Exercise: solar panels on your house?

You are considering purchasing an 11.6KW solar system for your house to be installed on January 1. This involves a large expenditure today but promises lower electricity bills in the future. The question is: what is the highest "sticker price" you are willing to pay for the solar panels?

Assumptions:

• The panels will last for 30 years, then stop working and have no resale value.
• Find the average electricity rate paid from the data pasted at the bottom of this page, and assume this rate will increase 2.5% per year indefinitely.
• You pay your entire electricity bill at the beginning of the year.
• Get rough estimates for solar output here (Links to an external site.). Output results are further below(second table)
• You receive a 30% tax credit for the cost of the panels and installation (so you only pay 70%).
• Use an annual interest rate of 10%.
• Installing the panels gives you an immediate $5000 benefit from knowing you did something environmentally friendly.

	KwH	Bill
December	1653	$ 213.55
November	1538	$ 189.01
October	1907	$ 242.41
September	2359	$ 311.42
August	2732	$ 365.40
July	2808	$ 376.40
June	2851	$ 382.62
May	2526	$ 326.92
April	1901	$ 238.61
March	1805	$ 225.05
February	1424	$ 176.38
January	1389	$ 171.20

	Solar Radiation	AC Energy
	( kWh / m2 / day )	( kWh )	Value ($)
January	4.9	465	60
February	5.11	436	57
March	6.11	568	74
April	6.63	584	76
May	6.53	593	77
June	5.83	505	66
July	5.83	519	68
August	5.65	506	66
September	5.47	476	62
October	5.42	498	65
November	5	456	59
December	4.45	420	55
Annual	5.58	6026	785