Solar financial payback

[cali8484]

I hope this is the right place for this.

When I got my solar install (36 Solar Edge panels and two Tesla Powerwalls) for the house (ignoring for now the cottage) the installer told me my estimated pay-back time (taking the tax credit into account) was around five years. I wondered how he came up with this, and if he really took everything into account, such as the lost income from the money taken out of investments to pay for the installation. Now that I've had the system running for close on to a year (so I know how much electricity I actually use) I decided to do some numbers, and I discovered that I cannot even find a meaning in the term "pay-back" or "break-even" time.

I've averaged 845 kWh/month and MECO, the utility here, charges about 35¢/kWh, so my average bill would have been (rounding a bit for ease of calculation) $300/month.

After tax credits (another reason for waiting until now: my tax return is done and I know the amounts) the installation for the house (panels + Powerwalls + inverters/gateway/installation) came to $45,100. On the educated assumption that the investments I sold to buy the solar installation were yielding 3.5%, the real cost to me of the installation is a reduction, in perpetuity, of $130/month of income. And since MECO charges me a $25/month minimum fee, of which I only use $7 worth (about 20 kWh) I'm also paying them $18/month for nothing so 130+18 = an actual cost to me of $148/month for my electricity, which would have cost $300, a net gain of $152/month.

How this can be turned into a "break-even" calculation, I am at a loss to figure. If I were to invest the saved $152/month in 3.5% investments, I have no idea how to figure how long it would take before I'd have enough to replace the whole system. I suspect that the 5-year break-even was based on bistromath (for fans of Hitchhiker's Guide to the Galaxy) but I'd have gotten solar even if it cost more than grid power. And how do you put a value on having power when the grid goes down? We've had a few power outages lasting a few hours each, but the longest mine was down was about 15 seconds, and I think that was because the A/C was trying to start.

Even just dividing my after-tax-credit cost of $45,100 by the $300 value of the generated electricity gives a break-even of 12 1/2 years, not five. They'd have had to have assumed an electric bill of over $700 to come up with 5 years, and even that does not count the lost income.

One final caveat: I over-built because I wanted to have power even on cloudy days. And I can afford it. A much smaller system would have maximized the economic outcome. A system half the size that used grid power during cloudy weather and the hottest months would have "saved" me more money overall, but that was not my goal. My goal was to minimize grid usage regardless of cost. (Though with two more Powerwalls I probably could have disconnected from the grid entirely. )

I am posting this in order to be brutally honest about the cost of solar, though none of this might be useful since I probably spent double what the most economically efficient system would have cost.

Do you have net metering? If so, there is likely no meaningful payback period possible for the Powerwalls. Given that you have Powerwalls and over sized your PV array it's pretty safe to say 5 year payback against your electric usage cost is highly unlikely. It's too late for you now but prospective solar buyers should always ask for payback breakdown before purchasing.

 

[daniel]

WOW! Thanks for all the great information and all the comments!

The way they usually calculate your break even years is by you taking out a loan. You monthly payment should be about the same as your electric bill would have been. And they will project an annual increase on the rate. So this year is $300/month, then the year after would be $310/month, etc... The amount of years that will take you to pay off the loan should be your break even point.

When they tell you 5 years, that can't be including the powerwalls. Even without the powerwalls, 5 years is too short for your system. I think when they quote you, they quote you a system will produce just enough for your last 12 months usage (not over built like you said). If you reduce your system to a 28 panel system, it will cost you about $25,000 or $17500 after tax credit.

So if you take out a loan of $17500 with a 4% interest rate, you will be paying $322 a month for 5 years. After that, you have no more loan so that's your break even point.

As your system right now, taking in the estimated annual electric bill increase, I think you will be at about 10 to 12 years to break even. I think that sounds about right. Powerwalls usually don't save you money. It is good when you are out of power! Normal system without powerwall if sized correctly will take about 5 to 7 years to break even.

Thanks for that. It makes sense. And BTW there was no way of knowing how much power I would use because I had the solar installed as soon as I bought this house. So we had to guess. It's a large house, so more electric usage was assumed, but as I live alone, I actually use a lot less than we expected. (Too big a house because the location and the price were right.)

How many kW is your system? Solar Edge doesn't make panels so I'm guessing you're referring to the Inverter and optimizers?

Oops. I'd been thinking the panels were Solar Edge because it's the Solar Edge app that shows me what the panels are doing. But when I went back and looked at the contract, the panels are 365-watt LG. And I misremembered the number of panels. There are 32 of them. The system is listed as 11.68 kW DC with a 10-kW inverter.

