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Solar – The Cost of Doing Nothing

By Derek Girling, HelioPower Solar Consultant

2009 was a watershed year for residential solar photovoltaic (solar PV) installations in California. Lower panel costs coupled with the uncapping of the Federal Personal Tax Credit (previously limited to $2,000) made solar PV more affordable than ever. Factor in announced rate increases from state utilities and you can see why solar system integrators are one of the few bright spots in today’s economy.

As a Solar Consultant with HelioPower, one of the most common questions I hear from my customers is “Do you think I should wait another year or two to install my system?” Homeowners are fearful that either the cost of the systems will come down significantly or new technologies with significantly better efficiencies will come on the market.

There are several reasons why this argument does not hold up!

First and foremost is the fact that our current state utility ratepayer funded system is functioning exactly as it was designed. When the California Solar Initiative was created, the incentives were high to reduce the impact of the initially high system costs. The theory was that, until enough manufacturers and installers entered the market, homeowners and businesses would need large rebates to incentivize them to invest in their solar PV systems. As competition drives pricing down, the rebates required to make solar PV a sound financial investment are reduced as well. The program is functioning exactly as planned and is even ahead of schedule!

Another good reason to invest in your system now is that when you factor your current utility bills in the period between now and when you decide invest, you’ll have to increase the system’s efficiency or decrease in the system’s price just to compensate for the lost costs the solar PV system would have avoided. If your current bill is $200 per month and you wait 18 more months, you’ll need to save almost $3,400 just to break even. More efficient technologies are on the horizon over the next several years but their actual efficiencies, price-points and reliability have yet to be determined. Solar PV modules have been around for over 30 years and have a well-established track record of production and reliability.

Postponing your decision has a dramatic effect on the back end of the investment as well. To get the best return on your solar system (IRR’s of over 14% are not uncommon), you’ll want to use your system for the longest time possible. In fact, solar systems are designed to produce clean energy for over 25 years. Unless you’ve figured out a foolproof way to extend your life, you’ll lower your return by waiting to install.

Here’s an example of exactly how much doing nothing costs. A typical homeowner in Southern California uses about 10,000 kWh. They will spend over $150,000 on electricity over the next 25 years if rates follow their historical rate of inflation. The typical system to offset 90% of this use would be around 6.4 kW. Right now this system will return nearly $110,000 in avoided utility bills including factoring in the cost of the system! So the cost of doing nothing is $110,000. Who wouldn’t want to have an additional $110,000 in their retirement account?

New financing vehicles like SunRun’s residential Power Purchasing Agreement (PPA) bring the investment required to go solar down to as low as $1,000. Your installer designs and installs the your system exactly as if you’d purchased it from them and SunRun pays the installer and sells you the power produced at a greatly reduced price. You get most of the financial benefits of solar right away with a minimal investment.

Finally, let’s not ignore the reason that most of us were interested in solar in the first place – our environment! Whether or not you believe global warming is both real and controllable, solar PV reduces the amount of pollutants introduced into the environment from burning dirty fuels.

The bottom line is that by installing your solar PV system now, you’ll make a big impact on your cost of living for decades to come.

You can reach Derek Girling at [email protected]