Rural Electrical COOP (Iowa).
Rural Electrical COOP (Iowa).
Yeah, your friend is taking a bath.
An example of those rates is $0.13-0.15/kWh.
See:
http://www.swiarec.coop/content/electric-ratesHis panel is 4kW peak, and let's assume its mounted at an angle that gives him 4kW at a sun angle of 50deg (yearly average for Des Moines)
So, let's dig into the details:
Average daylight hour/day in Des Moines is 12 (go figure), however, only 7.5 of those average hours it is actually sunny, so that's 2737 sunny hours per day.
http://www.des-moines.climatemps.com/sunlight.phpHowever, you mentioned his panel is mounted and not tracking, so that means if its south facing, at dawn and dusk, the azimuth of the sun matters, which is an average of 2/pi or about 63%, so he loses that! cutting down the equivalent full sunlight hours to 1742.
Now the sun elevation changes by about +/-20deg (not the 23.5deg of earth's axial tilt due to atmospheric refraction), and that effect is roughly a few percent, so we won't count it.
So we now have 1742 average full sun equivalent hours, or a yearly generation of 7000kWh.
So, at his current electrical rates, that's a year revenue (or reduction in his normal bill, but same difference) of $958.
So his zero percent discount rate payback, assuming no maintenance and free labor for install, and assuming the "payback" rate is the same as his billable rate (when in fact, since the first 200kwh/mo is the higher rate, its likely that the payback is on the lower marginal rare) is $6800/960, or 7.1 years.
With a discount rate of 3%, the break even is 10yr
5% is roughly 15yr (this, or HIGHER is usually the number one should use when calculating capital investment benefits)
Now, electrical rate increases are likely as time goes forward, which reduces the effective discount rate, so let's factor in average energy price growth (for Iowa, about 1-1.5% lately! year over year), so that reduces the effective discount rate to 3.5-4%, so let's give him the benefit of the doubt and go with a 3.5% rate or about a 11yr payoff.
So, if ANY of the following IS true, the panel is a bad investment:
1. He has a current mortgage that has more than 10yrs left on it at an APR of >3.5%
2. He paid for the panel in cash, and the assumption an average index fund with do better than 3.5% average over the next 10yr is valid
3. He owns a business that has an annual revenue growth over 3.5% and could grow with additional capital.
Now, your average crystalline panel has an output that degrades about 0.5% per year which raises the effective discount rate (note, cheaper amorphous silicon or other thin film panels degrade 1-2+% per year), meaning longer payoff, but has the opposite effect on the comparison to a mortgage, meaning the lifespan issue means if he has a mortgage at more than 3%, with more than 10yr left on it, paying that off is better.
Sorry for the huge digression, but far too many people get sold on the "it pays for itself" without digging into the real financial impact of the capital outlay.