Author Topic: EEVblog #1086 - 5 year Solar Power Payback?  (Read 5062 times)

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Offline mtdoc

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #75 on: June 09, 2018, 02:40:12 pm »
I'm not going read your trivial wiki references.
Well, you've demonstrated you have no understanding of or interest in learning basic investment concepts so I'm not surprised.

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The point is already made in actual performance figures.
  Yes - as I stated, look at any major financial indices and you will see that there are many 5 year  periods where diversified stock returns are negative.  That is the point that you seem unwilling or incapable of conceding after claiming earlier that a diversified or "properly managed" stock portfolio would provide the "ultra low risk" investment that Poe claimed existed.  Now you've switched to CD claims.

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I'm referencing a NCUA backed US federal credit union. Qualifying balances are $500k to earn some of the offers I see, so you will not likely see them.

I looked into the one 3.2% 5 yr CD listed on the screenshot you provided. It is a 3 week old quote (rates have since fallen),  from a very sketchy credit union, with very poor ratings, not FDIC insured and is only available by paying to be a member which is available to only a very limited group of people.  Even if it was available, it does not qualify as "ultra low risk"

BTW This not an academic exercise for me. I have a very large amount of money sitting in short term T-Bills and I would love to find a "ultra low risk" place where I can earn 3.7% over 5 years. I will contact them and investigate. And, if I find it I could likely make a nice commission getting many other's to put there money there as well.

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I am not talking about risk assessment anyway.
  Clearly, since you don't seem to understand what it means.  But that is the whole point underlying the  claim that there exists the "ultra low risk" investment yielding 3.7% that Poe claimed and you supported.

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I'm talking about standard returns on the typical kinds of investments being discussed.
What "typical kinds of investments?"  Index funds? CDs?  You've failed to provide any concrete evidence that there is a currently available "Ultra low risk" investment that yields what Poe says.

The truth is it doesn't exist.  Hint: 5 year treasuries are currently yielding less than 2.8% and the best you will find in a CD from a reputable FDIC insured bank is 2.85% or so.  That is how it must be - if the spread between treasuries and CDs was greater than it would represent an arbitrage opportunity that other banks would take advantage of and the spread would narrow again.

The "ultra low risk" investment with a ROE well above T Bills that you are claiming to exist is the financial equivalent of a "Free Energy Device" and to anyone who understands the underlying investment and risk principles, you appear like the typical physics naive and gullible free energy groupie.
« Last Edit: June 09, 2018, 03:02:52 pm by mtdoc »
 

Offline Poe

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #76 on: June 09, 2018, 03:18:19 pm »
These are the types of comments I was worried about.

Anecdotal evidence isn't helpful because it's one questionable data point.  Here's mine.. I haven't touched my 401k other than to put money in and it's 20 year RRR is 6.97%.  Completely ignored through the worst market in history.
https://www.investopedia.com/terms/r/realrateofreturn.asp

Here's real unbiased data on what electricity historically costs in the USA.  They have lots and lots of data.  Even Arizona.
https://www.eia.gov/totalenergy/data/annual/showtext.php?t=ptb0810
On aggregate, it's increasing with inflation.  Arizona's transportation rates are increasing due to a massive surge of Californian's moving there BTW. 

metrologist - I don't think the CD is really evidence of a 'good' investment because it's zero risk.  Return and risk are two sides of the same beast so this zero risk investment has a real rate of return of only -1.77% (negative).  So you're guaranteed to lose ~9% of your CD investment's worth due to inflation.  After 5 years your initial $5k will only be able to buy what $4500 can buy today. 
http://www.investinganswers.com/financial-dictionary/ratio-analysis/compound-annual-growth-rate-cagr-1096

Inflation is ignored with most solar payback calculations as well though.  The longer their calculated ROI, the longer the real ROI actually is.  If they calculate 5 years, it's actually 6.5.  If 10, it's 15.  And that's just to break even and replace the system.

mtduc - I'm having a hard time understanding what you're saying.  Are you saying that it's more likely for a solar installation's inflation-adjusted return to exceed a typical a 401k investment's real rate of return for any given time period?    Or are you saying that only a zero risk investment is worth comparing to a solar installation?

You're not commenting on the point I made that one is linear growth and the other is exponential.
http://smallbusiness.chron.com/difference-between-compound-growth-exponential-growth-simple-growth-61107.html

Do you feel the average savings investment is extremely risky or yields less than a 5% RRR?

Less insults and attitude, more data and rationale please.

