We recently sold our 2008 Renewable Energy Credits, (REC’s). After months of waiting to be offered a 15
year contract for our REC’s from a utility, we gave up and decided to get what
we could for our 2008 REC’s. I received offers ranging from $280 - $350
per REC. For lots of reasons, but mostly because I already had a business
history with them, I sold the REC’s to Standard Solar, our PV installer.
They paid $315 per REC, which is 70% of the alternative compliance payment
(ACP) for 2008. The ACP is the amount the utility has to pay for
each REC it does not produce (or purchase from folks like me).
The good news is that we now have some information
about what these REC’s are actually worth on the open market. If this
trend continues, and if the ACP doesn’t change, then we can make some
assumptions about the amount of time it will take to earn your money
back. My estimate for my own system is about 19 years. But that
number does not apply to current installations! The State and
Federal incentives have greatly increased since I installed my system.
(Also, remember that my system doesn’t face south, so I’m not getting the same
production that an ideally placed system would.)
So, what does all this mean for payback time on a
system installed in 2009? If you want to skip the math below, the answer
is about ten and a half years if you are eligible to take advantage of all the
incentive programs.
As in previous posts, let’s assume that you install a
4 kW system on a perfectly south facing roof. This is larger than my
system, but it’s the right size to maximize the credits being offered by the
state.
$5,000.00 Grant from Maryland (this is assuming that the proposed revisions to the grant
process go into effect, so this is not guaranteed, but I think it’s likely)
-AND-
$ 5,000.00 Property tax credit from the County
-AND-
$ 11,100.00 Federal tax credit. (Not subject to AMT restrictions!)
That’s up to $21,000 in incentives! This leaves you spending about
$15,900 out of pocket.
So, with a 4 kw system facing south in central
Maryland, you will generate an average of 4911 kWh per year. That is
equal to $539 at today's rates (assuming $0.11/kwh). Also, you will be
generating almost 5 MWh of energy per year, which equates to 4 or 5 solar RECs.
If we estimate the the REC’s will be sold for 70% of the ACP for each year,
(and that you only get half the RECs for 2009 because you won’t get your system
installed for a couple months yet) then you will earn over $11,000 over the next
14 years. Now, that number has not been discounted for inflation.
After all, you are paying for the system with today’s dollars, but will be paid
for the REC’s it generates in presumably less valuable future dollars.
But I’m not going to jump through the mathematical hoops of adjusting for
inflation because a similar issue holds true for the electricity rate
calculation – I assume rates will go up, but I haven’t actually factored that
into the calculations here. So, for simplicity’s sake, I’m going to
assume that the two equations will cancel each other out.
The estimated payback period works out to ten and a
half years. During that time you will save $ 5672 on electricity bills
(if rates stay the same) and will earn about $ 10,300 in REC payments.
Adding those together gets us up to the $15,900 paid for the system (after all
the incentive programs). After that, all the money you save on
electricity and earn in REC's is the icing on the cake! So, in your
eleventh year of solar system ownership you would ‘earn’ about $1,400. Not bad.
People pay well over $15,900 for a car.
What does that car earn them in the 10th year of ownership?