I do not make decisions solely based on payback time, here in Northern California we have many factors to consider. I hate paying a corrupt monopoly anything, I hate paying big oil, I want clean energy and would like power during the PSPS situations. If it gets down to payback time I do not care if it is 5 years or 20, I will install solar and battery storage for the above reasons. Also why I purchased 2 all electric vehicles.

I don't regard the utility here as corrupt, but I hate using fossil fuel. Like you, I wanted clean power.

Well, I suspect you buy things at a Costco or a Best Buy to save a buck now and then.

Boy, you didn't read my post at all, did you? I overbuilt by double just so that I could absolutely minimize my use of grid power. I like to play with numbers so I'm interested to know exactly how the finances play out, but I said in my post that I'd have done this even if it was more expensive than grid power.

And no, I have never shopped at Costco. I bought something at Best Buy once, but never again. And I've never stepped inside a Walmart in my life.

Ok, first of all, you are not supposed to take into account the 3.5% that your investment can yield. That's called opportunity cost (the income from other investments that you forgo to make this investment). There is always a higher yielding investment, so you can't take it into account in calculating your payback.

At 45000 cash cost, and 300 per month bill, your payback is in fact close to 10 years. You also have to take into account the fact that electricity prices are probably going to be increasing every year. Also, you should take into account the value of backup protection that your PWs provide (if outages are an issue in your area).

I am also not sure why you need 36 panels if your consumption is only 800-900 per month. I think you are overproducing, and not getting paid for it. So that's obviously is negatively affecting your payback period. You could probably get the same financial result with a 6kw system and 1PW, at a cost of about $25000 before tax credits.

I use the 3.5% because the actual cost to me for the system is a reduction in my income. I live on the income of my investments and after installing solar my income is an estimated $130/month less because of taking about $45K out of my portfolio. But my expenses are $275/month less. (Due to the $25/month minimum charge, so I don't save the whole $300.)

I had to get the Powerwalls because net metering was not available. So many homes on Maui have solar that they are fully subscribed for net metering. I presume the grid just cannot absorb any more daytime power without storage. So new installs going back a year or two before I moved here cannot get net metering. So for me, the only option for nighttime power was Powerwalls or buy power from the grid. They will not even accept my excess power. I'm allowed to feed a very small amount of power to the grid for load balancing. So, yes, for me Powerwalls are a necessity and therefore are a legitimate cost when calculating my break-even time.

But as I said, this is an academic interest for me. What I care about is that I'm not burning fossil fuel, other than a few kWh a month for load balancing, which is pretty much offset by the few kWh I send back, also for load balancing.

Thanks again for all the great comments.

 

[Dan123]

I use the 3.5% because the actual cost to me for the system is a reduction in my income. I live on the income of my investments and after installing solar my income is an estimated $130/month less because of taking about $45K out of my portfolio. But my expenses are $275/month less. (Due to the $25/month minimum charge, so I don't save the whole $300.)

I had to get the Powerwalls because net metering was not available. So many homes on Maui have solar that they are fully subscribed for net metering. I presume the grid just cannot absorb any more daytime power without storage. So new installs going back a year or two before I moved here cannot get net metering. So for me, the only option for nighttime power was Powerwalls or buy power from the grid. They will not even accept my excess power. I'm allowed to feed a very small amount of power to the grid for load balancing. So, yes, for me Powerwalls are a necessity and therefore are a legitimate cost when calculating my break-even time.

But as I said, this is an academic interest for me. What I care about is that I'm not burning fossil fuel, other than a few kWh a month for load balancing, which is pretty much offset by the few kWh I send back, also for load balancing.

Thanks again for all the great comments.

Everything you buy has an opportunity cost. If you pay $30000 for a car in cash, are you going to add the 3.5% that you could have earned on that $30000 to the cost of the car? No.

If you use your approach of only taking into account the lost income vs. savings, than your breakeven period is zero. You are saving money from month one.

I realize that in Hawaii net metering is not available. But you didn't need to get Powerwall AND oversize your system. You could have done one or the other. If you just get 2 Powerwalls, that would have allowed you to almost never export and to self-supply 95% of the time. Or you could have oversized your system without the PWs, and you would also self-supply 95% of the time (but a lot of energy would be wasted). you chose to do both, but that's not good for your payback. Now, you need an electric car to increase your power consumption.

