Ultimate Solar Calculator “App” Helps You Choose: To Own or Lease?

Date: 4 Sep 2014 | posted in: Energy, Energy Self Reliant States | 4 Facebooktwitterredditmail

Note: the “Ultimate Solar Calculator” has been updated and simplified. Stay tuned for an updated complex version of this same calculator.

A few weeks ago I wrote about the comeback of solar ownership relative to leasing, as the cost of rooftop solar PV continues to fall and new financing options make ownership easier than ever.

Is owning a solar panel right for you? Find out now!

The calculator below lets you compare (leasing) apples to (ownership) apples, and the chart below the calculator shows the value of your solar investment over 15, 25, and 30 years.

The default inputs are good estimates based on ILSR’s research, but you can customize the comparison extensively. The key elements in the ownership v. leasing comparison are in orange, but other options (like nearest city) will make the actual numbers accurate to your location.

Scroll below the calculator for explanations of the inputs.

Keep in mind that solar panels typically carry a 20-year warranty, but most panels are expected to continue producing electricity for 30 years or more.

The Ultimate Solar Calculator from ILSR

Embed this calculator on your website

Calculator Terms

Solar project size, cost, and electricity production

  • Annual kWh – the estimated amount of kilowatt-hours of electricity produced by the solar array each year.
  • Nearest city – (used to estimate the solar production)
  • Annual output degrade – the annual decrease in the solar production of the solar array, typically 0.5%
  • System size – the size of the solar array in kilowatts
  • Cost per Watt – the cost, including hardware and labor, to install the solar array per Watt of capacity
  • Total installed cost – self-evident, I hope
  • 30% federal tax credit – the cash value of the 30% federal tax credit (available through 2016)
  • State tax credit – state tax credit, if applicable
  • Utility/State rebate – utility or state rebate, if applicable

Economic Assumptions

  • General price inflation – estimated inflation in prices, for estimating the long-term investment value
  • Discount rate – an economists calculation of the time value of money. Default of 8% suggests that you’d value 92¢ today as much as $1.00 next year
  • Real discount rate – discount rate minus inflation rate
  • Net metering rate per kWh – the price for solar energy produced, in dollars per kilowatt-hour. Typically the same rate as is paid for electricity from the utility.

Financing Terms

Leasing Terms

  • Down payment (leasing terms) – the down payment on the lease
  • Lease price inflation – the annual increase in the lease payment
  • 1st monthly payment – the initial monthly payment for the lease
  • Electricity. price inflation – the expected annual increase in electricity prices (historically 3%, but higher in many areas in the past 5-10 years)
  • 15-year buyout price – the price, in dollars, for a leasing customer to buy the solar array after the lease expires (if available)

Embed Code:
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Photo credit:  Derek Gavey

John Farrell
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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.

John Farrell
Follow John Farrell:
John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.

4 Responses

  1. David L

    Are O&M and insurance costs embedded in the model somewhere? I would think these need to be factored into the economics of the direct ownership option.

    • John Farrell

      Maintenance costs are not in the model, other than inverter replacement. That seems to be the only meaningful cost in the long run.

      My research on insurance costs was inconclusive. Some suggested that solar would increase costs, others that it would be the same. The basis for increased costs seemed to be the presence of the panels on the home as presenting a potential threat to the safety of the home, in which case ownership or lease wouldn’t matter (because it’s an issue of the presence of them on the roof, not who owns them).

      IF you’ve got good data either, though, it’s pretty easy to update the model.

      • John Atkeison

        I would be very interested in knowing *any* reasonable figure for O&M, especially if the calculations & logic are available. Black & Veitch’s $45/kW seems pretty outrageous to me, but I have not done much to uncover how they got there.

  2. John Ihle

    O&M costs are difficult to calculate. Warranties and extended warranties for equipment need to be carefully considered but for me I have a tracker system that’s been up almost 5 years and I think that a 45 dollar/kW cost is reasonable… it depends on the system, ie the gear boxes, etc, some are serviceable and some aren’t. The cost for a fixed system would be much much less. but you still should have something in there like maybe 30 bucks and then you should be covered, imo.
    Also, what Marion indicated; having the “best” includes satisfied customers and it may not always be the cheapest or most inexpensive in the short term.. whether you lease, own, purchase direct and hire an electrician/installer vs whatever… I think there is value there but that’s not the point of the app. And do you need SunPower panels, at $6 bucks/watt, when you can get ReneSola, a pretty decent panel, for around 75 cents/watt? I don’t know, you should crunch the numbers which is more than what this app intends to do for you.
    Regardless an honest value of the energy produced has to include all those costs over time vs what you would pay for energy from the utility over the same period to better understand if it’s a “good deal” to be your own power company, lease your system or continue purchasing power from the utility. I’d like to see a return on investment indicated on the app.. vs utility purchases that is an investment into a standard business model which many may not agree with and you never never will see any return. It’s money out the door.
    The app is decent, imo. The “discount rate” term you can kind of get into the weeds on. But I think it’s the weighted cost of capital if you go for a loan from a bank may be a better descriptor…