The Economics of Rooftop Solar and Viability In Virginia

Rooftop Solar pricing has come a long way in the last few years. So much so that 3$/W installed price seems to be the norm. Recently I got quotes for a system for our house in Charlottesville from several local installers and quotes ranged from $2.50/W to $4/W depending on the installer and the technical details of the system (mono vs poly panels, string vs regular inverter etc.)

For the calculations, I will assuming a 3$/W installed price and using PVWatts to calculate the power produced by a 5kW system in Central Virginia for our roof pitch and orientation. Using these details, PVWatts says the system will generate about 6300kWh/year. At our electricity rate of about 11c/kWh that would be worth about $690/year.

Before subsidies, system cost is $15,000. Annual reduction in power bills is $690. That is a return of 4.6%/year. Now for the good part. Power prices go up about 3%/year. Solar panels degrade 0.7% every year. So this payout increases every year by over 2%! It is like a dividend growth stock that raises dividends by 2% every year.

Now let’s add in the 30% federal subsidy. That drops the price to $10,500. That raises the annual return to 6.5%.

Now if you do get a system for $2.50/W, the price after subsidies for a 5kW system would be $8750. This would increase your annual returns to 7.9%.

Not only that, this income is tax free. Calculating how long it would take to recover the initial $8750 at a 7.9% return that grows by 2% each year gives us just under 12 years.

Here are the payouts of a system over 25 years:

Here is the cashflow including initial investment and one inverter replacement after 12 years costing $3000.

If you are in a state with more sun or have a better oriented/pitched roof for solar (try PVWatts), then the payoff can be even faster.

In Albemarle County and in the City of Charlottesville, solar installations are exempt from property tax. Basically, the value they add to your house is not added to your property tax bill.

If your power is supplied by Dominion Virginia Power, then you can consider their Solar Purchase Program, where they will buy the entire output of your solar system and pay you 15c/kWh for 5 years. However this is treated as taxable income. Since you are selling all the power from the system to Dominion, that system can be depreciated, essentially offsetting the tax liability. This is just an opinion. Consult your accountant before trying or wait for my update after I file next years taxes. Be warned though, the program might be gone by then. Just FYI, we ended up getting a nearly 7kW system for an approximate price of $2.50/W. The installation is still in progress and I’ll post more details on that in a later blog post at my other blog.

Update: Here is an update on my installation along with an installer selection guide.

2 thoughts on “The Economics of Rooftop Solar and Viability In Virginia

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