 

[mspohr]

I have a combination of "professional" installed systems and DIY systems. On sum, the cost of these was about $20000 (after tax and utility company credits) for a total of 9.3 kW.
I've calculated my "return" in several ways.
Payback on the first system (4 kW professional install) was 7 years. Second system, DIY 2.5 kW about 3 years, third system DIY 2.8 kW 1.5 years.
I've also looked at this as a "lifetime" calculation with a 25 year life. Overall, the systems generate about 16.5 MWh/year at a cost of 7 cents / kWh (using 4% cost of money). After that, the electricity is free.
I also added a battery emergency power system for our blackouts but this is not included in the calculation.

 

[charlesj]

...

I had to get the Powerwalls because net metering was not available. So many homes on Maui have solar that they are fully subscribed for net metering. ...

So, does this mean you use it or lose it every single day? If so, over producing will benefit only on initial fully charging batteries. If you cannot use most of it after solar production is less than house need, the next days generation will partially go to the grid and wasted, cannot benefit you as there is no net metering. An interesting balancing act.

 

[daniel]

Everything you buy has an opportunity cost. If you pay $30000 for a car in cash, are you going to add the 3.5% that you could have earned on that $30000 to the cost of the car? No.

No. You don't count both the price of the car and the lost income: You count one or the other. That $30K car can be thought of as costing you $30K once, now, OR it can be thought of as costing you $87.50/month forever (assuming a 3.5% yield on investments).

I realize that in Hawaii net metering is not available. But you didn't need to get Powerwall AND oversize your system. You could have done one or the other. If you just get 2 Powerwalls, that would have allowed you to almost never export and to self-supply 95% of the time. Or you could have oversized your system without the PWs, and you would also self-supply 95% of the time (but a lot of energy would be wasted). you chose to do both, but that's not good for your payback. Now, you need an electric car to increase your power consumption.

As I explained, I got the oversized system because I care more about never having to use diesel-generated grid power than I care about saving money. Also, since we didn't know how much electricity I would use in this new house, we estimated high.

So, does this mean you use it or lose it every single day? If so, over producing will benefit only on initial fully charging batteries. If you cannot use most of it after solar production is less than house need, the next days generation will partially go to the grid and wasted, cannot benefit you as there is no net metering. An interesting balancing act.

The electric utility prohibits me from exporting more than a tiny amount of power, and they permit that tiny amount only because it's necessary for load balancing. Once my two Powerwalls are full, the solar panels only generate as much electricity as the house demands. So, yes, I have capacity that goes to waste. OTOH, on cloudy days when production is low, my over-sized system can still charge my batteries for the coming night.

I spent more money than I needed to because of my intense dislike of fossil fuels. And yet I still increased my net income!

 

[gpez]

No. You don't count both the price of the car and the lost income: You count one or the other. That $30K car can be thought of as costing you $30K once, now, OR it can be thought of as costing you $87.50/month forever (assuming a 3.5% yield on investments).

This isn't exactly correct - you do need to do both. This is mostly because a car is a depreciating asset and likely not an income producing asset (unless you use it for a work purpose) but also because you're not comparing options. If you were deciding between a $20k car and a $30k car and were doing a 5 year total cost of ownership analysis you'd need to include how much that extra $10k would be worth after 5 years when looking at the net/net. In a situation where a $30k car would enable you to earn more income you'd still need to compare the return on the $10k investment to do the comparison.

The only proper analysis here on a PV system (+/- Powerwalls), a depreciating yet income producing asset, is to look at return on investment (ROI). How much are you saving by spending the amount you are on the equipment? Bonus points for including a depreciation schedule and cost to remove as the technology ages. From there you can compare it against other investments and compare rates of return.

 

[daniel]

This isn't exactly correct - you do need to do both. This is mostly because a car is a depreciating asset and likely not an income producing asset (unless you use it for a work purpose) but also because you're not comparing options. If you were deciding between a $20k car and a $30k car and were doing a 5 year total cost of ownership analysis you'd need to include how much that extra $10k would be worth after 5 years when looking at the net/net. In a situation where a $30k car would enable you to earn more income you'd still need to compare the return on the $10k investment to do the comparison.

The only proper analysis here on a PV system (+/- Powerwalls), a depreciating yet income producing asset, is to look at return on investment (ROI). How much are you saving by spending the amount you are on the equipment? Bonus points for including a depreciation schedule and cost to remove as the technology ages. From there you can compare it against other investments and compare rates of return.

