In Which The Merits of Solar Power in the PNW Are Discussed
Going Solar?
I already have solar at my home in Portland, so I am not a stranger to the idea of residential solar installations. When we bought the house in Washington, I looked into getting solar at the new house since most of the big draw appliances are electric instead of gas (heat pump, water heater, oven). To my disappointment, the sales tax exemption had already expired and the Washington production incentive was already over-budget and had a waiting list. This is compared to Oregon, which not only offered a $0.55/watt rebate to the installer, but also a state tax credit up to $6000 over 4 years for a large enough system.On paper, my 5.7 kW system cost me $6579 after all the state and federal tax credits (from $21,105 pre-incentives) in 2016. That comes out to $1154.2/kW installed. Even at that price, the installer calculated a 10 year ROI based on my pre-married energy usage. After my wife moved in, our combined use was a little higher, but the array met our needs and was mostly trouble free, except for some hemlock needles shorting out a breaker in the junction box. Having "free" electricity even got me to dabble in the cryptocurrency mining craze for a while: the more electricity I used, the faster I would reach my 100% ROI. Sorta, kinda.
In Washington, without the state incentive programs, I knew solar would be a hard financial sell. Now that we've lived in the house for a year, we have a good idea of what our energy usage is and my mind drifted back to solar. But more than just the promise of "cheap" energy, my main draw was the way the panels form a second roof, shielding the attic from solar heating during the hottest months.
In the Portland house, even though I removed a stand of trees that shaded the south-facing master bedroom, the solar gain was dramatically reduced after the panels went up. in this house, the master bedroom also faces south with little to no shade or cover. It gets noticeably warmer than the rest of the house during the afternoon if there is any sun out, and unbearable during the dead of summer (my wife disagrees with my negative assessment of the thermal properties of the room in the summer).
Price Shopping
Ignoring the wife's objections (always a safe plan...) I reached out to a few companies to get a feel of how much a system would hurt without all the state incentives. Oh boy, was I in for a surprise. i would have thought that costs would have come down a little since 2016, but I guess the anti-china sentiments have held back the "flood" of cheaper and cheaper Chinese panels that killed solyndra. Either way, I got quotes ranging from $2180 to $2620/kW installed after the federal incentive. The new sales tax exemption and opting for cheaper and older Silfab A310M panels helped lower the highest bid to $2093/kW. I'll be doing some more price negotiations tomorrow morning, but it looks like that's the probably the best I'm going to get. For those of you keeping track, that's nearly double the price in Oregon for a similar sized system. The ROI calculations become a lot less favorable with advertised ROIs of 18 years.Doing the Math(s)
Being a spreadsheet warrior, I did my own calculations based on some research about how we get electricity in the PNW. I might do a blog post about that, but my number ran more like 19 years using my best guess about inflation and the PNW reducing its reliance on hydroelectric in the next two decades. Even the lower revised bid would still take 18 years to pay for itself.The installers also like to advertise estimated savings over 25 years in the $20,000-30,000 range. My own numbers show that to be extremely optimistic. Even the best bid would only give me a 66% installation cost recovery over 25 years: a far cry from the 168% offered by one of the installers. I define the 25 year install cost recovery as the difference in total energy costs (gas and electric) over 25 years with and without the solar panels. Even at 66%, that does mean a net savings in total energy costs over the next 25 years, the percentage depending on how large an array we spring for. For the array sizes proposed, we'd be looking at something in the 15-20% range.
For reference, my best estimate is that we will spend $58,200 over the next 25 years in energy costs (gas and electricity) if we do nothing. Yeah, my mouth dropped at that number too. My wife thinks I'm being silly and that 25 years worth of heat and light is worth a year's salary, but I can't help but wince at how much energy actually costs.
Opportunity Cost
Of course, just running the savings doesn't tell the whole story. In economics, opportunity cost is how one weighs the economic benefit of a purchase or investment. What could the money be doing otherwise, if it wasn't spent or invested in this particular venture? Well, if we take the long term view, the ballpark 25 year opportunity cost would be to assume we invest all $58k today in a 3% "savings" account or CD ladder and use the balance and interest to pay off energy costs over the 25 years. Turns out at the end of 25 years, we would have $19,800 in the CD ladder or savings account, so a "savings" of 34%. Well beyond any real cash savings the solar panels could offer over the 25 year operating period.Now to be clear, a 3% savings account doesn't really exist. Also, there is an opportunity cost to locking away $58k of liquid cash today for future energy costs. And that doesn't actually change the inescapable fact that we still ended up spending the $58,000, we just made back some of it in interest over the 25 years. Nevertheless, it does give a good ballpark of what could happen with endless cash reserves and the ability to financially plan 20, 30 years into the future. On the other hand, if you just leave the cash you would have spent on the solar array in a "savings" account "paying" 0.034% APY (and that's really stretching the definition of paying) you would effectively be losing money due to inflation.
With the solar panels, what we are doing is front loading the next 18-19 years' worth of costs into today's dollars. There is something about pricing today's dollars vs dollars 18 years in the future, but I'm not entirely sure I know how to make sense of it. I do know that with inflation, today's dollars are more powerful than the same amount 18 years from now. But then you factor in interest, and inflation, and technological changes, and everything else that makes the real world messy, I have no clue how the math shakes out.
There's sun in Washington?
And all of this solar savings maths assumes 1000 hours of peak solar each year, an assumption that my Portland array sadly fails to meet. I get about 86% of the advertised production each year (4901 kW/yr vs 5690kW/yr) To be fair, it's likely not helped by my non-ideal array orientation and east-west split array. The big old hemlock hiding the western array from afternoon sun also doesn't help matters. I never really expected ideal performance from my Portland array, but should I really expect better from this array in "rainy" Washington?So far, we haven't really seen that much difference in weather compared to Portland. Just as many sunny days, though winter is a little colder up here. I would expect an array up here to perform just as well as my Portland array, if not better due to the more ideal array location. (Okay, I am planning a split SW/SE facing array, but it should still be better than my tree covered purely east/west array in PDX).
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