Today I read an article talking about California's wildfires and their effect on California's energy grid. When the terrible fires happened last year many people believed that a number of those fires were caused by sparks that came from power lines. This led to law suits which led to the main electric provide in Northern California turning off the power grid this year during certain high fire risk periods. Today there are wide areas in Northern California without electric power.
One of the surprises that came from this is that many people who were equipped with solar panels found out that their solar systems would not provide any electricity to their homes during a power outage. That is because the typical solar system does not store the electricity it produces into a battery system from which the house then draws upon but rather transfers produced electricity into the electrical grid of the power company. Thus without an electrical storage system and without the house being wired to directly utilize solar power there will not be electricity for the home to use.
When a home system is producing electricity under the typical system the home's electric meter slows down accordingly and the home owner is only charged for any excess current they use. If the power company accepts what is known as Net Metering and the home system produces more current that what the home uses for a month then the power company will credit that amount to the home owner's electric bill. The one catch to that is that while the electric company charges it's customer a retail rate they often only credit them for excess production at a wholesale rate which is substantially lower.
But finding that out did get me thinking about what would be my cost here in West Michigan to install a roof solar panel system and how long would the actual payback be. I have not talked to any solar provider companies or any actual people who currently have roof top solar panels but I have done a little research and here is what I have discovered.
Checking my electric bill from the local Board of Public Works I found that during the last 12 months I used in my 1300 sq. ft. house 7115 kW hours of electricity. The overall BPW charge for our electric figures out to be .127 per kW hr. My annual electric usage equaled $904. Michigan prices for electric are usually a bit higher than the national average. A little over a year ago our BPW finished building a new power plant and converted from coal to natural gas which is supposed to be much cleaner and less expensive.
According to what I was able to find out on line the average solar customer installs a 6200 kW system which would seem about right if my annual usage is 7115 kW's. In Michigan the average cost for roof top solar panels is $4.11 per kW. That means a 6200 kW installation would cost me if I paid in cash $25,482. I don't know if that is before or after taxes.
For some reason the government has offered pretty big incentives for people to install solar power. This seems pretty much a crock to me for a whole lot of reasons, about which I could write from here to the end of next week. However, let's get back to what my cost would be to install solar.
Until the end of 2019 the Federal Government will, if you install a solar system this year, reduce what you would owe in taxes this year up to 30% of what it costs you to install a solar system. In 2020 that amount reduces to 26%, in 2021 I'm not sure but I think it's something like 20% and the incentive program expires at the end of 2021. Maybe something else will come up but if I am thinking about solar I either need to do something soon or hope that a breakthrough in technology would make an investment practical.
There also may be local incentives offered by my city or even by the BPW to become more energy efficient. I'm not sure if or what those are but perhaps they can add up to another $4 - 6 thousand dollars. I'm not going to include those numbers below but you are welcome to do the math yourselves later on.
So let's say I decide on installing a $25,482 6200 kW system next year. I would need to pay the full amount, and then to qualify for the 26%, $6000 plus government money, make sure to withhold that much from my 2020 tax estimates which will then reduce my tax owed by April 15 of 2021 by that amount. Thus after a year if I install in the Spring the actual cost for the system would be $19,366.
To figure the length of pay back I multiply 6200 kW hrs per year X my BPW rate of .129 kW hr. which equals an annual savings on my electric bill of $787. And at $787 per year it would take me 25 years to break even. Solar systems are supposed to be good for 25 years so in theory every year after that my electric bill would be only $117 per year.
There are however a few things to consider with solar. On the plus side, what I pay for electric may very well go up during those 25 years which would increase the amount I would be saving and thus reduce the actual payback period.
On the other hand there are a few negatives to consider. Apart from possible maintenance costs, like equipment breakdowns, cleaning, snow and tree branch removal, and the need to spend $10 -12 thousand dollars on new roof shingles before solar installation, there are solar energy efficiency questions when living in West Michigan and where I live in particular. A 6200 kW system might possibly produce 6200 kW's per year in a place like Arizona. But where I live we get a lot of clouds, a fair amount of snow, there are woods west of us across the street which block direct sunlight for the last hour of the day, and the trees near us produce a fair amount of pollen. I don't know how to actually calculate all of this but if my panels produce only 60% of capacity then my annual payback then becomes $472 which would equal a 41 year pay back.
Since I will turn 70 next year solar does not seem to be something that I will get too excited about.
Most of the information I could find on line whether solar is a good investment comes one way or another from companies that want to sell and install their solar panels. Each one assures me how wonderful a system would be. After watching U Tube videos of people who have installed systems I have come to the conclusion that the actual reason, apart from those that live off grid and need solar, or perhaps those who live in very sunny areas where the costs might be much different, is that installing solar makes them fell good about themselves.
They ignore the fact that Chinese miners earning slave wages dig out the dirty materials currently needed for solar panel production. They buy into the claim that man made CO2 is somehow any different than naturally produced CO2 (CO2 being the food that all plants eat) and buy into a claim, despite historic evidence showing the opposite, that any warming of the planet will be a disaster and must have been caused by the actions of man and can likewise be reduced by the actions of man.
But like I said, I'm almost 70. If I could invest now for something that would have a decent return much earlier and reduce what I would need to pay for utilities when I finally stop working it would be worth it. Hmm, maybe I'll check out wind.
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