Here we will use a very simplified example of how to think about the cost of solar. We will incorporate some numbers that you can use to think about your personal situation. Lets take a look at the following case fictitious case example:

• Size of home: 2,800 square feet
• Size of family: 2 adults, 3 children (Total of 5)
• Average monthly power bill: $125
• Peak power bills in the summer: $250
• Low power bills in the winter: $75

In our above example, the SMITH family has noticed that Rocky Mountain Power has been raising their rates over the last 3 years. They have noted a 8% increase in their annual bill total. Knowing that the rates are going to keep increasing over time they began learning about putting solar panels on their home. In our example lets assume we obtained a power bill and noted the usage graph on their bill. The total KWT use for each month of the last 12 months were as follows:

• January 478 KWTS
• February 519 KWTS
• March 867 KWTS
• April 1100 KWTS
• May 1200 KWTS (cooling system turned on)
• June 1,450 KWTS (weather is hotter)
• July 800 KWTS ( usually high but gone on vacation)
• August 2,300 KWTS (mother-in-Law visits home)
• September 1000 KWTS
• October 825 KWTS (cooler weather on the way)
• November 780 KWTS ( Lower rates, less use)
• December 640 KWTS

Our Example is picking the average monthly invoice of $125 out of thin air. We are not here calculating the rates for the power consumption shown in our monthly chart above. Rates are always changing and we did not do the math . Our monthly KWT chart is just to show how the solar expert may request your monthly KTS usage in order to calculate system size.

Moving on, lets use the chart above to determine the total annual KWT hours used @ 11,959. Average monthly use 11,959 /12 months = 996 KWT hours per month average use. Lets also pretend that the home has just had new windows installed and it was unusual for the mother-in-law to visit running the bill up so high in August.

The home has East and West Roof space for solar panels without any shade. The solar expert factors in solar modeling for geographic location, weather, dust, snow and so on. For the purposes of our example lets pretend that an 8.7 KWTS system is indicated. Also assume we are going to use 320 watt panels. The total system size would be 8,700 watts/320 watt panels= 27 panels needed. Lets assume that no backup battery system is wanted or included in the quote. Again, lets assume that the total price Company X is offering comes in around $25,000

The current Federal Tax incentive is @ 26%. $25,000 X .26 = $6,500 tax incentive.

The Current Utah State Tax incentive is $1,600+ $6,500= 8,100 total tax incentives

$25,000-8,100= 16,900 total system cost

We could assume that the SMITHS would need around 17,000 cash or a loan amount around 17,000. This example is fictitious and over-simplified so the real costs could be higher or lower depending on unique factors not even considered here. The main point being made is to show how the incentives lower the cost of the cash outlay, or loan amount to make it more likely the average monthly loan payment can often be the same or lower than our example of $125 average invoice per month being paid for the electric bill to Rocky Mountain Power (again this is a made up number for illustration purposes).

Lets assume the SMITHS paid a cash price of $17,000 and their bill was already $125/month. We can assume Rocky Mountain power bill rates will be increasing over the next 10 years. But lets pretend, Rocky Mountain Power is NOT raising rates at all. $17,000/$125 = 136 months to recoup the cost of the solar system. 136/12= 11 years to break even on the cash expenditure.

However, it would probably be less time than that because Rocky Mountain power is most assuredly raising rates over the next 10+years. It is not uncommon for a Cash deal to break even in 9 or 10 years. In our example, if the SMITHS decided to take a loan out, they would be looking for a monthly loan payment on a 20-year loan less no more than $125/month which is what they are already paying Rocky Mountain Power. This would be the analysis including the fact that they know Rocky Mountain power will be raising rates even higher over the course of the loan. With a solar loan, you lock in your rate for 20 years or 15 years, depending on the terms you choose. But, whatever monthly payment is estimated, it stays the same over the life of the loan (for the most part). With a solar loan, it is usually assumed that you put the tax incentives toward the loan in a lump sum. Or, that you will be putting it toward the loan in a few installments. Sometimes not all the tax credits can be taken in one year. It is allowed to apply tax incentives over multiple years to reach the 26% dollar amount.

Food for thought. Feel free to add comments or questions. As always, please be appropriate. Comments are moderated and approved for posting prior to being visible on our blog.