I would love to discuss things like how 401Ks are pretax/tax-deferred money so an actual larger investment, possible employer matching increasing it further, and how without tax payers subsidizing solar installations to the tune or 30%.. all ROI calculations will more than double.

Cool stuff to think about.
 

Offline mtdoc

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #77 on: June 09, 2018, 03:51:48 pm »
Inflation is ignored with most solar payback calculations as well though. 
True. But in the case of solar PV equipment (a “hard asset”) and energy, inflation is likely to help you. Solar PV panel prices have bottomed and they are now a commodity product susceptible to inflation effects on raw materials. Same for inverters and especially the copper in the BOM of a solar installation. And utility provided electricity rates are likely only headed one way.

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mtduc - I'm having a hard time understanding what you're saying.  Are you saying that it's more likely for a solar installation's inflation-adjusted return to exceed a typical a 401k investment's real rate of return for any given time period?    Or are you saying that only a zero risk investment is worth comparing to a solar installation?
I’m saying that it’s a strawman argument to try and make a direct comparison between a solar PV installation and a financial investment instrument, BUT if you are going to go that route then yes, the only fair comparison is to one with similar risk profile such a US treasuries. It is also only fair to compare over the working life of the solar PV equipment- not stop at 5 years or whatever the point is that the equipment has paid for itself.

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Do you feel the average savings investment is extremely risky or yields less than a 5% RRR.

It is an undisputable fact that  currently there is no safe savings investment available that yields anywhere close to 5% in real terms. Even 30 year Treasuries are almost 200 basis points away from that even without taking inflation into account (and yield may even approach zero if you do!). Thats just the reality of the current low interest rate world we live in. (It is by design of the central banks BTW, who have been desperate to discourage savings and encourage speculation in high risk financial instruments - hence the current bubble 3.0)
« Last Edit: June 09, 2018, 04:01:05 pm by mtdoc »
 

Online GeorgeOfTheJungle

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #78 on: June 09, 2018, 06:31:01 pm »
At first sight it seems to me it would be fair, perhaps, to get back for free as many kWh as you've put into the grid.

What's not right, as it happens in Spain, is when the rest of the spaniards have to pay you up to 4x as much. Why? Fuck you I say. I don't want to have to pay more because you've put PVs on your roof!

Some years we're paying more than 8 billion euros more, out of our pockets via the electricity bills, for this reason: the "primas a las renovables". And these 8 billions are not even VAT free, so add another 21% on top of that, just because yes.

« Last Edit: June 11, 2018, 10:29:54 pm by GeorgeOfTheJungle »
 

Offline Poe

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #79 on: June 11, 2018, 07:41:30 am »
I understand how higher electricity costs would help the solar investment, but inflation only affects price, it's independent of relative cost.  So while the price of electricity will surely rise due to inflation, the relative cost might remain the same or even decrease.  e.g. If your hourly wage can buy 100kWh today, the same might be true in ten years as both increase similarly.  Historically (reference the past links) the cost hasn't changed much so there's no data supporting the idea it will MASSIVELY increase enough to matter.

Now the other part I really don't understand.  How would inflation effects help when buying a PV installation today or its return ten years from now?  All components have been susceptible to inflation effects.  If the cost to replace your PV installation has doubled in price after 20 years due to inflation, how does that help?

Obviously the two investments can/have/will be compared.  I can't strawman your argument if I don't understand what it even is.  I think this is what you're saying:

Any investment with an equivalent 'risk' to that of a solar installation will have a worse financial return.

Is that accurate?  If not, tell me why.  If yes, we can discuss 'risk'. 

I think it's unrealistic to limit the investment comparison to insured savings, pretending a PV installation is as 'safe' as a bond.  FDIC deposits and government backed bonds are not an investment: https://www.sec.gov/rss/ask_investor_ed/saveinvest.htm
Insured savings like these serve a different purpose than actual investments and will always lose value because they're a main factor in what determines inflation itself.

Please look into linear vs exponential growth.  I think this is the biggest reason why solar doesn't make sense as a financial investment. 


I was going to invest in solar to diversify, thinking of it as somewhere between cash and something with a decent rate of return.  Unfortunately even with ideal circumstances, the relative risk increases and real return rate decreases with time.  So it only makes sense if I was going to continuously increase my PV size.  I think this is the SolarCity business model.

GeorgeOfTheJungle - It's similar in the USA, except instead of making the wealth redistribution based on energy production, it's based on the installation cost.  30% of qualifying PV installations are paid for by people who can't afford their own PV installation, through higher electricity prices.