Actually, in the case where you sell an investment to install solar (+ Powerwall in my case) you have to compare the ROI of both the investment you've sold and the one you bought. In my case, I sold a lower-returning investment for a higher-returning one, albeit one with a limited lifetime. But my solar installation will outlast me, and overbuilding means that even when it has deteriorated to 3/4 of its present efficiency it will still produce way more than I need. And since I have no kids I really don't care what its value is after I die.

Basing the break-even calculation on the supposition of paying off a loan with the savings makes sense. I just couldn't do that because loan rates vary depending on your credit rating and your lender and since I didn't borrow for it, I have no idea what my loan rate would have been.

 

[Dan123]

Actually, in the case where you sell an investment to install solar (+ Powerwall in my case) you have to compare the ROI of both the investment you've sold and the one you bought. In my case, I sold a lower-returning investment for a higher-returning one, albeit one with a limited lifetime. But my solar installation will outlast me, and overbuilding means that even when it has deteriorated to 3/4 of its present efficiency it will still produce way more than I need. And since I have no kids I really don't care what its value is after I die.

Basing the break-even calculation on the supposition of paying off a loan with the savings makes sense. I just couldn't do that because loan rates vary depending on your credit rating and your lender and since I didn't borrow for it, I have no idea what my loan rate would have been.

If I offered you an investment that pays 5%, would it be correct to calculate the return on that investment using 1.5% (since you currently have the money invested at 3.5%)? I don't think so. 3.5% is one investment, and 5% is another investment. PV is also another investment, and its returns shouldn't be diminished by the fact that you have other investment opportunities available.

 

[wwu123]

I think the biggest fundamental problem in the academic exercise is mixing "payback period" into an ROI calculation. ROI should be compared over the lifetime of the investment, but payback period ignores any gains after the break-even point. Many people weighing solar look for a payback period less than say 7-10 years, because the average family moves within 7 years, early equipment failure, or you may die early, or some other life event forces you to sell and basically eat the remaining "cost" before payback. Conversely, if you're in the house for longer than the payback period, then you're basically printing money the rest of the equipment lifetime - are you including that free money in your ROI or not?

In other words, if you calculate a payback period of 24.5 years and the panel lifetime is 25 years, it's a better investment.

But if one must, my simple payback calc without opportunity cost is: how many months of $280 savings ($300-$20 utility charge) would get you back to $45,100? Comes out to about 13.5 years.

If you include that your intiial capital is earning 3.5% a year, then at 13.5 years your original $45K is now $69K. But guess what, the $280 you're saving every month also earns 3.5%, plus factor in rising utility bills at 3.5% inflation means in year 2, you're saving additional $280 x 1.035 per month, and so on. So at 13.5 years, that's also $69K. So with or without opportunity cost comes out to the same 13.5 year payback. But play it out 25 years, your original $45K is worth $106K at 3.5%. But your $280/mo annuity from solar is now worth $206K, nearly twice as much.

 

[daniel]

If I offered you an investment that pays 5%, would it be correct to calculate the return on that investment using 1.5% (since you currently have the money invested at 3.5%)? I don't think so. 3.5% is one investment, and 5% is another investment. PV is also another investment, and its returns shouldn't be diminished by the fact that you have other investment opportunities available.

It depends on whether I'm spending available cash after deciding how or whether I wanted to spend money that was just sitting in savings; borrowing money I do not have, with an obligation to make monthly payments for a set period of time; or taking money out of an existing income-producing investment.

Money in savings presently produces so little income it's effectively zero. It can serve as a rainy-day fund in case of emergencies or it can be spent on any number of luxuries, necessities, or investments. Borrowing creates debt, which brings with it all manner of stresses and limitations. But an investment can be considered as so much money, or it can be considered as an income stream. I consider my investments as an income stream because I live off that income and have no present need for the capital.

If you offered me an investment that pays 5% I would research it to decide how safe it is, and if I decided it was safe then I would consider it as a 1.5% improvement over the present 3.5% investment. (That 3.5% is a guesstimate of course.) If you offered an investment that paid 3.6% I probably would not even consider it because the increase is too small to bother for the amount that I would put into any single investment. (When I hear of people getting wiped out because they put everything they had into one investment I always wonder how they could have been so naive.)

