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How do you calculate savings at the 11-year mark? If you'd invested the same amount in index funds over an 11 year period you'd see your money double in an appr

by MRD85 8y ago

How do you calculate savings at the 11-year mark? If you'd invested the same amount in index funds over an 11 year period you'd see your money double in an approximately 10 year period.

ChuckMcM 8y ago
We have kept records of the power we've consumed, the power we've generated, the cost of the system and the cost of repairs/maintenance (one panel and one inverter so far over its lifetime). For the financial analysis we assumed the money would be committed to paying for power one way or the other, there isn't really an option for putting it aside in the mutual fund so the 'invest' option was off the table. With the use of a current measuring system[1] we also have time of day usage numbers which is an option that helps people who aren't home during the day. In our case there is always someone in the house so the tiered rate metering was the only rate schedule we needed to consider[2]. With this information we can calculate the total money would would have spent just paying for power from PG&E and making no change, to the money we spent on the system install ($20,000) and the subsequent money we paid to PG&E for power and for their meter reading service. A bit more than 11 years after the install the total money spent over the period was less for the solar option. Our current annual electricity spend is about $420 (that is $120 for their meter reading + about $300 in additional KWh of energy above what we generate) vs roughly $3000/year or average $250 a month. Effectively $2600 a year is not being spent. If I were a min-maxer then I'd be putting that money into a mutual fund and it would start compounding and well, then the difference would start to look ridiculous. [1] "The Energy Detective" -- http://www.theenergydetective.com/ http://www.theenergydetective.com/ [2] While it is true we could have changed further things about our lifestyle to fit into other rate schedules that avenue wasn't pursued.
- laurencerowe 8y ago
  It's worth modeling the cost of capital of your system to provide a fair comparison. Assuming the it lasts 20 years before you need to replace it entirely and after maintenance you save $2600 a year ($217/month) then what rate of interest could you pay if you took out a loan to cover the initial capital outlay? Plugging the figures into: https://smartasset.com/personal-loans/personal-loan-calculator https://smartasset.com/personal-loans/personal-loan-calculat... and adjusting the interest rate slider you get a monthly payment of $217 when the interest rate is 11.75%. That's a pretty good rate of return for your investment. Not ridiculous, but solid.
- JohnCohorn 8y ago
  $250/mo is a pretty generous number to compare against. Our >2500 sqft house averages under $100/mo. With the fairly extreme heat we have in in Texas, and A/C set to frigid while we’re home our bill _peaks_ at ~$150 in August. Well..that’s after a $1000 investment in attic insulation the first month we moved in.
  - ChuckMcM 8y ago
    Do you keep track of your KWh per month? If so, consider reading this page: https://www.pge.com/en_US/residential/rate-plans/rate-plan-options/tiered-base-plan/tiered-base-plan.page https://www.pge.com/en_US/residential/rate-plans/rate-plan-o... and then plugging in the numbers. That will give you an idea. For my house in Nov of 2014 the tiers were Tier 1: 15 cents/kwh Tier 2: 18 cents/kwh Tier 3: 26 cents/kwh Tier 4: 32 cents/kwh And the baseline allowance is 10KWh a day (our house typically uses 24 - 28KWh per day. Put those numbers in to your power bill and tell me what the number comes out to.
- MRD85 8y ago
  What I mean is that your initial outlay either needed capital or a loan. This is money that could have been invested, with electricity bills taken out of that kitty. What's confusing me here is that you've said you've been saving $2600 per year in electricity costs but it took 11 years to save $20000 off your bills. Either you've averaged about $1800 per year in savings or you've spent more than $20k on the system + maintenance, or I'm missing something. Was there some sort of tax offset here to make it more cost effective? The point I was trying to make is that a dollar spent 11 years ago isn't the same as a dollar spent today.
  - ChuckMcM 8y ago
    Thanks for that clarification, we did in fact finance the initial capital, we were re-doing the roof and as part of that we chose to refinance the house to take advantage of the lower interest rates. And yes, there were government rebates in force at the time, the actual system cost was closer to $40,000 but our part of that bill was half or $20,000. FWIW the refinance which only added the cost of the roof and panels to the balance and reduced the interest rate left us with a smaller monthly payment with a similar pay off date (replaced a 30 yr fixed with a 15 year fixed) As for costs, maintenance included replacing a failed inverter, that was $3500, and a panel, that was $450. The way in which electricity has also changed, when we started it was just kilowatts in vs kilowatts out annual true-up, they dumped that and switched to time of day, but changed their mind when the economics didn't work out for them, and now they are on the tiered system. They also blew up the town of San Bruno and convinced the PUC that they should be allowed to raise rates to cover their costs, so the price of electricity has gone up. Net result is that we didn't save as much per month when we started, incurred maintenance costs above the original $20K, and PG&E has changed the rules several times on how the accounting works. Fortunately all of that complexity can be factored out just by computing the bills vs what we paid.

by MRD85 8y ago

How do you calculate savings at the 11-year mark? If you'd invested the same amount in index funds over an 11 year period you'd see your money double in an approximately 10 year period.

