Mar

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Solar Energy Financial Overview

Posted by cameron

March 30, 2007 |

It has been estimated that Venture Capital Investment in solar energy has tripled over the last 2 or 3 years. It seems the time is right for companies to invent solutions that will tap into the tidal wave of interest in alternative and renewable energy. Its about time since today’s solutions ride on technology that is decades old and has hardly made an impact. How many homes in your neighborhood have solar energy? There are none in mine. So what is the problem? It’s financial. I understand all the future “fluffy” thoughts about cost avoidance and house resale value but I’m concerned with the hard numbers of upfront cost and payback.

Example: my average monthly energy bill runs around $140 per month. That is $1680 per year. I know costs will increase but for the sake of broad-brush estimates I have ignored that for the time being. Over twenty years that works out to be $33,600. Lets say energy inflation doubles that over twenty years to $67,000. The best estimate I have seen puts an installation at around $70,000. I chose twenty years because that is the estimated life of the solar cells. Batteries for energy storage have a life of around 10 years so they would be replaced twice in that time. Bottom line is I see no payback before the solar cells need replacing.

On the other hand, I can move into a smaller house and probably cut my current energy bill by a third. I could invest in consumption avoidance by using energy star products. If you don’t know about Energy Star go here and check it out. These are basically high efficiency products from windows to appliances that far exceed the government’s minimum requirements.

Ah, what about tax credits I here you say. Take a look at the IRS Form 5695 and accompanying instructions. There are two credits possible, one for the solar equipment (maximum $2000) and one, which can also be applied to new windows, not just solar energy (maximum $500). I didn’t bother with State because it will be smaller than federal. I’ll be kind and call the total $3000. It doesn’t change the picture at all. Unfortunately if the government were to increase these credits I’m certain that companies will find a way to shave off some of it.

Ah, but what about Net Metering I here you ask. This is the one thing that has the potential to make me change my mind. If I can sell enough energy back to my utility company then the pay back time will shorten. This will require wading through local government regulations and my energy company’s policies. A future post no doubt.

But don’t take your eyes off the venture capitalists. They don’t invest billions of dollars without a reason. If solutions are not here today then they may be here tomorrow. By investing in a smaller home and energy efficiency in all possible ways, I have not closed the door to solar energy in the future. I have in a way made the transition a little easier by reducing consumption.


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