Say you live in a 3-bedroom, 2-bath house with good roof exposure for solar equipment. Your home is all electric and your average monthly electric bill is $260. Energy consumption is 1,600 kWh per month. You had your home audited and, through making smaller changes, you decreased the bill 15 percent to 1,360 kWh per month, or $221.
Now you decide to completely eliminate your electric utility bill and, in the process, reduce your home's carbon footprint to nearly zero. You find a 5kW system that will do the job and costs $40,000 — a lot of money, for sure, but you take into account the following:
i Once the system is in place, a TOU (time of use) rate structure will apply. Plus, you believe you can use 90 percent of your electricity in off-peak, lower-rate hours, and will therefore be selling most of your solar production back to the utility at the top rate.
I The warranty on the panels is 20 years, less for some of the other equipment. Reliability is good on the brand chosen, which was not the cheapest.
I The state will give a rebate of $10,000 directly to the PV system contractor so it's not even billed to you, the homeowner.
All this brings your total out-of-pocket cost to $30,000. But you also qualify for these credits and deductions:
I The feds will give a $2,000 tax credit for the system, bringing the cost down further to only $28,000.
I You finance this with a tax-deductible equity loan at $140 per month. This means that you're immediately saving the difference between the power bill you eliminated ($221) and the cost for the loan. In this case, that's $141 per month after taxes.
From day one, this deal is in the black.
Using 7 percent as the energy inflation rate, the payback is 11 years, but this does not account for the fact that the value of the equipment is also rising.
With this factor included in the equation, the payback goes down to 7 years.
The potential savings in carbon footprint are 13,000 pounds per year.
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