People often do this calculation without considering the time value of money. If you took that same $8K you spent on your system and put it in a bank CD; you would earn about $420 each year in interest. That means your real savings for the solar system is only $580 a year, not $1000. That makes the payoff time expand from 8 years to nearly 14. Still might be worth it to you, but also might not.

I find your comment misleadingly pessimistic. It makes more sense to compare ROIs directly (or equivalently, payoff periods) rather than subtracting them and finding a residual payoff period. Just annualize everything (depreciation, inflation) and see which one has a higher ROI.

1. You need to take into account depreciation of the value of the panels. They degrade in performance and eventually will be worthless after about 30 years.

2. You need to take into account inflation against the CD roi (or conversely the /appreciating/ value of the dollar value of the energy produced by the panels). The post-inflation value of the bank CD is going to be about 2% per year. Inflation does not need to be corrected for the solar power option because it produces energy instead of dollars.

(1000/y-8000/30y)/$8000 = 733/8000 = 9.1% depreciation-adjusted ROI from solar panels

5.5% - 3.3% inflation = 2.2% inflation-adjusted ROI from bank CDs.

So solar panels are about a 4x better investment than bank CDs, contrary to your comment where they are somewhat comparable.

they won't be worthless, they'll be producing about 25% less power, and after that degrade very slowly indeed. but that doesn't matter much because 30 years is basically forever at any reasonable discount rate

bank cds do not pay a reasonable discount rate, it's true, but there are investments that do. maybe a nice index fund balanced with a money market fund?

you should also take into account the precipitous drop in electricity prices starting 10 years from now

You’re born short power, just like you’re born short housing (assuming no inheritance). Buying panels and buying a house makes you net zero on your exposure to power and housing prices. It is not fair to compare a hedge (solar) which reduces your exposure to risk (covering a short position on power) to a risky investment like stocks, which does not cover a position and increases your correlated risk.

Just comparing expected value is fine as a stopping point in your thought process if you are risk neutral — in that case, you should buy leveraged stock funds to maximize your expected value.

If you are like most people and assign some internal cost to risk, then covering your innate short position on power while also getting 9% return on investment after inflation is a no-brainer.

agreed, but it's probably less than 9%, because energy will get much cheaper

True, but consider grid electricity prices increasing over those decades too.

they won't increase; they'll drop like a stone

Huh, my city has already approved rate increases for the next 5 years! (it has increased every year forever...)

yeah, it'll take a while for the new technology to trickle down to the more backward regions

I think they probably meant from the perspective of society writ large. If you you are choosing between spending $10m on PV with the primary goal of decarbonization, are you better served by spending it on subsidizing rooftop PV or on utility scale PV? Probably the latter.

> “In a base comparison, without considering subsidies, fuel prices, or carbon pricing, utility-scale solar and wind have the lowest LCOE of all sources. Utility-scale solar PV comes in anywhere from $24/MWh to $96/MWh, while onshore wind registers the lowest possible LCOE over the shortest range, from $24/MWh to $75/MWh. Offshore wind’s LCOE ranges between $72/MWh and $140/MWh. … Unsubsidized residential rooftop PV has an LCOE between $117/MWh and $282/MWh, while the LCOE of community and commercial and industrial (C&I) solar ranges between $49/MWh and $185/MWh. When factoring in federal tax subsidies under the US Inflation Reduction Act, including domestic contest provisions, rooftop PV comes in at $74/MWh to $229/MWh, and community/C&I rooftop PV at $32/MWh to $155/MWh.” [1]

[1] https://www.pv-magazine.com/2023/04/14/average-solar-lcoe-in....

because you're paying $1.10 per peak watt in a place with a suboptimal capacity factor, and if we add the rebates and 'free' gov money, probably closer to $2. if we're talking about us dollars, low-cost panels cost $0.08 per peak watt (though predatory usa import tariffs double that) and we can probably expect a whole solar farm built with them to cost about $0.50 per peak watt, maybe $1 if you're talking about the us. that solar farm can be located in a place with a 20% or even 30% capacity factor, because it gets twice as much sun as your house, so it generates twice as much energy with the same amount of panels

so your utility company is probably going to make four times as much energy per dollar invested in solar panels as you are, unless you're in the usa, so they can sell it to you much cheaper than you can make it yourself

so probably if you'd put the $16000 or whatever into the stock market it would yield more than enough to pay your electric bill for those 30 years or actually forever

the panels won't wear out in 30 years either, though, and the reduction in risk may be worth it to you

> so your utility company is probably going to make four times as much energy per dollar invested in solar panels as you are, unless you're in the usa, so they can sell it to you much cheaper than you can make it yourself

I agree they can make it cheaper than me, but I don't think your second conclusion follows.

What they will do (and ARE doing) is simply increase their profit.

My utility company has already approved rate increases for the next 5 years (7-12% per year), and it has increased every year for the previous 10+.

So for me, the cheapest way to get electricity is to make it myself from my own roof. I made 933kWh in May for a bill of -$56.

yeah, to me it seems like a pretty reasonable investment even when you aren't being ground under the boot of kleptocratic government corruption, but an obviously good one when you are, unless they start levying a special solar panel tax ot something

If we're counting overall RoI then the "rebates and free gov money" should be added in.

did you do your roof at the same time? theres a big cost of taking the solar off and putting it back on when doing roof work which can kill cost efficiency if not lined up with the lifecycle of your roof.

Tin roof, it will outlast the rest of the house

the funniest part is where we assume everything stays the way it is. Centralized systems are more efficient but have poor reliability. What if they just stop supplying power? What if a kwh costs $10?