First of all, solar power makes a lot of sense here in Arizona, but may not in other parts of the country. Both the federal, and most state governments have created tax incentives for residential homeowners who install solar systems. There is a 30% tax credit from the feds, and here in Arizona, the state offers a flat $1,000 tax credit. Most of the individual power companies offer some sort of incentive, but that varies greatly depending on the utility company.
There are several ways that a homeowner can purchase, or lease a system, and here's where it gets a little more complicated. Esmay Electric (Michael Kirk 928 575-5335) here in Havasu is our contractor, and they offer 3 ways for the homeowner to have a solar system installed.
1. Purchasing a solar system is pretty straight forward. The system we are having installed is considered small at 4.6 kilowatts (4,600 watts). As an interesting comparison, we have 3 solar panels on the roof of our motor home, and their total wattage is 320. The total cost for our system, including permits & installation is $30,130. If we were eligible for all of the tax credits, which we wouldn't be, the cost is reduced to $22,770. With a straight purchase, we would be responsible for applying for the tax credits, and would have to write a check up front for the full amount of $30,130.
2. Two lease options are available, and the first one makes no sense at all, unless you need a no money up front option. With O down, our monthly lease payment would be $72 a month, and over 20 years, the total cost of the system would be $25, 808.
3. The second lease option makes a lot of sense, and here's how it works. We make an up front payment of $9,286, and have no lease payment. In the 7th year of the lease, we make a final lease buyout payment of $885, and the system is ours. Total cost $10,171. Since the system is owned by Sunpower for the first 7 years, they can depreciate the equipment on a 100% schedule, and they also are the ones eligible for the tax credits. Their profit margins are built into 3 things - our up front payment, the tax credits from, the feds, state, utility company, and the ability to depreciate the system over 7 years.
2. Two lease options are available, and the first one makes no sense at all, unless you need a no money up front option. With O down, our monthly lease payment would be $72 a month, and over 20 years, the total cost of the system would be $25, 808.
3. The second lease option makes a lot of sense, and here's how it works. We make an up front payment of $9,286, and have no lease payment. In the 7th year of the lease, we make a final lease buyout payment of $885, and the system is ours. Total cost $10,171. Since the system is owned by Sunpower for the first 7 years, they can depreciate the equipment on a 100% schedule, and they also are the ones eligible for the tax credits. Their profit margins are built into 3 things - our up front payment, the tax credits from, the feds, state, utility company, and the ability to depreciate the system over 7 years.
In a nutshell, we invest about 10 grand, and reduce our utility bill to zero. If you look at it from a length of time return on investment, with an average monthly utility bill of $100, it will take about 8.3 years for us to get our money back. I look at it slightly differently. We're investing/spending $10,000, and will immediately get a little less than 10% return on that money, paid to us every month in the form of no electric bill.
This type of expenditure may not make sense for everybody, but it sure does for us, particularly when you look at the dismal return on investment from any type of savings account.
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