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Solar Power: A New Way to Keep the Lights on!

The utility bill comes and goes each month without much fanfare; the amount is more or less reasonable, and if you intend to keep the lights on, you pay what the bill says you owe. I would wager to say that the majority of people rarely pay attention to the various fees and charges on the bill, nor do they look at how much electricity (kWh) they are using each month, or what they are paying per unit ($ per kWh). There hasn’t been a reason to look that closely, because for as long as most of us can remember, the power company has been the only game in town; well, those days are over! Homeowners now have the option to produce their own electricity with a Solar Photovoltaic System! The question that remains, of course, is: should they?

When deciding whether you should spend the money to construct a Solar PV System, you must first figure out how much value you will gain by doing so. That value can be broken into three segments: 1) Electricity, 2) Tax Benefit, 3) Environmental Benefit; the total of these three segments is what you stand to gain by building a system; and once you understand what you have to gain, you can look at what it’s going to go cost you, and if the value is more than it will cost, it’s a good project!

Let’s look at an example of a customer who has the roof space to install a 12,000W Solar PV System, at a cost of $34,000, and see if this is a good idea or not.

 

Electricity Benefit

Let’s first look at the value of the Electricity you will generate with Solar Power. I want to first take a look at what the “Do Nothing” option looks like; what is it going to cost you over the next 25 years to keep paying the power company. We’re going to run through this example twice: 1) for Florida Power and Light Customers, and 2) for customers of City of Vero Beach Electric.

1)      I’ve made a table below, that shows how much an example customer, of Florida Power and Light, would spend each month, each year, and in total over the next 25 years, if they were to use 1500kWh per month (A bill of $187.50 at today’s rates). I’ve also totaled the annual cost of electricity to show that this example customer would spend $107,385.97, over the coming 25 years if they DO NOTHING, and just keep paying Florida Power and Light!

FPL Table Part 1

FPL Table Part 2

 

We are assuming that rates will increase an average of 5% annually, which is a forecast given by a report issued by the Florida Public Service Commission. Although rates with FPL have been holding low over the past decade, they are requesting to raise rates 25% over the next 3 years; so we are modeling the predicted average rate increase. Please note, I’ve also included a “Present Cost” calculation, at various interest rates. This calculation shows the amount of money you would have to invest at a given interest rate, where the original investment, plus the interest earned on the investment each month, minus the electric bill each month, would result in the bill being paid according to the table above every month for 25 years, and at the end of 25 years, no money being left in the account – this is a very accurate way of gauging how much the electricity generated by the system is worth, based on what the customer expects to make, should they have invested the money elsewhere.

2)      This second table shows how much an example customer, of City of Vero Beach Electric, would spend each month, each year, and in total over the next 25 years, if they were to use 1500kWh per month (A bill of $225.00 at today’s rates). I’ve also totaled the annual cost of electricity to show that this example customer would spend $128,863.17, over the coming 25 years if they DO NOTHING, and just keep paying City of Vero Beach Electric!

Vero Table Part 1

Vero Table Part 2

 

Tax Benefit:

Next we’ll go ahead and look at the tax benefits associated with building a Solar Power System! For a homeowner (non-business use), the benefit is entirely in the form of a 30% Investment Tax Credit that is issued by the US Federal Government, as an incentive for homeowners to GO Solar! If the price of the system is $34,000, the customer is eligible for a 30% Tax Credit, which amounts to $10,200! This is essentially a Cash Value “Gift Card” for the IRS; what I mean by that is that it is money, that is entirely yours, but can only be spent to pay your Federal Taxes. Even with standard deductions, most people pay an effective tax rate of at least 10%; which means, if your household earns $50,000 per year or more, you’ve likely paid in $5,000 or more in taxes this year (typically these taxes are collected off of your paycheck so many people aren’t sure how much they pay). The good news is, even if you can’t use the whole credit this year, it’ll roll forward for the next 20 years.  So go ahead and ask your accountant or tax advisor what you paid last year, and what you’d be eligible to offset if you purchased a solar power system.

–          Send them this link so that they can research the statue and give you the most accurate information possible! – http://programs.dsireusa.org/system/program/detail/1235

–          Make sure you have a tax professional review this investment, as we are certain that the solar power system will create this tax credit for you, but we don’t know what that means for you personally.

Environmental Benefit:

 

Do you know how much pollution is generated each month when your electricity is made? For every kWh generated, there is approximately 1.5 lbs. of CO2 released into the atmosphere. So our example customer consumes 1,500 kWh per month, and thus creates 2,250 lbs. of CO2; That’s more than a TON!

Did you also know that it take a tree 40 years to absorb 1 Ton of CO2 ( I’ve seen this fact posted many times but the following calculation pleases my engineering mind: https://www.quora.com/How-many-trees-does-it-take-to-transform-one-ton-of-CO2-into-oxygen-over-the-time-of-one-year-Are-there-any-statistics-for-different-trees-leaf-trees-conifers-or-even-other-plants).

If you wanted to go out and try and plant enough trees to offset the CO2 produced by your home, you would have to plant a new tree every month (and keep it alive, let it grow to 100+ feet, and 9 Feet Diameter each) in order to offset your footprint 100%! Can you imagine? Over the next 25 years, you’d have to plant and maintain 300 Trees! Where would you put them, and what would that cost to maintain? We think it would be a lot easier to just install a Solar Power System and stop producing CO2 in the first place! If you even tried to offset 10% of your household’s pollution, that’s still thirty 100 foot trees in your backyard; I personally don’t have the space for that!

 

Although people disagree about how much CO2 is appropriate in our environment, most of us can agree that today’s amounts are too much. Governments around the world are coming together to penalize entities that pollute more than an agreed upon threshold, and major companies are starting to budget “carbon costs” into their energy cost calculations to hedge against future penalties. The Disney Corporation takes a very moderate approach and values CO2 pollution at $25 per ton ($0.0375 per kWh).

If we were to follow their lead, our example homeowner would be hedging themselves against ~$675 annually in future carbon penalties (18,000 kWh x $0.0375 per kWh = $675), or $16,875 over the first 25 years of the system’s life ($675 annually x 25 years).

This is extremely conservative as CO2 credits (a way of paying homeowners for going solar and removing Carbon) typically trade for upwards of $0.20 per kWh (5 times+ our estimate) in places where these markets exist and the governments are enforcing penalties; check it out for yourself at https://www.srectrade.com/

 

Recap:

So in review, our example homeowner is trying to decide if they should spend $34,000 on a Solar Power System for their home, and if they do they will receive:

1)      Electricity

a. $107,385.97 worth of Electricity for Florida Power and Light Customers

i. Present Cost of $47,471.39 at 6% APR Discount

b. $128,863.17 worth of Electricity for City of Vero Beach Electric Customers

i. Present Cost of $56,965.66 at 6% APR Discount

2)      Tax Benefit

a. 30% Investment Tax Credit is worth $10,200 if the system costs $34,000

3)      Environmental

a. $675 per year, or $16,875 over the life of the system.

i. Could be MUCH higher

The choice is yours, but I think you see how we feel on the matter! Give us a call today if you’d like to see how much electricity you could be generating on your roof! Don’t be discouraged if you don’t have the money to pay for the system up-front; we have financing partners that allow you spread the cost out over 20 years, where the monthly payments are less than what you are paying for electricity today!