 
« Last Edit: June 11, 2018, 07:44:02 am by Poe »
 

Offline mtdoc

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #80 on: June 11, 2018, 01:20:33 pm »
I understand how higher electricity costs would help the solar investment, but inflation only affects price, it's independent of relative cost.
Now the other part I really don't understand.  How would inflation effects help when buying a PV installation today or its return ten years from now? 

Inflation is a monetary phenomenon.  It is the erosion of purchasing power. It negatively impacts monetary assets only. In an inflationary environment, the cost of hard assets (eg. Solar PV equipment, Copper wire, etc) increases, so in monetary terms, the earlier you buy them the better.

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  I can't strawman your argument if I don't understand what it even is
Your strawman comparison occured before I posted in this thread.

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Any investment with an equivalent 'risk' to that of a solar installation will have a worse financial return.

Is that accurate?  If not, tell me why. 
  No, solar installations are not financial instruments, arguing as if they are is the strawman you created with your initial post.

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I think it's unrealistic to limit the investment comparison to insured savings, pretending a PV installation is as 'safe' as a bond.
In the context of the strawman your post created, it is the only accurate comparison.  The fact is, a solar PV installation, covered by homeowners insurance is as safe, or safer than a bond.

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FDIC deposits and government backed bonds are not an investment

Your arguing semantics, but nevertheless, it's is a distinction without meaning.  The reality is that an individual with available capital, has to choose what they will do with their money.  Invest it in their home (eg a solar installation)?, invest it in other hard assets?, invest it in stocks?, a business venture?, bonds? or put it in a savings account or CD. In the financial management world, US T-bills are considered the safest (for now) and most liquid place to earn a return on one's excess capital. Until the new central bank made low interest world (post Greenspan era), T-bills were often a place to get a very good risk adjusted return your investment. Anyone who bought 30 year treasuries yielding 14% in the yearly 1980s can attest to that.

And when considering what to do with excess capital, everywhere and always there is a direct relationship between return and risk - that is the "Ohm's law" of financial management:



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Please look into linear vs exponential growth.

Really? 7th grade math on this forum.   :palm:
« Last Edit: June 11, 2018, 01:54:45 pm by mtdoc »
 

Online GeorgeOfTheJungle

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #81 on: June 11, 2018, 11:25:46 pm »
GeorgeOfTheJungle - It's similar in the USA, except instead of making the wealth redistribution based on energy production, it's based on the installation cost.  30% of qualifying PV installations are paid for by people who can't afford their own PV installation, through higher electricity prices.

And that's not fair because in that bussiness model I'm forced to buy your product even if I don't want to, that's the mafia way of doing bussiness, and it's backed by the state. Thumbs down.
 

Offline Poe

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #82 on: June 12, 2018, 04:59:03 am »
Mtdic - I'm truly trying to understand your argument, but you just appear defensive.   :(

You haven't explained how inflation helps such an investment.  You defined inflation, so I thought you understood what it means, but you also said that inflated prices somehow improve the solar investment that was already made.  Please explain.  Maybe respond to my previous example or data? 

You called any unfavorable comparisons with traditional investments a strawman argument because, according to you, solar isn't an investment.  This I really don't understand because it fits the definition (https://en.wikipedia.org/wiki/Investment).  Even if a different word is used, you appear to understand that people will consider buying solar for a return and will compare it to other financial investments.  I'm one of those people and I'm asking specifically: Which do you think makes the most financial sense and why.  It's clear you would answer solar, but please help me and others by explaining your decision.

It would be understandable if you said that any form of risk is too risky for your personal situation.  Unfortunately, your comments have only implied that sentiment, so I can't be certain.  You appear to be avoiding the risk discussion altogether and acting as if all investments are like repeatedly "letting it ride" at the craps table.  Like one day it will all just disappear instead of risk just affecting the degree of rate swings.  Basically, I'd like to know if we just disagree on the 'risk' part.

My comment about growth was not meant to be insulting.  I just got the feeling that you didn't understand this concept because you wanted comparisons to extend beyond 5 years.  Seemingly oblivious to the fact that this is exponentially worse.  As the period increases, the compound-growth curve (green) will exponentially exceed the linear-growth line (red).  Dave's ROI is ~10years (with typical 15cents kWh and inflation factored in) this is roughly where the red and green lines intersect as well.  So we could do comparisons at 25 years if you'd like, but it might not have the outcome you were hoping for.


edit - Just in case it wasn't clear... the solar investment installation is the red line with a fixed dollar return each year and the green line is the compound growth investment.

