This is a question that would have different answers depending on the respondent. I am not pro solar (or alternative energy) as a blanket solution to our energy needs now or in the long term.
I do feel that certain types of alternative energy are cost effective in certain parts of the country but overall the return does not justify the investment.
I never consider justifying alternative energy using tax or utility incentives.
Tax and utility incentives only shift the cost to other rate or tax payers. This is unfair to those that cannot afford to make an investment but are forced to subsidize someone that has the means to install alternative energy systems.
Getting to breakeven
When I am looking at making an alternative energy investment I do some simple math.
- I review my energy bills to see how many kilowatt hours per year I use and at what cost. The total cost would depend on the cost of energy, regulatory fees and taxes.
- Then I look at the cost of a system to produce all or part of my electrical needs.
- If you can only afford to install a system that produces a percentage of your requirements you can use that percentage to determine how many years it will take to "recover" your investment.
There are two costs that also need to be included: the cost of money (interest rate) over the term of the loan and film degradation (loss of power generation) over the life of the panels.
In Michigan the only way to make photovoltaic look attractive to the consumer is to "reduce" the cost by applying federal tax credits and utility buy-backs. The utility buy backs are dropping rapidly so make sure if you consider this that you are locked in to a specific number over the term of your loan.
If PV was truly worth the investment to the end user you would not be subsidized to buy it.
Solar hot water
If you were considering solar water heating your return on investment may be a different story. I still recommend that you calculate your return on investment without any tax or utility incentives since they are part of an elaborate shell game in hiding true costs.
I live in Michigan and have not been able to make a case for small wind or photovoltaic panels.
I do however have a solar hot water system on my roof. The system was installed by a previous owner in the mid-1070's. I see a remarkable reduction in my water heating (electric) costs whenever we have a reasonable (average) amount of sunlight. When we have several days consecutive of overcast weather my water heating costs soar.
So don't believe the hype, do the math. If you feel differently about tax and utility incentives you can use them as you see fit. I think it's time to force products to provide actual value based on cost without forcing your neighbors to pay for a percentage of your purchase.
For more information:
Read "How much will it cost to get solar panels on our 2200 sq ft Dallas home? Will we be able to eliminate our energy bills?" a Q&A answered by Dennis Cheslik.
Also, read "I am looking at either a PV system or solar hot water. Which has the biggest ROI?" a Q&A answered by Paul Rosen.