PROOF that SOLAR POWER is a GREAT INVESTMENT

SOLAR POWER IS A GREAT INVESTMENT

 

From a financial perspective, Solar Power is a GREAT investment.  In British Columbia, this fact is not yet widely accepted or understood.  And it is difficult to prove without a few spreadsheets, the thought of which usually send people into a deep slumber.  However, in this post I will present the information that substantiates the fact that investing in solar power is a wise financial decision.  So grab a cup of coffee and brace yourself for some exciting facts and figures!

 

Ladner-BC-8kW-Install

Pictured Above:  Rikur Energy 7 kW Solar Power Installation in Ladner, BC

 

A SOLAR POWER SYSTEM CAN PROVIDE:

  • AN AVERAGE YEARLY RETURN ON INVESTMENT OF 15% OR MORE
  • A TOTAL RETURN ON INVESTMENT OF 460% OR MORE
  • PROTECTION AGAINST RISING ELECTRICITY COSTS

 

The above table looks at the payback and return on investment of a 5 kW Solar Power System for a typical household, which at todays prices would cost around $12,500 for a standard installation.  You can see in the “Solar System Value”column, that after 30 years you would have saved $57,509.97 after payback of the system.  This translates into an average yearly ROI of 15.34% and a total ROI of 460% over the expected lifespan of the system.

At this point you may be wondering how on earth I came up with these numbers.  All I can say is, read on….

 

ELECTRICITY BILLS

 

Many people pay their electricity bills without really understanding how the provider of the electricity (utility such as BC Hydro or Fortis) charges them.

For Residential consumers of electricity, the most common rate structure involves 2 steps, where up to a certain amount of electricity is billed at one rate and then all electricity beyond that is bill at another higher rate.

See below for BC Hydro’s Residential Rate explanation as seen at the following link. https://www.bchydro.com/accounts-billing/rates-energy-use/electricity-rates/residential-rates.html

 

When you get your bill each month or two months, you may be presented with something that looks like the image below.

 

I encourage anyone not already doing so, to sign up for the BC Hydro online account, where you can see your current and previous bills, daily consumption, and lots of other interesting statistics related to your properties energy usage.  https://app.bchydro.com/sso/UI/Login?realm=bch-ps&goto=https%3A%2F%2Fapp.bchydro.com%3A443%2FBCHCustomerPortal%2Fweb%2Flogin.html

Depending who you are, being able to check your electricity usage either interests you or is extremely boring.  To those who feel the latter, the world is moving to more energy conscious societies, so please get on board and educate yourself now, or risk getting left behind.

Below is an image of a spreadsheet table detailing the cost of energy over 1 year for a typical consumer of electricity (1,000 kWh).

 

 

As you can see from the above table, a typical household is currently spending around $1,500 per year on electricity.

 

NET-METERING

 

Now would be a good time to explain the Net-Metering program currently in place, which is how BC Hydro deals with anyone that produces their own electricity, whether it be from solar, wind, hydro, etc., whilst remaining connected to the grid.

The way it currently works is as you produce electricity on your property, it is first used to supply the needs of your property, and any excess is sent out to the grid, for which you are credited at the same rate as you buy electricity.  Over a whole year, which is described as an Anniversary date by BC Hydro, you will be paid 10 cents per kWh for any excess energy that you produced on your property over and above your consumption.

For example if you have used 1,000 kWh, but 500 kWh came from your own solar power system, then you are only effectively using 500 kWh from the grid and, therefore, will only be charged for 500 kWh.  If your solar power system produced 1,500 kWh, then at the end of the year you would be paid 10 cents per kWh for 500 kWh which would be $50.  Another benefit of the net-metering program is that the more expensive Step 2 electricity is offset first by any electricity produced by your solar power system.

https://www.bchydro.com/work-with-us/selling-clean-energy/net-metering.html?WT.mc_id=rd_netmetering

 

 

 

If that same household above invested in a 5 kW Solar PV System, their bill would drop down from $1,462.11 to $765.35, which is a savings of nearly $700 or 48%.  See the below table for proof of this.

 

 

The numbers in the “Solar kWh” column seen in the table above were generated by the PVWatts website, which uses historical weather data, and takes into account tilt angle, direction, and various sources of losses to come up with the numbers.  It is trusted source for modeling Solar Power Systems.

https://pvwatts.nrel.gov/pvwatts.php

 

 

NOTE: 10% SYSTEM LOSSES IS VERY CONSERVATIVE.  ACTUAL LOSSES COULD BE LESS, WHICH WOULD RESULT IN HIGHER SOLAR OUTPUT VALUES

 

Another option would be to look at the website below to get a better idea of how the output of a Solar Power System changes with respect to different factors.

https://sunmetrix.com/discover/

 

ELECTRICITY PRICE ESCALATION

 

Since 2007 the average yearly increase in electricity prices has been 6.5%.  Only 11 years ago, the cost of electricity before taxes was 6.65 cents per kWh, and now in 2018 it is 11.41 cents per kWh.

Proof of this is shown below in a Report by BC Hydro, and a study by Hydro-Quebec, both of which can be found at the following links.

https://www.bchydro.com/content/dam/hydro/medialib/internet/documents/appcontent/your_account/ElectricityRates_Comparison_Report.pdf

http://www.hydroquebec.com/data/documents-donnees/pdf/comparison-electricity-prices.pdf

 

 

 

SYSTEM LIFESPAN

 

A solar PV system is expected to last 30 years or more.  Evidence of this is supported by studies leading Solar Manufacturers and reports of systems that were installed as far back as the early 1980s (using early 80s technology!) and are still going strong, showing very little change in Solar Power production.

https://cleantechnica.com/2011/12/27/solar-panels-creating-electricity-for-much-longer-than-20-years/

https://us.sunpower.com/sites/sunpower/files/media-library/white-papers/wp-sunpower-module-40-year-useful-life.pdf

https://electrek.co/2016/07/04/solarcity-increase-useful-lifetime-of-solar-power-installations/

http://www.concordmonitor.com/old-photovoltaic-nh-solar-14270530

 

 

I wanted to show this table again before I continued on to a comparison of investing in a Solar Power System versus putting money into a Registered Investment, Non-Registered Investment, or Mutual Fund at current rates.

The “Interest On Savings @ 1.5%” column shows how much interest is earned per year on the amount of money saved on electricity by a Solar Power System.  I am assuming here that this money is going into a Registered Investment so that I do not have to take into account Income or Capital Gains taxes.

 

COMPARISON WITH OTHER INVESTMENTS

 

 

CONCLUSION

 

Is it fair to say that investing in a Solar Power System today would result in a greater Return On Investment than if you were to put your money into a Registered Investment, Non-Registered Investment, or Mutual Fund at today’s rates?

I am not a financial advisor, but I felt it necessary to delve as deep as possible into the financial aspects of owning a Solar Power System, in order to address the concerns by many that it does not make sense in BC.  I hope I have shown here that it not only makes sense, but that investing in a Solar Power System is a great investment.