When we discussed our home solar panel project in mid-2011 with friends, one of the first questions everyone asked was, “What’s the payback period before you break-even?” The second question was unsurprisingly, “How much is it costing you?” but the focus always ended up on the payback. After all, if you’re going to invest in green technology, you’re hoping that at some point in the near future, you get ahead of the game. It turns out that something we didn’t plan for — our Chevrolet Volt — is actually helping us boost the ROI and cut our payback time in half.
Details of the solar panel investment
I shared details on both the solar panel project and the car before, but let me step back and recap a bit. In October 2011, we added 41 solar panels to our southern-facing roof in southeastern Pennsylvania. Each panel is rated for 230W of Direct Current (DC) so that works out to an array of 9.43kW DC. In our family of four, with two work-at-home adults, we average around 7,500 kWh of electricity usage. So the system may be a bit oversized for our needs — about 125 percent — but we planned ahead. It’s a four-bedroom house so we thought that the next occupants could have at least one more family member and therefore use more electricity.
At the time, we were quoted a price of $5.50 per watt for the project. When you multiply that price times the 9,430 watts of the system, you get the total cost: $51,865. That’s just the gross cost, however. We received a 30 percent Federal tax credit for $15,560 and a state rebate check of $7,100, bringing the net cost to around $29,205. Our typical electric bill for a year had been roughly $2,500, which makes the break-even point around 11.7 years.
Adding an electric vehicle one year later
A year after the solar panels were installed — they generated 13.8 MWh in the first 12 months and you can see the real-time stats here — we opted to add an electric car to our garage. So we traded in an Acura RDX and, after shopping around, replaced it with a 2013 Volt. This was to be our primary car, just as the Acura was. We have another vehicle in the garage, but it’s a rarely driven sports car: A 2007 model that just passed 18,000 miles on the odometer.
Since the Acura was our primary vehicle, we racked up miles quickly. Even though we both work from home, my wife and I are often driving the two kids to activities or head a few miles into town most days for food or other goods. With the Acura we were averaging about $250 per month on gas as a result. Now, with the same general driving habits, we pay a maximum of $50 on gas in a given month.
With the Volt — you can see driving stats for that too — we’ve already turned 7,228 miles in the six months of ownership. That’s normal driving behavior for us: We typically drive about 15,000 miles on the main car. Of those miles, 5,255 have been solely on battery power and the car reports our gas mileage at 125.33 MPG so far. Even though we’re averaging 1,250 miles per month, we’re only filling up the gas tank once — or maybe twice — in a given month. The tank is small too: Just over 9 gallons.
So what does this do to our solar panel payback? It cuts it nearly in half to around six years. How so?
The reduced payback on our investment
Three-quarters of our driving is powered by electricity. Even with the addition of the Volt, which we charge every night, we still don’t have an electric bill. We’re at the point where we’re much closer to using all of the electricity our panels produce, but we’re not there yet. And we’ve cut down on our gasoline expenditures as a direct result of both the car and the solar panel system, saving around $200 per month that we used to spend.
That works out to $2,400 a year in gasoline savings and when added to the $2,500 in electricity bills we’re no longer paying each year, you get $4,900 in net cash flow savings. Divide that figure in to the net cost of the solar panel project and it works out to 5.96 years before break-even. Best of all, the payment for the Volt is slightly less than the Acura payment was, but I don’t consider that as part of the solar panel payback.
There was a recent intangible benefit gained by the solar investment, as well. Just before we bought the Volt, we decided to refinance our home. The appraiser added $30,000 in value to the house just for the solar panel array. That gave us the best possible rate because of our LTV, or loan to value, ratio.
Without that extra boost in the appraisal, we would have had to pay more in fees to get our low rate or simply have a marginally higher rate. I don’t consider this part of the payback either, but it sure helped!
This post was updated at 7:22 am, May 13, to reflect to correct Federal tax credit percentage.