What's the Payback?
The question everyone asks about solar electricity
Introduction
How does “payback” work?
How do I get the best payback on efficiency?
How much investment in energy efficiency is necessary to substantially reduce the size of a PV system?
What else is part of my personal payback?
Smart shopping to cut initial costs
A brief word on energy efficiency opportunities
Resources
How much investment in energy efficiency is necessary to substantially reduce the size of a PV system?
Let's go back and look at a PV system for our hypothetical household, and think about the payback at different levels of energy use, and different levels of energy efficiency investment. The following tables use the same baseline assumptions used for Table 1:
| Percentage of energy savings | comparative energy use | kW of PV needed | PV system cost estimate | Simple Payback in years |
|---|---|---|---|---|
| 10% | 1 | 7.54 | $75,384.62 | 76.92 |
| 20% | 0.9 | 6.78 | $67,846.15 | 69.23 |
| 30% | 0.8 | 6.03 | $60,307.69 | 61.54 |
| 40% | 0.6 | 4.52 | $45,230.77 | 46.15 |
| 50% | 0.5 | 3.77 | $37,692.31 | 38.46 |
The following two tables combine the cost of a PV system with the cost of energy efficiency investments. Table 5 shows total costs when electricity use is reduced to different percentages of the baseline 9800kWh used per year. Table 6 shows the payback in years for these combined costs.
If we look under the $4,000 column at the 70% of baseline amount in Tables 5 and 6, we see the system cost and payback respectively for our the Maple Street household PV system. Note that if the Maple Street household were able to reduce electricity use another 10% (to 60% of the baseline) by changing their energy use habits (investing only effort and no additional money), they would knock another $7,500 off their PV system cost and almost 8 years off the payback.
| % of baseline | $0 | $200 | $500 | $1,000 | $1,500 | $2,000 | $3,000 | $4,000 |
|---|---|---|---|---|---|---|---|---|
| 90% | $67,846 | $68,046 | $68,346 | $68,846 | $69,346 | $69,846 | $70,846 | $71,846 |
| 80% | $60,308 | $60,508 | $60,808 | $61,308 | $61,808 | $62,308 | $63,308 | $64,308 |
| 70% | $52,769 | $52,969 | $53,269 | $53,769 | $54,269 | $54,769 | $55,769 | $56,769 | 60% | $45,231 | $45,431 | $45,731 | $46,231 | $46,731 | $47,231 | $48,231 | $49,231 |
| 50% | $37,692 | $37,892 | $38,192 | $38,692 | $39,192 | $39,692 | $40,692 | $41,692 |
| % of baseline | $0 | $200 | $500 | $1,000 | $1,500 | $2,000 | $3,000 | $4,000 |
|---|---|---|---|---|---|---|---|---|
| 90% | 70.1 | 70.3 | 70.6 | 71.3 | 71.7 | 72.2 | 73.2 | 74.2 |
| 80% | 62.3 | 62.5 | 62.8 | 63.4 | 63.9 | 64.4 | 65.4 | 66.4 |
| 70% | 54.5 | 54.8 | 55.1 | 55.6 | 56.1 | 56.6 | 57.6 | 58.6 | 60% | 46.8 | 47.0 | 47.3 | 47.8 | 48.3 | 48.8 | 49.8 | 50.8 |
| 50% | 39.0 | 39.2 | 39.5 | 40.0 | 40.5 | 41.0 | 42.0 | 43.0 |
These tables would show different results if different baseline assumptions were used, but the impact of reducing electricity requirements on the payback of a PV system would be just as dramatic. Once again, the Maple Street Household calculations do not include a number of factors that would reduce PV system cost and payback even further, such as equipment depreciation, extra utility bill charges, and future inflation in the cost of energy (as illustrated in Table 1). This is why you need to look at your own household electricity needs and efficiency opportunities in order to calculate the payback on a PV system for your own home.
Almost every home has opportunities to cut electricity use without reducing comfort or convenience. See Resources for links to information about residential energy efficiency, calculating your energy use, and financial incentives available for energy efficiency improvements.
copyright © 2004 WisconSUN