ChuckMcM 8y ago

We have kept records of the power we've consumed, the power we've generated, the cost of the system and the cost of repairs/maintenance (one panel and one inverter so far over its lifetime). For the financial analysis we assumed the money would be committed to paying for power one way or the other, there isn't really an option for putting it aside in the mutual fund so the 'invest' option was off the table. With the use of a current measuring system[1] we also have time of day usage numbers which is an option that helps people who aren't home during the day. In our case there is always someone in the house so the tiered rate metering was the only rate schedule we needed to consider[2]. With this information we can calculate the total money would would have spent just paying for power from PG&E and making no change, to the money we spent on the system install ($20,000) and the subsequent money we paid to PG&E for power and for their meter reading service. A bit more than 11 years after the install the total money spent over the period was less for the solar option. Our current annual electricity spend is about $420 (that is $120 for their meter reading + about $300 in additional KWh of energy above what we generate) vs roughly $3000/year or average $250 a month. Effectively $2600 a year is not being spent. If I were a min-maxer then I'd be putting that money into a mutual fund and it would start compounding and well, then the difference would start to look ridiculous. [1] "The Energy Detective" -- http://www.theenergydetective.com/ http://www.theenergydetective.com/ [2] While it is true we could have changed further things about our lifestyle to fit into other rate schedules that avenue wasn't pursued.

laurencerowe 8y ago
It's worth modeling the cost of capital of your system to provide a fair comparison. Assuming the it lasts 20 years before you need to replace it entirely and after maintenance you save $2600 a year ($217/month) then what rate of interest could you pay if you took out a loan to cover the initial capital outlay? Plugging the figures into: https://smartasset.com/personal-loans/personal-loan-calculator https://smartasset.com/personal-loans/personal-loan-calculat... and adjusting the interest rate slider you get a monthly payment of $217 when the interest rate is 11.75%. That's a pretty good rate of return for your investment. Not ridiculous, but solid.
JohnCohorn 8y ago
$250/mo is a pretty generous number to compare against. Our >2500 sqft house averages under $100/mo. With the fairly extreme heat we have in in Texas, and A/C set to frigid while we’re home our bill _peaks_ at ~$150 in August. Well..that’s after a $1000 investment in attic insulation the first month we moved in.
- ChuckMcM 8y ago
  Do you keep track of your KWh per month? If so, consider reading this page: https://www.pge.com/en_US/residential/rate-plans/rate-plan-options/tiered-base-plan/tiered-base-plan.page https://www.pge.com/en_US/residential/rate-plans/rate-plan-o... and then plugging in the numbers. That will give you an idea. For my house in Nov of 2014 the tiers were Tier 1: 15 cents/kwh Tier 2: 18 cents/kwh Tier 3: 26 cents/kwh Tier 4: 32 cents/kwh And the baseline allowance is 10KWh a day (our house typically uses 24 - 28KWh per day. Put those numbers in to your power bill and tell me what the number comes out to.
MRD85 8y ago
What I mean is that your initial outlay either needed capital or a loan. This is money that could have been invested, with electricity bills taken out of that kitty. What's confusing me here is that you've said you've been saving $2600 per year in electricity costs but it took 11 years to save $20000 off your bills. Either you've averaged about $1800 per year in savings or you've spent more than $20k on the system + maintenance, or I'm missing something. Was there some sort of tax offset here to make it more cost effective? The point I was trying to make is that a dollar spent 11 years ago isn't the same as a dollar spent today.
- ChuckMcM 8y ago
  Thanks for that clarification, we did in fact finance the initial capital, we were re-doing the roof and as part of that we chose to refinance the house to take advantage of the lower interest rates. And yes, there were government rebates in force at the time, the actual system cost was closer to $40,000 but our part of that bill was half or $20,000. FWIW the refinance which only added the cost of the roof and panels to the balance and reduced the interest rate left us with a smaller monthly payment with a similar pay off date (replaced a 30 yr fixed with a 15 year fixed) As for costs, maintenance included replacing a failed inverter, that was $3500, and a panel, that was $450. The way in which electricity has also changed, when we started it was just kilowatts in vs kilowatts out annual true-up, they dumped that and switched to time of day, but changed their mind when the economics didn't work out for them, and now they are on the tiered system. They also blew up the town of San Bruno and convinced the PUC that they should be allowed to raise rates to cover their costs, so the price of electricity has gone up. Net result is that we didn't save as much per month when we started, incurred maintenance costs above the original $20K, and PG&E has changed the rules several times on how the accounting works. Fortunately all of that complexity can be factored out just by computing the bills vs what we paid.