Should I care about payback period?

[garrett5688]

Living in Texas, haven’t seriously considered solar because our electricity is relatively cheap.

But with Tesla’s updated pricing, I’m tempted.

if I can get a system (without power wall) that covers our usage, and finance it for equal to or less than my average monthly bill, what’s the downside?

do I really care about pay back period or 25-30 year savings?

Assuming i pay a minimal amount to the electric company monthly for grid service, aren’t I just effectively locking in an electric rate for the length of the loan?

Is there a catch or something that I’m not considering?

 

[Silicon Desert]

hmmm, interesting thought. One thing that comes to mind is what happens if you needed to sell the home?

 

[arnolddeleon]

Figure out what will give you joy. What will you pay for that. Everything doesn't have to have payback. For some it is only about the dollars. For most that is just a part of it.

 

[garrett5688]

hmmm, interesting thought. One thing that comes to mind is what happens if you needed to sell the home?

Would likely pay off the loan early so sale of the house is smoother.

or worst case, sell the house and pay off the remaining balance from the proceeds.

 

[jrweiss98020]

If you have to finance it, worrying about payback period is secondary...

 

[niveknow]

I'm in the same boat also from Texas (Houston). Way I simplified it was that I was paying for electricity today. So I either pay the grid or I pay against a solar financing and eventually at some point.. be solar loan free (5-7 yrs) then be grill $$ free at the same time. So why not?

I pulled the trigger at the last major price drop. Now just waiting for permits and install.

 

[Southpasfan]

The only problem with cost analysis is that you have to make some assumptions, and everyone might make different ones.

Let's say you're going to just pay a utility $400 month average, forever. Well, one thing about that is if you die after one month you don't leave any more calculating to your loved ones.

But lets say you assume you do live for 20 years. That's going to be $4800 per year times 20 or $96,000.

I could then do a present value on that but let's not. Because you can get a extra large system with three powerwalls, financed, for less, and the panels have a 25 year warranty and the powerwalls 10.

How much less? That system after tax incentives at a 5% 20 year loan is $55,436.

That's the effect of the price drops, low interest rates, and a general confidence in the equipment. To get that $40k of benefit you do take some risks, basically (1) that you need to fix the system along the way, and (2) that you sell the house and don't get extra $ for the system.

In the past, with panels not quite as efficient, no good battery backup technology, and higher interest rates, the economic benefit was far less clear, if there even was an economic benefit.

 

[sleevemedia]

Solar interest rates are not that attractive. You'd probably do better with a cash out refi with how competitive lenders are on closing costs due to the current lack of home inventory, unless you intend to overpay. If you do, payback period doesn't matter because it's entirely in your control.

 

[bob_p]

We went through this last year before purchasing our 15.4 KW/4 PowerWall system in Houston., with the goal of producing at least 50% of our electricity from solar.

Under the assumptions we made, we projected break-even after about 10 years (a year earlier if we deducted how much we would have spent to install a gas generator for power backup after a hurricane).

And, based on our actual usage over the first 6 months of operation, we may be doing a little better than our projections, especially after we changed over to a "Free Nights" electric plan at the beginning of June.

We used actual Smart Meter data (at 15 minute intervals) to determine electric usage prior to solar, and then make some projections of what our bills would look like after solar.

Under a fixed rate plan, we reduced our electric bills by 69% for the first 5 months of the year.

Under the Free Nights plan (free electricity from 9PM to 9AM), we reduced the electric bill by 90%, and by scheduling charging of our Tesla S & X for overnight, EV charging is free.

At least until they start excluding homes with solar/battery storage from the Free Nights plans, that appears to be a much better strategy than going with a 1:1 net metering plan in Texas (especially if you're charging EVs...).

 

[Willy3]

We went through this last year before purchasing our 15.4 KW/4 PowerWall system in Houston., with the goal of producing at least 50% of our electricity from solar.

Under the assumptions we made, we projected break-even after about 10 years (a year earlier if we deducted how much we would have spent to install a gas generator for power backup after a hurricane).