« Last Edit: June 12, 2018, 05:04:00 am by Poe »
 

Offline metrologist

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #83 on: June 12, 2018, 07:25:36 am »
metrologist - I don't think the CD is really evidence of a 'good' investment because it's zero risk.  Return and risk are two sides of the same beast so this zero risk investment has a real rate of return of only -1.77% (negative).  So you're guaranteed to lose ~9% of your CD investment's worth due to inflation.  After 5 years your initial $5k will only be able to buy what $4500 can buy today. 
http://www.investinganswers.com/financial-dictionary/ratio-analysis/compound-annual-growth-rate-cagr-1096

Inflation is ignored with most solar payback calculations as well though.

The challenge was not to identify a 'good' investment, nor to meet any other qualifying semantics. It was simply to identify a 'low-risk' investment that would turn $5k into $6k over a 5 year period (or basically match Dave's results). A federally insured NCUA share account at 3.25%, amortized quarterly, comes awful close.

I'm not sure how much Dave's hardware has depreciated in value over that time, and I also wonder if homeowners insurance would really cover a damaged panel, given typical deductibles. Maybe, and then maybe the premium is higher to cover the system, or will be after a claim. IIRC, the MFG replaced Dave's panel, but I'm sure that is not their policy and Dave enjoyed the benefit of his position (it would have been mutual).

Since I know my rates are going to go up quite a bit due to new time of use pricing (13C 10 years ago, ~22C now, expected 45C peak next year), Solar probably has a lot more potential for me, assuming I can convince my neighborhood to cut down some heritage trees. The barrier to entry here is not merely a small financial membership fee. Also, to get a system like Dave's here is going to cost a heck of a lot more than $5k, and there is going to be installation and etc.

I appreciate your contribution to the discussion and will happily check back later to peruse the developments.
 

Offline mtdoc

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #84 on: June 12, 2018, 09:10:34 am »
You haven't explained how inflation helps such an investment.  You defined inflation, so I thought you understood what it means, but you also said that inflated prices somehow improve the solar investment that was already made.  Please explain.

I explained very clearly. I’m not sure why you are unable to comprehend why inflation favors holding hard assets and disfavors holding monetary assets. It’s a pretty basic concept. Lots available online and in finance textbooks if you need more information.

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You called any unfavorable comparisons with traditional investments a strawman argument because, according to you, solar isn't an investment.
No that’s NOT what I said. I said a PV installation is not a financilal instrument. It is an investment in the same way a new roof or better insulation or windows might be an investment.

Again, these are pretty basic concepts. I think maybe you are just being provocative. If not, I’m sorry - perhaps do some reading on line or take a course at a local college.

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It would be understandable if you said that any form of risk is too risky for your personal situation.  Unfortunately, your comments have only implied that sentiment, so I can't be certain. 

Um, I’m not sure where you got that. For many years, I been actively involved in the financial markets, in everything from actively trading option and futures contracts on the long and short side (high risk) to directly buying US Treasuries (low risk) to everything in between. My current focus is on acquiring some income property (single and multifamily rentals) -though that market has gotten toppy as well. This requires capital held in a low risk, liquid financial instrument so it’s ready to deploy when a bargain comes along or when the markets correct.  However, I do still currently hold and actively trade some high risk financial instruments.

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You appear to be avoiding the risk discussion altogether
Well, since I was the one who introduced the idea of investment risk into this discussion, have mentioned it in every one of my posts here and suggested that RaR and VaR are important concepts for anyone who wishes to better understand the role of risk in comparing investment returns, it’s pretty bizarre that you woud say that.

Are you trolling? If not and you just have reading comprehension difficulties, my apologies. Either way, I don’t think we’re getting anywhere.  Good luck in you financial pursuits.
« Last Edit: June 12, 2018, 09:22:16 am by mtdoc »
 

Offline Bassman59

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #85 on: June 13, 2018, 02:25:25 am »
I said a PV installation is not a financilal instrument. It is an investment in the same way a new roof or better insulation or windows might be an investment.

This is the whole of the argument.

A reasonable homeowner makes "investments" in the property to improve quality of life. Better windows make HVAC more efficient, which in turn makes the house more comfortable. A roof that doesn't leak is a good thing. Some people like to have a swimming pool in the back yard, and installing one costs as much, if not more, than rooftop solar.

(I see a lot of people making home improvements only because they want to sell the property. I don't understand that -- why not do the improvements when you move in, so you can enjoy them?)

