Get out your calculators: solar panels just became a long-term investment

Jeff Green | Oct 08, 2009

Editorial by Jeff Green

With the long-anticipated announcement that local power distribution companies will pay 80.2 cents for every kilowatt/hour produced by small-scale alternative energy installations (under 10 kilowatts) for a period of 20 years, solar panels on rooftops and front yards are now the domain of another group of green-minded folks.

In addition to the pro-environment, green idea of solar power as an alternative to coal-fired power generation, solar power is poised to provide greenbacks for those who are willing to invest.

There are small and larger businesses opening up across the province, selling solar panels and electrical grid tie in equipment for home-owners.

To get some marketplace numbers, I went to Eco-Alternative Energy of Sharbot Lake. They have packages available, including installation and all associated costs that can provide systems with as few as seven 175-watt solar panels all the way up to 60 panels. The smallest package they sell costs $13,447 (including a $950 charge from hydro to hook the system up to their meters).

That sized system will generate, based on conservative calculations about average daily power generation, $1,250 each year in revenue. At that rate the payback for the system is 10.7 years. By the 20-year mark, the system will have generated over $25,000 in revenue, a 180% return on the initial investment.

For larger systems, the numbers improve substantially.

For example, a 24-panel system, which costs $32,000, will generate $4,300 in revenue each year, which means it will take 7.5 years to pay back the initial investment. After 20 years, the system will generate over $86,000 in revenue, a profit of $54,000 or a return of 270% over the initial investment.

The largest system that is eligible for the 80.2 cent buy back from hydro costs $73,650 to install. It will pay $10,750 back each year, for a 6.8-year buy back. After 20 years, it will generate $215,000 in revenue, a profit of $141,350 or a 290% return on the initial investment.

It should be noted that most houses do not have enough roof space for 60 solar panels, so for the larger systems, most people would be faced with extra costs for poles and supports for the panels that don’t fit on their roof.

“Roof size is really what most people look at when they buy a system,” said Ron Kortekaas “they want to put as many panels up as their roof can hold.”

For people who don’t have an extra $25,000 or so lying around, the option of borrowing for an installation can be attractive, and at least two of the major banks, RBC and TD Canada Trust, have instituted a 1% discount on fixed term loans for energy saving investments.

Borrowing money increases the pay-back time for the systems, but since the systems generate money each month from the moment they are installed, the revenue will minimize the effect of the loan on family finances.

While this kind of investment is not for all of us, it pays to have a closer look at it.

And there are two other things to consider.

First: the 80.2 cents per kw/hr price is 13 times the current market rate for power, and as more people invest in solar power generation that shortfall will have to be covered by power distribution companies. It will not be covered by provincial grants. This means that the price everyone pays for power will increase, perhaps substantially. That has certainly been the case in Germany, which is the model that Ontario used in developing this new program. So, those of us who do not get into solar generation will end up subsidising those who do get into it. Their profits will be at our expense.

Second: Although this new system is set up as a business proposition, there is also a net decrease in carbon emissions that comes from these systems. The smallest 1225-watt system will save 1.9 tons of carbon emissions per year; the 24-panel 4200-watt system will save 5 tons, and the 60-panel 10,000-watt system 14.6 tons per year. 

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