And, based on our actual usage over the first 6 months of operation, we may be doing a little better than our projections, especially after we changed over to a "Free Nights" electric plan at the beginning of June.

We used actual Smart Meter data (at 15 minute intervals) to determine electric usage prior to solar, and then make some projections of what our bills would look like after solar.

Under a fixed rate plan, we reduced our electric bills by 69% for the first 5 months of the year.

Under the Free Nights plan (free electricity from 9PM to 9AM), we reduced the electric bill by 90%, and by scheduling charging of our Tesla S & X for overnight, EV charging is free.

At least until they start excluding homes with solar/battery storage from the Free Nights plans, that appears to be a much better strategy than going with a 1:1 net metering plan in Texas (especially if you're charging EVs...).

how has your production been compared to their estimate? I’m in Texas with an east facing roof at 23 degrees slope with no shade and pvwatts estimates production much higher than what Tesla estimates. My electricity is through a co-op at a flat 9¢ (No TOU) with net billing (not net metering). They buy it back at about 50% of what they charge. Anyway, I’m doing all this math and using the info from our smart meter also, but I’m trying to figure out if Tesla just low balls their estimates or if their set ups are just less efficient than PVWatts’ default efficiency.

 

[droidment]

I am from Houston as well... Just pulled the trigger on a XL system too. Everyone I know asks about the payback period. I calculated a 10 year payback period but was hoping that if sell my home before that, that I recoup atleast half of the cost in increased value. So for the buyer, 10K more for lifetime free electricity does seem like a good bargain, don't you think?

 

[jboy210]

I am from Houston as well... Just pulled the trigger on a XL system too. Everyone I know asks about the payback period. I calculated a 10 year payback period but was hoping that if sell my home before that, that I recoup atleast half of the cost in increased value. So for the buyer, 10K more for lifetime free electricity does seem like a good bargain, don't you think?

You might want to ask a real estate agent what the impact of solar is on a home prices. By me it is pretty minimal. A kitchen remodel will definitely return more value and get more people looking at your house.

 

[Ostrichsak]

You might want to ask a real estate agent what the impact of solar is on a home prices. By me it is pretty minimal. A kitchen remodel will definitely return more value and get more people looking at your house.

I think this experience may be a little bit dated. There was a time (not all that long ago) where a solar system would actually lower the value of your home because they were all leased. These leases were a way for companies to make money on the backs of people too ignorant to read the fine print and crunch the numbers themselves. The predatory practices involved with solar has set it back a decade in terms of what the general public thinks when they hear the word "solar" for the most part.

As long as you aren't in some lease (this was how most were in years past) solar will most definitely add value to your home. This amount can very but some people still think it doesn't add any value based on when a majority of the homes sold with it required the new owner to assume the crappy lease associated with it as well. Things have changed and it really just depends on the buyer but a solar system will definitely add value to your home now. 50% is a good ball park but this will vary based on age, location, electricity cost and all sorts of factors. You can ask for whatever you want for your home and a buyer can offer whatever they want and in the end a home is worth what a seller is willing to accept and what a buyer is willing to pay. Not a penny more, not a penny less. Buyers and sellers alike are becoming much more hip to the solar game and a wise buyer will see value in a solar system done right... as long as it's not a lease.

Personally, if I find a home I really want and the seller has a nice, newer solar system on it and is valuing it at only 50% of what they paid... I'm all in. Now, someone else may not find that to be as much of a bargain but a $20k solar system already installed for only $10k... how do I sign up for that right now?

 

[Silicon Desert]

You might want to ask a real estate agent what the impact of solar is on a home prices. By me it is pretty minimal. A kitchen remodel will definitely return more value and get more people looking at your house.

A really good point. For me, when I sold my home, the buyer paid over asking price (which we already inflated ). Fortunately the appraiser added in a significant amount for our solar which allowed the buyer to finance the amount he wanted. Without the increase due to solar, he would have had to pay the difference in what he offered as compared to an appraisal without it.

