Just about everyone likes the idea of generating clean power from solar – what you may not realize, is that you can now also enjoy a handsome financial return on your solar investment. Please bear with us as we go through The Investment Return of Solar Energy.
Solar installations are rated in kilowatts – in our example, the system is 7.2kW (24 panels of 300 watts each). But the electricity we buy from our utility is priced in kilowatt-hours (kWh), so we need to calculate how much electricity our 7.2 kW system will generate.
Since there’s enough math going on here already, we’ll side-step the calculations leading to system output, and state that 1 kW of south-facing solar will generate about 1450 kWh of electricity in Houston. Thus, our 7.2kW system will produce about 10,440 kWh of electricity over the course of a year.
A 7.2kW array producing about 10,440 kWh of electricity costs just over $15,000 to install after the 30% federal tax credit.
Let’s also assume our electricity costs are $0.11 per kWh for electricity, therefore the 10,440 kWh your solar panels produce is worth a little over $1,148 a year.
So by one measure, the investment return of solar energy (current return or yield) is 7.7% ($1,148/$15,000), or a tax-free equivalent of 10.7% at a 28% marginal tax rate.
Sort of eye-popping when compared to alternative, safe investments. Also, consider the value of the power produced by your system will rise over time as electricity rates increase.
We have programs that calculate more ratios regarding the investment return of solar energy, including Levelized Energy Cost, Net Present Value, Cash Payback and IRR, but our point here is to keep it simple. To get an in-depth analysis for an installation for your property, please call 713.802.0223.
Hope this helped, it’s pretty simple…in fact it’s a no-brainer.