Solar Power Rationale

(From J.R. Tozer) Partly as an exercise for myself, I've detailed some of the rational
for installing the solar system below.   You might find it interesting:

Property Values  (in case we decide to move for some unforeseen reason)

Articles in "The Appraisal Journal" say that a home will sell for $20 more for each $1 reduction in annual expenses.   The logic is that the person can put $1 additional towards their mortgage, which at a 5% interest rate increases the size of the mortgage by $20.   While this is a sweeping generalization, I am sure there is some merit to it.   Our solar system should decrease monthly expenses by $1800/year, which translates to a $36K higher property value.  Since the system will only cost $28k, one could say the system is break even (or better) right from day one.

Reduction in CO emissions

By one calculation, our 5Kw system will reduce our CO2 emissions by about 10,000 pounds per year.  To make it easier to quantify this, it is about the same amount our Corvette would output during 11,000 miles of driving (3 yrs at current rate).

According to the carbonneutral.org calculator, we are personally causing the emission of a total of about 50,000 pounds per year from all sources.  So the solar system reduces our personal "carbon footprint" by 20%.  This compares to the 5-15% reduction called for by the Kyoto protocol that over 160 countries have committed to.  Amazingly only the United States and Australia have declined!  

Our other major carbon emissions come from food (12,000), the Sportsmobile (12,000), and our other cars (8,000).  I'm trying to reduce our driving some by riding my bike (or 200 mpg motorized bike) on local errands.

Interestingly, one can purchase a "carbon offset" for the whole 50,000 lbs for just $99.  A pretty cheap way to minimize our impact - if it really works.  Non-profits like carbonfund.org take your money to subsidize the creation of new wind farms, etc.   The theory is that without these additional funds, the wind power wouldn't be viable and so wouldn't be built. With the funds, wind farms are built instead of coal-fired plants, thus reducing the carbon being output. (See Carbon Offsets about some possible downsides to this.)

U.S. dependence on foreign oil

In order to help reduce our dependence on foreign oil, I think we'll have to find a way to use less gasoline.   Electricity in the U.S. comes primarily from coal (50%), natural gas (19%), and nuclear (19%).   Here in San Diego, 65% of it comes from nuclear (San Onofre), with the remainder from natural gas.  Thus solar power isn't really going help reduce our dependence on foreign oil by itself.

However, I'd like to purchase and drive an electric vehicle (or plug-in hybrid) when they become available.  They are not yet for sale, but there are lot's of nascent efforts underway, and I imagine we'll be able to buy an electric car in the next five years (e.g., the GM "Volt").  Doing this will surely help reduce our dependence of foreign oil, but it will require electricity from somewhere.  By getting this solar system for our house, we'll be in a better position to make this transition.  If we can conserve electricity (partly by getting rid of the fish tank and by getting thermal solar to heat the spa), we can power an electric car from the system  - effectively reducing our footprint by another 10%.

Return on Investment

Comparing the solar installation to a similarly priced money market investment reveals that the solar system generates about twice as much after-tax cash flow initially.  Given the rising costs of electricity, the system will actually generate five times as much after-tax cash flow toward the end of it's life (even considering the reduced efficiency of the system over time).

The cash saved by the solar system builds over time to offset its original cost in just eleven years.   When considering the cost of money appropriately, the cash flow from the solar system generates a principle amount that catches an alternative investment of the system cost by the 14th year.

Over the 40 year life of the system, it will generate over $300,000 of after tax benefit more than a money market investment for the same time and amount (this is equivalent to about $100,000 in today's dollars).

You can see the attached excel spreadsheet for the raw calculations and assumptions used.  None of these calculations consider the increase in property value for having the system.

By the way, even if I add unexpected costs of $500/year for service of some sort, the system still generates more cash than a money market, and it still breaks even with it before year 18.