A Look At Solar Economics

I’m a huge fan of solar energy. My boat has solar panels and I can go weeks without plugging into shore power. I love everything about it. So today I’m going to share an analysis of solar power economics that I recently undertook. I do this every few years, because someday soon, I hope, it will make sense for me to install solar power on every project I undertake. It hasn’t happened yet. 

In the early days, solar power has largely relied upon government subsidies to make financial sense. The panels were expensive and inefficient. The payback on many installations was over 40 years. I don’t know too many investors who would wait that long for an ROI. So governments created incentives by purchasing the electricity generated at a higher price than the cost to the consumer for electricity. That shortened the payback to somewhere between 10 and 20 years in many cases. But as solar technology has improved, the panels have become more efficient, and the cost of manufacturing the panels has improved. Solar is on the cusp of making sense financially on its own. In response the government subsidies have been scaled back significantly. 

Back in 2014, SolarCity was the largest residential solar installer in the world. Tesla, Elon Musk's car company acquired/rescued his cousins' troubled firm in late 2016 for $2.6 billion in stock and the assumption of approximately $3 billion in debt.

The sales at SolarCity, now a unit of Tesla have been sliding ever since the acquisition. They installed only 1/3 the number of panels last year compared to when they were independent. Today, Sunrun has taken over as the largest supplier of installations in the US and has the most economic 

As the company has been trying to achieve profitability, it has changed the sales model for solar installations several times. They eliminated the door to door sales team as part of a company restructuring. In some ways, that’s a shame because the door to door sales model seems to be the most effective in the industry. Tesla’s competitors are still using it because it works.  

Tesla will be allowing customers to purchase "directly from their website, in standardized 4kW increments of capacity. The aim is to put customers in a position of cash generation after deployment with only a $99 deposit upfront. 

 The Tesla website allows prospective solar customers to take out a loan for a 4-kilowatt system that will generate an estimated "$600 to $800 per year" at a cost of $85 per month for 240 months at a 5.99 percent APR.  If you want the Teslas Powerwall, you are looking at another $58 per month. The entire system will give you about 4,000 watts of power generation capacity and about 14 kWh of storage. But remember, you’re only getting about 4-6 hours of useful sunlight each day to produce that kind of power. If you average consumption over the entire day, you’re only getting about 700 watts of useful power on a sustained basis. That’s enough to power your refrigeration, basic lighting, the fan for your furnace, home appliances.

The oven will need to be powered from the utility. So will the clothes dryer and the air conditioner. 

The payback on the system is in about 18.5 years depending on the cost of electricity. In California where the electricity is much more expensive, the payback is closer to 10 years.