Rooftop solar means that I'm doing my little part to reduce dependency on fossil fuels. Am I a hypocrite because I drive a gasoline-powered car? Perhaps, although I do ride my bike to work as often as possible.
 

Offline Poe

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #86 on: June 14, 2018, 12:17:57 am »
Hard assets only benefit from inflation by value though.  So you'd have to sell them to benefit in any way, right?  But if they depreciate more than inflation, like new cars and solar installations, you'd lose money by selling them.  So it's best not to sell them, right?  In which case inflation had no effect?  ...or is selling them after 5 years for half of what it cost you part of your strategy?

Not trying to be provocative or troll, just feel like I'm playing word game or red herring whack-a-mole.  No, solar isn't a financial instrument, but why does that preclude the comparison?  They're both investments, regardless of what you want to call them.  One has a linear return and possibly lower risk.  One has an exponential return and possibly higher risk.... depending on what you're comparing since there's actually a large gradient of risk/return options for the latter.  People have limited wealth so they decide between financial choices by making a comparison.

I could understand if your 50+ years old and lowered your retirement portfolio risk to insured 'savings', which lags inflation.  Solar might be a good idea for this life situation.  Although, if you're younger and already depending on some form of retirement planning to beat inflation by an amount which would exceed the solar return, why not put the money in there instead since you're already taking that risk?  Especially if, like many people, you're not already maxing out what your employer matches or would not max out in order to pay for the solar.

If anyone knows of good unbiased data that attempts to objectively weight these options, please post it.

The following is typical of what I find.. conservatively plan on 5% real rate of return (from passively managed 401k plans) and >10 year ROI solar installations.
http://www.interest.com/401k/news/kind-return-expect-401k-plans/
https://www.solarpowerauthority.com/how-much-does-it-cost-to-install-solar-on-an-average-us-house/
https://www.investopedia.com/ask/answers/041015/what-rate-return-should-i-expect-my-401k.asp
https://www.nrel.gov/news/press/2017/nrel-report-utility-scale-solar-pv-system-cost-fell-last-year.html

« Last Edit: June 14, 2018, 11:17:38 am by Poe »
 

Offline Poe

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #87 on: June 16, 2018, 01:19:32 am »
My solar neighbors had some input relating to the solar risk.

Their export rate decreased and a few 'supplier transportation taxes' were added at the start of this year.    Effectively they're making 50% less on exported electricity.  It wasn't something they had planned on.

One paid for the install out of pocket and didn't export much due to a smaller install, so no worries.  Another has a Tesla leased install (Telsa estimated an ROI at 7.5years) with double the capacity his family needs, so he got hit harder. 

That Tesla lease is odd in that his payback depends on how much money he generates.  So based on the first year's production, his ROI was going to be ~ ten years (not 7.5).  After these price changes though, it's now closer to 16.  It might be further out since he's still using Tesla's $kWh model where they assume the price of electricity will notably outpace inflation and assume 100% of the power generated by the panels is fed to the grid.

They all said they had to notify their insurance when getting installed and it added a small amount.  I didn't probe on the exact premium increase, but it didn't sound like very much.  One said adding the deck was more.

I will say that the Tesla install looks much nicer than the others.  Not sure what the hardware or panel difference is, but I'd pay more for it. 
 

Offline Poe

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #88 on: June 19, 2018, 04:54:30 am »
Found some USA data that's kind of close..

Unfortunately, like most of these "...worth it?" solar reviews, their math is screwed up. 

In this one, they misinterpret the kWh rate to be 39 cents, with an ROI of eight years. 

Luckily they posted their bill.  It shows they get billed at 11cents for the first 374kWh then 31 cents after that.  Taxes and fees increase it, but some are fixed prices.  So his solar install's first kWh nets him roughly 20 cents.  Then as his bill decreases, the effective rate drops to ~11cents per kWh generated.

So his best case ROI is actually closer to 16 years.  Realistically ~21years.  33 years without the tax credit. 

Newer panels are better, but since that's not the entire cost of the total install, and other costs have increased or been added, the ROI doesn't appear to have improved much.


 

Offline metrologist

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Re: EEVblog #1086 - 5 year Solar Power Payback?
« Reply #89 on: June 19, 2018, 03:14:39 pm »
Tell your neighbors to hire more summer kid labor to clean the panels and the output might increase. Don't worry about those 1099 forms, they surely won't fall off the roof and injure themselves either...and if they did, I'm sure your home insurance would cover it. Or if they're not over 60, just climb up themselves, that's free...or cheaper than a fund manager? :-//
 


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