Your renewable energy system is an investment that will pay for itself completely.
Here's how:
First, the system will pay back an average of 8%-12% per annum through electricity generation. This allows a renewable system to recover the full installation costs within 8 to 11 years. Individual system payback periods will vary, and depending on your state, the initial investment will vary as well.
The second way the system pays for itself is in value added to your property and independence from the volatility of domestic energy markets. You are basically abel to lock in your energy price at the time of installation, as energy prices increase, your cost remains constant.
Finally, if you use less power than is produced by your renewable energy system, you may be eligible for net-metering.
Incentives vary by state, tax bracket, and commercial versus residential installations. Information on photovoltaic incentives is compiled on Solaqua's site for your convenience and reference in the PHOTOVOLTAIC section under Financial information. |
Example of Cost-Recovery: |
This example is for a mid-sized residential installation in New York State. |
A mid-sized system we will call 4.125 kilowatts, this will produce about 16.5 kilowatt hours of electricity per day Now to determine our cost recovery horizon we first must know the initial investment. Assuming this is an installation done on residential structure we can expect a state tax contribution of $3,610 and a Federal tax contribution of $2000. Additionally, New York State Energy Research and Development Authority will contribute $4.00 per installed Watt, reducing the initial investment by $16,500.
That's great you might say, but WHAT DOES IT COST???? |
Just like any commodity, the price of solar panels changes with market forces but the trends have been pretty consistently towards lower prices. Historically, PV is now 100 times cheaper than it was upon initial use. But recently, with the added demand from foreign countries and the increase in energy awareness, the prices have been fluctuating. Right now a PV system can be installed in New York state for about $8 to $10 per Watt. Assuming this system was designed at the time of this writing, the total cost could be about $33,000. |
| |
| Panel STC = (Watts) |
165 |
| Capacity = (Watts) |
4125 |
| No. Panels = |
25 |
|
|
| Per Watt Cost |
$8.00 |
| NYSERDA Rebate |
$4.00 |
|
|
| Initial Cost |
$33,000.00 |
| NYSERDA Rebate |
$16,500.00 |
| Financed Cost |
$16,500.00 |
|
|
| Federal Tax Credit (30%) |
$2,000.00 |
| State Tax Credit (25%) |
$3,750.00 |
|
|
| Net Cost To Customer After Benefits |
$10,750.00 |
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Now to recover these costs!!
The payback is dependent upon current and future energy prices. We assume a model that anticipates an average increase in energy costs of 3% per year.
Starting with a base rate of $0.12 per kilowatt hour we can construct a cost-recovery equation. |
| This table shows amount of electricity generated for the first, tenth and twentieth year of the system's life as a function of value ($). |
| Totals by Years |
|
|
|
| Years |
1 |
10 |
20 |
| Electricity Savings $0.11/kWH escalated 3%/yr |
$713 |
$8,171 |
$19,153 |
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| Plugging the numbers into a geometric series results in a payback period of about 12 years. |
Additional Factors to Consider in Pay Back Period
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There are some additional factors to take into account when analyzing the cost-recovery scenario for your renewable energy investment. The main thing to remember here is that if you take advantage of available state and federal incentives (especially the Energy $mart Loan Fund in NY) you can finance your system with an instant annual positive cash flow. Meaning you will immediately begin to earn money on your investment. This is an example taken from a study that investigates the financial benefits gained from the financing options available in New York State.
Link to Example
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