Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Case study of the economics for rooftop solar panels

Photo courtesy of DollarPictureClub.com

Photo courtesy of DollarPictureClub.com

Came across a helpful case study analyzing the economics of installing rooftop solar. This analysis is provided by a website whose owner is not readily identifiable. Keep in mind the purpose of this website is to gather leads which are provided to rooftop solar installers. Thus the goal is to sell rooftop solar.

You can find the analysis at How Much Do Solar Panels Cost.

The case study is designed for a typical household that is a customer of Los Angeles Department of Water and Power. (This is relevant because a subsidy from LADWP covers 25% of total cost.)

In this case, a 3 kW installation is designed to cover 5600 kWh of the household’s 8,000 kWh annual consumption.

Total system costs are usually in the following proportions:

  • 30% – solar panels
  • 20% – balance of system (all of the materials and equipment needed other than the panels themselves)
  • 15% – labor
  • 15% – permits and inspection fees
  • 20% – operational costs

Labor and other parts are more than the cost of the panels.

Total costs are estimated at $19,500. That comes out at $6.50 per watt.

Of this, taxpayer subsidies reimburse $9,252 of the cost, leaving a net cost of $10,248.

Total lifetime savings are $21,989, which is over 25 years, or $880 per year. That average savings of $73 a month is in relation to the assumed $100 per month average cost of electricity without solar panels.

The case study calculates a net present value of $2,919 with a rate of return of 11%. Payback time is 9.5 years.

I did not notice a date on the case study. If it is several years old, recent price declines in cost to manufacture the panels could change the calculations.

I have not spent a lot of time looking for the total cost of a rooftop solar installation, so this is a great learning tool for me. Check it out if you want to drill down into the details of one example.

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