 

[charlesj]

Payback period?
My opinion and I have a few
I wonder if consumers consider this when buying other stuff like cars, blenders, home theater, etc.?
This is not a business investment.
Yes, there is a payback period depending on lots of factors, one is the cost of electricity and likelihood of price increases.
Some areas seems to be stable, others like PG&E not so much.

 

[andy.connor.e]

Im not sure about a solar system retrofitted to an existing roof. What i have calculated, is the solar roof is well worth the investment because of its life span. I say about 50 years but Tesla says 60 years. If we take that literally, then currently you get a federal tax credit, (depending on state) a state tax credit, you get electricity generation for decades, and you avoid a roof replacement at around 25-30 years. The part that i ask myself, is what roof has an ROI? Solar roof is not designed to make money, like a stock investment, but when you compare your options, a shingles, tile, metal etc... roof is a sunk cost and returns nothing to you.

I believe OP, you are referring to a system that is retrofitted to an existing roof? If so, what you would be investing in if the roof completely covers your energy usage, is that you are guaranteeing that you will not be paying increased electricity rates if they go up in the next 10-20 years, which is bound to happen. I agree with no powerwall because they are way too expensive IMO, i was quoted $11,500 for a single powerwall and $17,500 for two.

 

[wjgjr]

Im not sure about a solar system retrofitted to an existing roof. What i have calculated, is the solar roof is well worth the investment because of its life span. I say about 50 years but Tesla says 60 years. If we take that literally, then currently you get a federal tax credit, (depending on state) a state tax credit, you get electricity generation for decades, and you avoid a roof replacement at around 25-30 years. The part that i ask myself, is what roof has an ROI? Solar roof is not designed to make money, like a stock investment, but when you compare your options, a shingles, tile, metal etc... roof is a sunk cost and returns nothing to you.

I believe OP, you are referring to a system that is retrofitted to an existing roof? If so, what you would be investing in if the roof completely covers your energy usage, is that you are guaranteeing that you will not be paying increased electricity rates if they go up in the next 10-20 years, which is bound to happen. I agree with no powerwall because they are way too expensive IMO, i was quoted $11,500 for a single powerwall and $17,500 for two.

We recently installed a solar roof (and finally got PTO,) and I would note the warranty on the roof is only 25 years. That is not to say it won't last longer, but it is worth recognizing that after that time, you are on the hook for a lot of issues, just as with a regular roof. Plus, panel production would potentially be down to 80% and dropping. And, I would expect by that time that technology will have improved such that even if the roof has some life left in it, it might still make more financial sense to rip it out and put in something new. So, I would be careful with assuming too much in terms of benefits after the 25-30 year timeframe. Also, some items, like the inverters, have shorter warranties, so even over 25-30 years, you might have to factor in some roofing expenses.

Payback period?
My opinion and I have a few
I wonder if consumers consider this when buying other stuff like cars, blenders, home theater, etc.?
This is not a business investment.
Yes, there is a payback period depending on lots of factors, one is the cost of electricity and likelihood of price increases.
Some areas seems to be stable, others like PG&E not so much.

I would not entirely agree that this is not an investment (business or otherwise) precisely because it does directly generate revenue, which tends to distinguish it from something like a blender or a home theater, whose payback is largely in happiness/convenience. (A car is a bit more of a mixed item in that there can be real cost/benefit that should be done over not just the level of luxury but also evaluating it versus other transportation options, for example.)

There are absolutely other, good reasons for solar, and I think the chief ones would probably be satisfaction in knowing you are doing something positive for the environment as well as improving your energy independence (particularly if paired with powerwalls.) But in the end, it seems solar panels or roof are exactly the type of thing you should do a financial analysis on. Whether you are paying cash (and looking at payback periods) or financing (and comparing payments to utility savings) it is definitely worth understanding the true cost and value. Even if your goal is altruistic in terms of helping the environment, it is worth figuring out whether solar is the best way to achieve that as there might be cases where it makes more sense to use the money planned for solar and put it to use in other ways that help the environment more.

