Purchasing and Negotiation Training

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s Note: This is the second in a two part series on my (so far) discouraging g effort to equip my north Texas home with solar powered electricity.  Part One sets link up the technical aspects and the second part addresses the financial considerations.  

Pricing and payback 

This is where the prospect of roof top solar becomes less appealing.  A 10kW system prices out at $42,000 or $4.20 per Watt.  Doing the project in 5 kW increments reduces the cost to $22,000 per increment or $4.40 per watt.  These budget figures alone make solar an un-doable project.  Energy saving alternatives such as reflective (radiant) barriers, increased insulation, and upgrades windows could all be done for less money and arguably a quicker payback.  But, as they say on infomercials, “Wait, there’s more.”

The local power service company in our area provides a 30% rebate up front which is paid to the solar contractor.  Applying the rebate to the $42,000 price creates a reduction of $12,600 bringing the net out of pocket to $29,600.  A Federal income tax credit of 30% on the $29,600 completed project further reduces the cost by $8,900 making the net out of pocket to $20,700 after tax credit.  The out of pocket for the 5kW system nets out at about $12,000.  This Residential Renewable Energy Tax Credit is set to expire in 2016.

The expected annual savings from the 10kW system is estimated but not guaranteed to be $1,800.  Dividing the $29,600 expense by the $1,800 savings, and ignoring the time value of money, the payback period is 16.5 years, a thoroughly lousy investment.

Another impact of the panels is the pricey addition to the house which raises insurance premiums.  Hail storms in north Texas have forced two re-roofs in thirteen years.  The warranty protection from the manufacturer against hail damage is not robust meaning that my insurance would need to cover the cost of new panels.  This solar roof top project is growing worse financially.

Other saving graces?

With such a dismal financial prospect, but a desire to capture the sun’s energy, I dug a bit deeper.  The technology is such that no storage batteries are required; the solar power is tied to the grid with inverters  and automatic transfer switches.  Bright winter days are best for energy creation and result in net power back to the grid.  The exact extent is being calculated but because electrical energy usage is minimal in the winter, the payment from the utility company cannot be substantial.  Worse yet, local utilities only pay the solar customer about 40% of the unit price they charge per kWh.  Yet, some so called “green generators” will buy back solar power for 100% of what it charges.  Unfortunately, the green generators charge about 25% more per kWh (on average) so no matter the route, the end point leads to the same dead end.

I will stay on this project starting with interviews of neighbors who have already experimented with solar panels and a though evaluation of payback analysis generated by the utility company and contractor.