Payback
One of the first things people ask when considering an investment in a solar or wind energy system
for their home or business is “What’s the payback?” The payback question is typically not asked of
our other purchases. We don't ask a salesperson what the "payback period" is for a new boat, hot tub
or car. What we spend our money on ultimately comes down to individual priorities and preferences.
For solar or wind energy what most people are looking for is called a “simple” payback analysis
where the cost is compared to the value generated.
A simple answer is that any renewable energy system will not only save you money per month but will
also make money by providing a return on your investment. Investing in a renewable energy system
is really like buying “energy futures”. Unlike other so called "renewable energy" purchases like
geothermal heating and cooling, you are fixing the cost of your future energy needs in today’s dollars.
Consider this: Geothermal heating and cooling systems while a beneficial step in improving energy
efficiency still continue to use electricity, sometimes to the tune of thousands of kWh per month in the
wintertime. However having a solar or wind energy system will reduce or offset your energy
consumption by making electricity and reducing your need for utility provided energy.
Therefore investing in a solar or wind energy system is very attractive if you want to remove the
uncertainty of price increases, energy shortages, and the effect of inflation. A solar or wind energy
system makes non polluting clean energy thus keeping our air, land and water clean for us, our
children and future generations. And that above all is true, honest "payback"
In Summary:
Inflation
Just inflation will cause electricity prices throughout the United States to rise continuously into the
future. And the value of what your dollar is able to buy will change. Because renewable energy is a
long-term investment, it's important to take inflation into consideration.
Electricity price increases
When you fix your future electricity costs by switching to using solar or wind energy, you're protected
from electricity price increases. Calculating payback doesn't take this benefit into consideration.
The after tax value of electricity savings
With most investments, you pay taxes on any money you earn. But, you don't have to pay taxes on
the electricity savings you get from solar and payback can't account for this benefit. To really
compare a solar investment to other "energy saving" investments, convert your return on investment
from solar into pre tax dollars. As an example look at these two scenarios typical for Illinois:
Example #1
$17,000.00 2.4kW installed wind energy system
$ 5,100.00 30% federal tax credit
$ 5,100.00 30% Illinois DECO rebate
$ 6,800.00 cost after tax credit and rebate
$480.00 value of electricity (tax free) = .10 per kWh x 4,800kWh yearly wind energy production. Plus
you will not get charged tax, delivery fees and misc. fees based on a per kWh basis. Your overall utility
bill be greatly reduced.
Compare to:
$480.00 interest earned (taxable) on $6,800.00 investment on 12 month CD w/7.06% annual return.
Example #2
$30,000 4.2kW installed solar energy system
$ 9,000 30% federal tax credit
$ 9,000 30% Illinois DECO Rebate
$12,000 cost after tax credit and rebate
$540.00 value of electricity (tax free) = .10 per kWh x 5,400kWh yearly solar energy production. Plus
you will not get charged tax, delivery fees and misc. fees based on a per kWh basis. Your overall utility
bill be greatly reduced.
Compare to:
$540.00 interest earned (taxable) on $12,000 investment on 12month CD w/4.5% annual return
So while the initial cost of a renewable energy system represents a substantial investment, over it’s
life it will not only pay for itself, it will generate a profit! Additional tax credits and rebates if available
will further increase your return on investment by lowering system costs. If electricity prices increase,
your rate of return will increase.
Other factors to consider:
Environmentally, solar and wind energy makes sense since there is no pollution, emissions or waste.
Socially, solar and wind energy makes sense when we consider energy independence and security.
Bottom line...The "payback" makes sense!
for their home or business is “What’s the payback?” The payback question is typically not asked of
our other purchases. We don't ask a salesperson what the "payback period" is for a new boat, hot tub
or car. What we spend our money on ultimately comes down to individual priorities and preferences.
For solar or wind energy what most people are looking for is called a “simple” payback analysis
where the cost is compared to the value generated.
A simple answer is that any renewable energy system will not only save you money per month but will
also make money by providing a return on your investment. Investing in a renewable energy system
is really like buying “energy futures”. Unlike other so called "renewable energy" purchases like
geothermal heating and cooling, you are fixing the cost of your future energy needs in today’s dollars.
Consider this: Geothermal heating and cooling systems while a beneficial step in improving energy
efficiency still continue to use electricity, sometimes to the tune of thousands of kWh per month in the
wintertime. However having a solar or wind energy system will reduce or offset your energy
consumption by making electricity and reducing your need for utility provided energy.
Therefore investing in a solar or wind energy system is very attractive if you want to remove the
uncertainty of price increases, energy shortages, and the effect of inflation. A solar or wind energy
system makes non polluting clean energy thus keeping our air, land and water clean for us, our
children and future generations. And that above all is true, honest "payback"
In Summary:
Inflation
Just inflation will cause electricity prices throughout the United States to rise continuously into the
future. And the value of what your dollar is able to buy will change. Because renewable energy is a
long-term investment, it's important to take inflation into consideration.
Electricity price increases
When you fix your future electricity costs by switching to using solar or wind energy, you're protected
from electricity price increases. Calculating payback doesn't take this benefit into consideration.
The after tax value of electricity savings
With most investments, you pay taxes on any money you earn. But, you don't have to pay taxes on
the electricity savings you get from solar and payback can't account for this benefit. To really
compare a solar investment to other "energy saving" investments, convert your return on investment
from solar into pre tax dollars. As an example look at these two scenarios typical for Illinois:
Example #1
$17,000.00 2.4kW installed wind energy system
$ 5,100.00 30% federal tax credit
$ 5,100.00 30% Illinois DECO rebate
$ 6,800.00 cost after tax credit and rebate
$480.00 value of electricity (tax free) = .10 per kWh x 4,800kWh yearly wind energy production. Plus
you will not get charged tax, delivery fees and misc. fees based on a per kWh basis. Your overall utility
bill be greatly reduced.
Compare to:
$480.00 interest earned (taxable) on $6,800.00 investment on 12 month CD w/7.06% annual return.
Example #2
$30,000 4.2kW installed solar energy system
$ 9,000 30% federal tax credit
$ 9,000 30% Illinois DECO Rebate
$12,000 cost after tax credit and rebate
$540.00 value of electricity (tax free) = .10 per kWh x 5,400kWh yearly solar energy production. Plus
you will not get charged tax, delivery fees and misc. fees based on a per kWh basis. Your overall utility
bill be greatly reduced.
Compare to:
$540.00 interest earned (taxable) on $12,000 investment on 12month CD w/4.5% annual return
So while the initial cost of a renewable energy system represents a substantial investment, over it’s
life it will not only pay for itself, it will generate a profit! Additional tax credits and rebates if available
will further increase your return on investment by lowering system costs. If electricity prices increase,
your rate of return will increase.
Other factors to consider:
Environmentally, solar and wind energy makes sense since there is no pollution, emissions or waste.
Socially, solar and wind energy makes sense when we consider energy independence and security.
Bottom line...The "payback" makes sense!