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Incredibly janky port of comments from my old WordPress site:

Andrew G

2020-01-03 at 9:36 pm

Interesting stuff, especially your local quirks. I’m in a country where I don’t speak the language and it’s on the rural side so there isn’t a lot of online info. But in late summer we installed a 35kw rig for about 35,000 after subsidies (handled by the installer) and at the end of the year we got a cheque for 1,050! They’re literally giving away money! Everyone needs to get on this!

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Incredibly janky port of comments from my old WordPress site:

AtlasNL

2019-12-31 at 12:51 pm

Came here through MMM website. I am shocked to learn about the insane high prices on solar systems in your country, compared to very low electricity prices!

I am based in the Netherlands, our PV-system of 9.6kwp has a cost of 9.749 EUR (roughly 10.5k USD). It generates about 9,000kwh per year – and electricity cost is 0.21 EUR per kwh, so ROI is roughly 19.4%. All the more kudos that you do it despite the crazy, insane (!) costs of the systems there and the very, very low kwh price!

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Incredibly janky port of comments from my old WordPress site:

Frank Baumgardt

2019-11-19 at 7:33 pm

Hi,

Thanks for your write-up. How are you considering the difference in future value? After 25 years or so, the value of the PV system will be fairly small/approaching zero (also need to factor in inverter replacement costs), while your bond will have the same face value as it does today.

Thanks,

Frank

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Profit Greenly (Post author)

2019-11-25 at 6:54 pm

Good question Frank. I sort of answer this in the depreciation section, but I didn’t go into it enough to try and keep the length down (and yet it’s still already a pretty long post!). The way to calculate whether bonds will beat solar in the long term is to simply assume 100% depreciation on your solar panels, because at some point they will eventually be worthless. To do this simply open up 2 investment calculators, one for bonds and one for solar. In the bond ones enter the price of your solar panels after the tax rebate ($24k in my case), with $0 additional contribution over 30 years. Set the return rate at whatever the bond pays out (30 year US treasuries are currently yielding 2.22% so I put that in there). In the other window enter a starting amount of 0 (because we are assuming 100% depreciation) with an additional contribution of what the panels will save you each year ($1,382 in my case) and the same return rate as before. Now compare the two windows and see when the total balance of the solar window exceeds that of the bond window to see at what point the panels top the bonds.

Using the above numbers I found that investing the savings from my panels will top the total value of putting their purchase price into a 30 year treasury just after 22 years. Also, even when the totals of the two will be the same the investment from the panels will owe less taxes because it will have a $5k higher principle after 22 years and thus $5k less gains to be taxed. Also my panels will still be producing power and still have some residual value after this, but even if they didn’t they’d still beat the bond. I don’t have to worry about replacing an inverter before 25 years because my SunPower panels feature microinverters that are warrantied for 25 years (https://us.sunpower.com/sites/default/files/media-library/warranties/wr-sunpower-residential-complete-confidence-warranty-overview.pdf). People who buy cheaper panel/inverter combos won’t have as good of a warranty, but they’ll reach break even faster and may win out in the end. When the 25 year warranty of my panels is up the total value I’ll have from investing their savings is $45.5k while the 30 year bond will only be at $41.5k (which will include over $9k more in taxable gains so it’s true value may be over $1,000 less depending one what the capital gains rate is at that time). At 25 years my panels will still be producing 92% of the power they they are producing today. I’m not sure when my system will truly fail, but there are panels from the 70’s still working today so there’s hope for decades of additional income.

The real world returns will be a bit different than this. I mean, few people are buying 30 year treasury notes. If you use the 1.76% return from a shorter 10 year bond then the break even point moves up over 2 years. It also seems likely that power prices will increase over the coming decades so the annual return on these panels will increase. The year that I measured in this post was also said to be a down year for solar. Real world data has confirmed this so far as my system has produced 25% more electricity this September/October than it did during the same period last year. The long term capital gains rate also seem unsustainably low at this point, and if that rises then panels also improve. If you compare panels to a stock or bond fund that could actually lose value in the short term you could see even faster payback because solar will just keep producing power no matter what the market is doing.

The reality is that the future is uncertain. If long term “safe” investments like bonds see a large increase in return then, yes they will beat solar. SREC prices could also fall to zero and nationwide power prices could also drop. PA may eliminate the net metering rules, or legislate some crazy fee for solar homes. These are all risks you take when you buy solar. But every investment has risks. With solar you can at least be sure that you’ll be generating clean power for decades to come while also beating the current return on bonds. Hope this helps!

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Solar still going good?

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Yes. Still not getting 12k kWh per year, but SREC prices rose up from $0.02/kWh to around $0.04/kWh in 2021 and stayed there in 2022 and electricity prices are also rising so ROI has actually improved. I do annual updates of my energy production and consumption on Twitter if you want more details.

https://twitter.com/ProfitGreenly/status/1477421312964501509?s=20&t=rA6zL3YDAvEjBJ7M3QZCaw

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