Cost and Payoff

Friends and neighbors keep asking us about costs and payback time. There's the old saying "you need money to make money," and that certainly applies here. Despite all the credits, exemptions, and incentives, there's still significant up-front costs.

The short answer is that it's about the cost of a new car -- but a big difference is that the car doesn't pay for itself over time. Here's more detail for our specific situation.

Up-Front Costs:

Power Generation (3.3 kW): $25,511
Water Heat (30 tube system): $9,053
Total Initial Cost: $34,564
Includes all equipment, engineering, installation, permits, fees, etc.

Expected Year One Payback (July 2009 through June 2010):

PUD PV incentive: ($1,650) *
PUD SWH incentive: ($500)
IRS 30% credits: ($10,369) **
Generation: ($300) ***
WA "5101" rebate: ($537) ****
SWH savings: ($218) *****
Total 1st Year Payback: ($13,574)

*Snohomish County PUD incentive of $500 per rated kW, which is prorated for partial kW. We opted for the cash incentive instead of PUD 2.9% loan program.
**The $2K caps for solar were removed in 2009 economic stimulus legislation. Federal tax credit offsets income tax due (it's not a deduction); big credit may actually need to be spread over a couple tax years.
***Savings based on current utility rates (winter $.08367/kWh and summer $.08053/kWh as per PUD residential schedule), plus 6% city utility tax, and 3,450 kWh/year estimated generation based on our system size, efficiency, pitch, orientation, shading, etc.
****Washington Production Incentive at base rate $.015/kWh with out-of-state components, extended to June 2020 in 2009 state Senate Bill 6170. You get paid to generate solar power, even if you use it yourself!
*****Estimated 2,508 kWh/year savings with 2-4 person solar water heat system.

Expected Payback For Subsequent Ten Years (July 2010 through June 2020):

If PUD rates don't go up [yeah, like that'll happen]: ($10,550)
If PUD rates go up on average 2%/year: ($11,155)
If PUD rates go up on average 6%/year: ($12,607)
These are cumulative totals for 10 years, not annual amounts.

Since we paid $1,035 to PUD for the most recent full billing year (and that's before the rates went up in April), we'll be effectively zeroing out our electric bill. The combined system can pay for itself in 15 to 20 years, although this varies depending on your assumptions (for example, we're not including loan interest above, the system age may diminsh generated power levels, and who knows if the production rebate will be extended again beyond 2020). Any years after the payoff point are gravy (the PV modules have a 25-year warranty for 80% generation, but should last even longer).

About 10-15 years out, we're expecting to replace a couple components (water tank and PV inverter), so we'll need to set aside some of the savings towards those future costs. We're assuming we won't be selling or moving before then (although, if we do, we should be able to recover the cost on resale).

Of course, besides the financial upside, there's the environmental benefits, and the joy and peace-of-mind that will last longer than a new car or expensive vacation.