ROI for Sun
By walterbays on May 05, 2008
Not NASDAQ - solar power. The ASES annual solar energy conference is in San Diego this week. The top question I get about my solar panels is how long is my return on investment? I did calculate it before we installed them. At current electricity prices and time value of money they will just break even over their useful life. (And we live near the ocean where morning fog obscures the panels on many summer mornings.) Still, if we had another price shock equivalent to the 1973 oil embargo they would pay back about twice the initial investment, in current dollars. And if we had another price shock equivalent to Kenny-Boy Lay's market manipulation, they would pay back about five times the initial investment. Economically, call the panels zero cost insurance.
Now what's the ROI on an SUV? Our solar panels cost about a quarter to a half the price of a big SUV. Will that Escalade have a productive life of 20 years? And over that time how many dollars will it return to your pocket? Or will it perhaps take more money out of your pocket? For the price of the SUV you could instead buy solar panels, zero out your electric bill, buy a Chevy Malibu (which sits in clogged traffic equally well as the SUV), and have enough money left over to pay for over 200,000 miles worth of gas for it, at $4/gallon.
So why aren't there more solar panels in sunny Southern California? Why is Germany, in the cloudy wintery north, so far ahead of the U.S.? Two reasons: (1) money, and (2) money.
(1) Lots of people don't have the luxury of deciding whether to spend discretionary money on a new SUV or on solar panels; they're deciding whether to pay the mortgage, pay the electric bill, or fill up the gas tank. Ditto businesses hard pressed to show a profitable bottom line. Increasingly solar energy entrepreneurs are in effect buying energy "drilling rights" on rooftops. LA's electric utility Edison is building the equivalent of a new generating plant by putting panels on the roofs of commercial and industrial buildings. The building owners pay nothing, and get a good long term locked in electricity rate. Here in San Diego, Hewlett-Packard is converting its campus to solar power. HP stockholders will pay nothing for it, and HP will get substantial energy cost savings in the future. While they're at it, HP is matching the rebate to their employees who want to put solar panels on their homes.
(2) The recent earth shaking discovery that people are more willing to give goods and services in exchange for money, than to give them with nothing in return. (See capitalism.) The biggest barrier to local development of solar energy in San Diego has been a convoluted rate structure that in many cases actually made businesses that installed solar generators pay more money to use less electricity, than before they installed them. Small wonder that northern California is far ahead of sunnier southern California in solar power installations. Now that crazy rate structure is changing, which could bring a boom in locally generated solar power.
For homeowners in San Diego no change is forthcoming. Germany has all those solar installations because of a rate structure that pays for solar electricity at much higher than market rates. In San Diego you see many solar panel installations like ours covering a small portion of the roof. The rate structure here is fair up to the point that you replace your total annual electricity usage with solar power. Produce more than you use, however, and all the excess is just "donated" to the utility without compensation. So you're okay if your solar installation is a bit smaller than you need, but it's economic madness to make it any larger than you need. If not for this rate structure, our solar panel installation could have produced enough electricity for one or two of our neighbors in addition to our own needs.