisher Asset Management ( 10 ) Flash Camcorders ( 3 ) flat ( 4 ) flats ( 2 ) Flip ( 3 ) Francis Chou ( 29 ) free ( 17 ) frugal ( 3 ) Frugal Living ( 34 ) Fund Holdings ( 961 ) futures ( 2 ) FVE ( 2 ) gambling ( 3 ) garmin ( 2 ) Genting ( 2 ) george soros ( 27 ) giveaway ( 15 ) Glenn Greenberg ( 20 ) Glenview Capital ( 14 ) GMAT ( 1 ) Google ( 2 ) Gotham Asset Management ( 7 ) gps ( 5 ) GRE ( 1 ) Greenlight Capital ( 22 ) Guitars ( 3 ) Half Marathon ( 2 ) Hawaii ( 2 ) Hedge Funds ( 1154 ) HELOC ( 1 ) High School Education ( 7 ) High School Textbooks ( 6 ) HOA ( 3 ) hobby ( 17 ) holiday shopping ( 7 ) Holidays ( 3 ) Holyland ( 11 ) Home Improvement ( 2 ) home ownership ( 5 ) Homes ( 18 ) Homeschool ( 18 ) Houses ( 2 ) Housing ( 3 ) Hykon ( 2 ) Ian Cumming ( 15 ) Icahn Enterprises ( 6 ) india real estate ( 5 ) Infinuvo ( 6 ) Insurance ( 3 ) invesco ( 17 ) investing strategies ( 3 ) Investment Portfolio ( 96 ) Investment Research ( 10 ) Investments ( 7 ) iRobot ( 5 ) Irving Kahn ( 13 ) israel ( 5 ) Jason Maynard ( 10 ) Jefferies ( 2 ) Jeffrey Bruce ( 39 ) Jeffrey Ubben ( 23 ) Jerusalem ( 2 ) Jim Chanos ( 20 ) Joel Greenblatt ( 7 ) John Armitage ( 40 ) John Griffin ( 16 ) John Paulson ( 17 ) Joho Capital ( 19 ) Jordan ( 3 ) Joseph Steinberg ( 9 ) Julian Robertson ( 4 ) Kahn Brothers ( 14 ) Kakkanad ( 4 ) Kanyakumari ( 2 ) Kawai ( 2 ) Ken Fisher ( 10 ) kerala real estate ( 5 ) Kids ( 49 ) Kids Yamaha ( 3 ) Kindle ( 2 ) kochi ( 8 ) Kodaikanal ( 2 ) Korg ( 2 ) Kraft ( 2 ) Kuala Lumpur ( 2 ) KWA ( 2 ) Kynikos ( 20 ) laptop ( 5 ) Larry Robbins ( 14 ) Las Vegas ( 2 ) Leon Cooperman ( 30 ) Leucadia ( 2 ) Leucadia National ( 13 ) Lone Pine Capital ( 9 ) long ( 6 ) long call ( 2 ) long puts ( 3 ) Lou Simpson ( 15 ) LSAT ( 1 ) Mahabalipuram ( 2 ) Malaysia ( 3 ) Marathon ( 2 ) Mark McGoldrick ( 10 ) Markel ( 23 ) Mason Hawkins ( 4 ) MCAT ( 1 ) Melinda Gates ( 31 ) memorabilia ( 266 ) MFP Investors ( 37 ) Michael Dell ( 22 ) Michael Price ( 40 ) Middle School Education ( 4 ) Middle School Textbooks ( 3 ) Mini Notebook ( 3 ) MODUS ( 1 ) Mohnish Pabrai ( 22 ) mortgage ( 2 ) Mount Kellett ( 10 ) MSD Capital ( 22 ) Music ( 6 ) Mutual Funds ( 8 ) mysore ( 2 ) Nelson Peltz ( 13 ) Netbook ( 4 ) Notebook ( 3 ) numismatics ( 266 ) O-Duster ( 1 ) Oahu ( 2 ) offers ( 2 ) Ole Andreas Halvorsen ( 10 ) Omega Advisors ( 29 ) online tax ( 4 ) ooty ( 2 ) Options ( 4 ) Pabrai Fund ( 17 ) passive income ( 7 ) pattaya ( 2 ) Paulson & Company ( 7 ) Paulson and Company ( 9 ) PEG ( 2 ) Pershing Square ( 19 ) Phil Fisher ( 5 ) philately ( 283 ) Philippe Laffont ( 28 ) Piano ( 9 ) PLAN Test ( 1 ) portfolio ( 4 ) Prem Watsa ( 17 ) product reviews ( 13 ) Property Taxes ( 2 ) PSAT ( 1 ) R2I ( 24 ) R2I Finances ( 3 ) R2I Housing ( 5 ) Raising Kids ( 41 ) Rat Race ( 15 ) RBS Partners ( 19 ) reading ( 5 ) real estate ( 6 ) Reducing Expenses ( 2 ) REIT ( 3 ) Retirement Portfolio ( 9 ) Reviews ( 81 ) Richard C. Blum ( 12 ) Robert Bruce ( 39 ) Robert Karr ( 19 ) Robotic Vacuum ( 4 ) Roland ( 2 ) Roomba ( 10 ) schooling ( 2 ) Sears ( 12 ) seeking alpha ( 2 ) Services - Reviews ( 33 ) Seth Klarman ( 19 ) Shipping ( 5 ) Shopping ( 3 ) short ( 5 ) short calls ( 2 ) short put ( 2 ) short puts ( 2 ) short selling ( 13 ) Ski ( 5 ) Sled ( 4 ) Solar Stocks ( 13 ) Soros Fund Management ( 14 ) Southeastern Asset Management ( 4 ) Southwest ( 2 ) spin-offs ( 2 ) SQ Advisors ( 15 ) stamp collecting ( 283 ) Stanley Druckenmiller ( 33 ) Statue of Liberty ( 2 ) Stephen Mandel ( 9 ) Stock Analysis ( 84 ) Stock Investments ( 4 ) Stock Portfolio Updates ( 6 ) stocks ( 3 ) summer ( 2 ) tax ( 7 ) TaxAct ( 3 ) TaxCut ( 1 ) Teacher's Editions ( 5 ) Technology ( 5 ) Test Prep ( 11 ) Thailand ( 3 ) Thekkady ( 2 ) theme park ( 2 ) Third Point ( 10 ) Thomas Gayner ( 40 ) Thyra Zerhusen ( 29 ) Tiger Cub ( 34 ) Tiger Global ( 17 ) Tiger Management ( 13 ) Time Square ( 2 ) TOEFL ( 1 ) TPG-Axon ( 20 ) Travel ( 278 ) Travel Reviews ( 82 ) Trian Fund Holdings ( 9 ) trip report ( 21 ) TurboTax ( 3 ) Tweedy Browne ( 10 ) Vacations ( 28 ) value investing ( 25 ) ValueAct ( 9 ) ValueAct Holdings ( 6 ) Vancouver ( 2 ) Video ( 3 ) Viking Global ( 10 ) Wallace Weitz ( 14 ) Warren Buffett ( 32 ) Wayanad ( 4 ) Weitz Investment Management ( 13 ) wilbur ross ( 17 ) William Von Mueffling ( 12 ) Wintergreen Advisors ( 15 ) Yacktman Asset Management ( 10 ) Yale Endowment ( 17 ) Yale University ( 7 ) Yamaha ( 7 ) YDP ( 1 ) YPG ( 1 )