I think the biggest fundamental problem in the academic exercise is mixing "payback period" into an ROI calculation. ROI should be compared over the lifetime of the investment, but payback period ignores any gains after the break-even point. Many people weighing solar look for a payback period less than say 7-10 years, because the average family moves within 7 years, early equipment failure, or you may die early, or some other life event forces you to sell and basically eat the remaining "cost" before payback. Conversely, if you're in the house for longer than the payback period, then you're basically printing money the rest of the equipment lifetime - are you including that free money in your ROI or not?

In other words, if you calculate a payback period of 24.5 years and the panel lifetime is 25 years, it's a better investment.

But if one must, my simple payback calc without opportunity cost is: how many months of $280 savings ($300-$20 utility charge) would get you back to $45,100? Comes out to about 13.5 years.

If you include that your intiial capital is earning 3.5% a year, then at 13.5 years your original $45K is now $69K. But guess what, the $280 you're saving every month also earns 3.5%, plus factor in rising utility bills at 3.5% inflation means in year 2, you're saving additional $280 x 1.035 per month, and so on. So at 13.5 years, that's also $69K. So with or without opportunity cost comes out to the same 13.5 year payback. But play it out 25 years, your original $45K is worth $106K at 3.5%. But your $280/mo annuity from solar is now worth $206K, nearly twice as much.

That all sounds reasonable and is why I got all bollixed up over the whole concept of payback period or break-even point, and decided instead to just look at the net increase in my disposable income.

Again, I got solar because I wanted solar, not in order to save money. The financial calculation is academic, and because if I can show it saves money even without net metering which is not available here any more then it could encourage others to go solar, and that benefits the planet. (I also bought solar bonds when Solar City was issuing them, as those financed the installation of solar. Being unsecured and illiquid a purely financial calculation would have argued against them, but I wanted to support solar at a time when I lived in a place where I could not install solar on my own home.)

BTW, I had my solar installed almost eleven months ago. The investments I sold to pay for it are now down about ten percent from when I sold them. It gives me a warm fuzzy feeling to know that I sold them when they were close to their all-time high.

 

[Dan123]

Many people weighing solar look for a payback period less than say 7-10 years, because the average family moves within 7 years, early equipment failure, or you may die early, or some other life event forces you to sell and basically eat the remaining "cost" before payback. .

Presumably, the solar system + PW increases the value of the house. So if someone moves in 7 years, all or a portion of that cost can be recouped by increasing the selling price of the house.

 

[cali8484]

The financial calculation is academic, and because if I can show it saves money even without net metering which is not available here any more then it could encourage others to go solar, and that benefits the planet. (I also bought solar bonds when Solar City was issuing them, as those financed the installation of solar. Being unsecured and illiquid a purely financial calculation would have argued against them, but I wanted to support solar at a time when I lived in a place where I could not install solar on my own home.)

Good intention but unfortunately your case is,to put it kindly, probably not the best example to convince people of the financial advantages of going solar.

 

[daniel]

Presumably, the solar system + PW increases the value of the house. So if someone moves in 7 years, all or a portion of that cost can be recouped by increasing the selling price of the house.

Here on Maui, solar is viewed as a big plus in the real estate market and is prominently mentioned in listings.

Good intention but unfortunately your case is,to put it kindly, probably not the best example to convince people of the financial advantages of going solar.

 

[cali8484]

Don't get me wrong. Energy sovereignty is an admirable goal but not financially justifiable based on grid electricity cost at this time.

If you are interested, here is someone sharing very informative experience with 6 Powerwalls

 

[daniel]

If you care to summarize, I'm interested. I'm not watching a 20-minute video based on "Here is something interesting." I just have a very low tolerance for video. I seldom even watch a whole movie in one sitting.

My understanding is that a lot of people have solar performing more economically than buying power from the grid. Obviously this is dependent on how much sun you get and what your electric rates are and whether or not you can get net metering. The fact that solar is not suitable everywhere should not be used to dismiss it anywhere.

I don't know what "energy sovereignty" is supposed to mean, but the goal need not be going off-grid entirely. The goal should be to reduce fossil fuel use as much as is economically feasible, and that is definitely economically feasible in many parts of the country. The fact that I went overboard with it is not an argument against the economics of solar.

My experience shows that in a place with high electric rates and a lot of sun you can get twice as much solar as you need and still come out ahead financially from Day 1.

 

[cali8484]

If you care to summarize, I'm interested. I'm not watching a 20-minute video based on "Here is something interesting." I just have a very low tolerance for video. I seldom even watch a whole movie in one sitting.