 

[bob_p]

Through the first 6 months of this year, our actual solar power generated is about 90% of what the installer had projected. May and June were pretty close to their projections - the other 4 months were lower - which could have been due to more rain or cloudy days than average. So it will probably take several years to determine if we are achieving close to the installers' projections.

Before committing to our system, we checked with our realtor about the impact of solar power on home value.

At least in the Houston market, there still appears to be some buyer resistance to homes with solar panels, since they are still a small percentage of the market. Using the solar panels for backup power, should provide some increase in resale value (whole home generators could cost $10-20K, depending upon the home size). Beyond that, it may be difficult to get close to the value of the solar/battery storage system, at least in our area.

We expect that will change by the time we sell our house - and by then, we also expect that our electricity savings will have covered the cost of the system, and it's also likely we'll have at least one hurricane when we'll be able to run off grid during an extended power outage.

So we didn't worry too much about resale value and focused on how long it would take to break even on the investment.

The future impact of solar panels on resale is difficult to project, especially because technology will continue to improve, and the systems we install today could be considered "old technology" five to ten years from now, superseded by more efficient solar panels/roofs and higher capacity battery storage - at lower prices...

 

[charlesj]

...

There are absolutely other, good reasons for solar, and I think the chief ones would probably be satisfaction in knowing you are doing something positive for the environment as well as improving your energy independence (particularly if paired with powerwalls.) But in the end, it seems solar panels or roof are exactly the type of thing you should do a financial analysis on. Whether you are paying cash (and looking at payback periods) or financing (and comparing payments to utility savings) it is definitely worth understanding the true cost and value. Even if your goal is altruistic in terms of helping the environment, it is worth figuring out whether solar is the best way to achieve that as there might be cases where it makes more sense to use the money planned for solar and put it to use in other ways that help the environment more.

Yes, I agree it is an investment of sorts. It is also an enjoyment that you can in a small way do one over the power company, paying for the system and not them.
It is more of an investment if one does not expect to live in that house for a long time. Then you how to break even at least.
It does save $$$ over time.

 

[wjgjr]

Yes, I agree it is an investment of sorts. It is also an enjoyment that you can in a small way do one over the power company, paying for the system and not them.
It is more of an investment if one does not expect to live in that house for a long time. Then you how to break even at least.
It does save $$$ over time.

And there is nothing wrong with deriving value from finally scoring a point against the power company. Like a lot of things, there are benefits that are harder to quantify (kind of reminds me of driving out of your way to get cheaper gas - where sometimes it is worth it and sometimes it actually costs more in terms of gas used.)

But I would still say it is an investment whether or not you live in your house long - and it is easier to measure if you do live in your house, since, as has been discussed elsewhere, the value of solar when selling is at best unpredictable, and there is definitely no guarantee you will get back its residual value. And, I think it is important to realize that solar doesn't always save money over time, factoring in the install cost. For example, our solar roof (with some assumptions, of course, including pulling out the roof cost) has a definite payback on our south-facing roof. However, we put PV on our north-facing roof as well, even though it is at best break-even to do it (it would certainly lose money on its own, but looking at it as an add-on to the south-facing project, it is essentially break-even.)

There are a properties around us where the tree canopy would make solar a bad investment, or one would have to cut down trees (an environmental negative) to improve performance. That is an example to me of my above point that even if one is driven in part to help the environment, there may be other ways to do it. For those properties, there exist options from buying clean energy from competitive suppliers (as we have suppliers that advertise selling with a minimum % of renewables,) to looking at community solar concepts, to other energy-saving projects (perhaps geothermal or purchasing more efficient appliances,) or just donating to causes.

The one bit of good news as it applies to this forum is it seems like Tesla has been declining panel installs where the return is too low (and I don't know exactly how they set that cutoff) so it is likely people moving forward with Tesla do have something that can save them money over time - or at least get them close.