Solar Panels Investment Basics
Breakthroughs in materials engineering and manufacturing processes has made solar energy not only environmentally beneficial, but also a viable financial investment.
The biggest question most people planing to make solar energy investment is “Is solar energy financially viable to me?”. Not too long ago, the answer was probably NO. But now, most of the times, the answer is yes! How can you tell? well, you should calculate your solar energy system investment’s ROI period.
This article will help you understand how the ROI period is calculated.
To estimate ROI on your solar energy investment, you will need to know 3 parameters: solar panels system price, selling price of the electricity you generate and solar radiation in your area.
Total Price Of Solar Panels Systems
A solar panels system includes several components, the most important one being solar panels. Currently (Feb. 2009), the price of 1 KW of solar panels can be as low as 5,000US$. That’s way down from an average of 10,000US$ per KW that used to be the standard for several years.You should also include price of system installation and other system components, such as inverters and controllers.
This price above does not include incentives. Many countries offer programs that provide tax refund for buying a solar panels system. The total price you should use in the ROI formula below should be the net price of your system : total costs of solar energy system - incentives.
Selling Price Per KW/H
The way you get a return on your solar energy investment is by selling the energy you generate to your utility company. The price you get for every KW of electricity you ‘upload’ to your utility grid depends on your utility company, we well as incentives you get from your government.
Contact your utility company or local government office and ask about these incentives.
Solar Radiance Levels
The amount of solar energy hitting the face of the earth varies widely between locations and at different times of year. That amount is usually measured in KW/h, per square meter, per day.
In most inhabited areas, the average yearly radiance ranges between 3-4 KW/h/m^2/day. Obviously, during summer the average is higher than that, getting much lower in the winter. In sunny areas ( Western US, North Africa, southern Europe, parts of Asia and Australia), this figure hovers around 5 KW/h/m^2/day. In deserts, where some of the world’s largest solar plants are located , solar radiance levels can get as high as 7 KW/h/m^2/day. Make sure you know the solar radiance level for your area.
Calculating ROI Period
Once you have all 3 parameters available, you can calculate the ROI period, in years, using the following formula:
ROI (years) = Total Price Of Solar Panels System / (365 * Solar Radiance Levels * Selling Price Per KW/H)
So let’s assume your system (a 1 KW system) , including installation, after rebates, costs 5,000US$. You live in San Francisco, California, where average yearly radiance levels are 4.89. You get paid 0.2 US$ per KW/h you sell to your utility. You ROI period is:
ROI (years) = 5000 / (365 * 4.89 * 0.4) = 14
Every day past 14 years, you will be actually earning money from you solar investment!
We will soon be releasing a solar energy calculator, to help you estimating the ROI period for your solar investment. Stay tuned by registering to our RSS feed.