My understanding is that a lot of people have solar performing more economically than buying power from the grid. Obviously this is dependent on how much sun you get and what your electric rates are and whether or not you can get net metering. The fact that solar is not suitable everywhere should not be used to dismiss it anywhere.

I don't know what "energy sovereignty" is supposed to mean, but the goal need not be going off-grid entirely. The goal should be to reduce fossil fuel use as much as is economically feasible, and that is definitely economically feasible in many parts of the country. The fact that I went overboard with it is not an argument against the economics of solar.

My experience shows that in a place with high electric rates and a lot of sun you can get twice as much solar as you need and still come out ahead financially from Day 1.

I fully support your point about reducing fossil fuel consumption but your financial analysis, as others have pointed out, is not really what typical grid electricity consumers would accept. Without getting into net present values and opportunity costs, you spent $45K+ out of pocket to cut a $300 monthly electricity roughly in half to ~$150. That's roughly 20+ years for payback which I think most of the solar installers would tell your that's a hard sell to typical grid electricity consumers who do not share your level of passion for green energy. If you had a right sized PV array without batteries then the financial case would be much stronger.

 

[charlesj]

...
The electric utility prohibits me from exporting more than a tiny amount of power, and they permit that tiny amount only because it's necessary for load balancing. Once my two Powerwalls are full, the solar panels only generate as much electricity as the house demands. So, yes, I have capacity that goes to waste. OTOH, on cloudy days when production is low, my over-sized system can still charge my batteries for the coming night.

I spent more money than I needed to because of my intense dislike of fossil fuels. And yet I still increased my net income!

Thanks.
I am presuming then that the Gateway is programmed to limit how much can go to the grid? Curios.

 

[charlesj]

... 3.5% is one investment, and 5% is another investment. ...

A good exercise is to do a compound return on $X at 3.5% for X years, then at 5% and 1.5%. The difference at end time is not the 1.5% compounded, especially as X increases. I was surprised with the answer a good many years ago yet people claim the 1.5% is the difference.

 

[daniel]

I fully support your point about reducing fossil fuel consumption but your financial analysis, as others have pointed out, is not really what typical grid electricity consumers would accept. Without getting into net present values and opportunity costs, you spent $45K+ out of pocket to cut a $300 monthly electricity roughly in half to ~$150. That's roughly 20+ years for payback which I think most of the solar installers would tell your that's a hard sell to typical grid electricity consumers who do not share your level of passion for green energy. If you had a right sized PV array without batteries then the financial case would be much stronger.

But knowing that I spent double what a most-economical system would cost, anybody that cares to and has the math skills, could extrapolate downward to get some useful, if not precise, numbers. A bigger factor is that I live alone and most people don't, so my energy usage is below the household average.

Also, because it cools down rapidly after sunset here, I need very little A/C when the sun is not shining. A family in south Texas would have very different needs.

Thanks.
I am presuming then that the Gateway is programmed to limit how much can go to the grid? Curios.

Correct. The gateway only sends to the grid what it absolutely must. I.e., when a large home draw stops abruptly it takes a moment for the panels to stop producing, and for that moment it must send power to the grid. Similarly, when the house suddenly demands power, it takes a moment for the panels to start producing, so it must draw power from the grid for a moment. (There may be similar very brief delays for the Powerwalls to respond. I actually don't know.)

I am in awe of the electronics and the engineering that goes into a system like this.

A good exercise is to do a compound return on $X at 3.5% for X years, then at 5% and 1.5%. The difference at end time is not the 1.5% compounded, especially as X increases. I was surprised with the answer a good many years ago yet people claim the 1.5% is the difference.

Except that at this stage in my life I am not investing. I am living on my income. My solar installation increased my income by about $150 a month even though I have a huge built-in leeway for solar production on cloudy days. A young person will be looking at investment and the effects of compound interest. I am looking instead at income cash flow and the opportunity benefits of what I can do with that money.

In addition, since the increase in my disposable income is the result of a reduction in spending, rather than an actual increase in income, the increase is not taxed. I am now not paying tax on the income from that $45K and at the same time my utility expenditure is $275 less than it was. My total income tax has gone down and my utility bill has gone down also. I'm actually saving more money than the above numbers suggest.

Of course it's very different if you borrow. In that case you pay income tax on the income used to pay off the loan and you only get to deduct the interest. Borrowing has a huge down side.

Caveat: I am not an accountant and at this point I may be speaking through the other end of my alimentary canal.