Suppose we use approximately 1500 kWh of electricity per month, and we are considering purchasing a 5 kW rooftop solar panel array. Duke Energy’s residential electricity price is $0.10395 per kWh. The federal tax credit goes down to 26% of the cost of the solar panels next year. The cost of a 5 kW solar array is about $22,600. Based on our location and roof pitch, the 5 kW system is expected to produce 6,000 kWh annually, which would be deducted from our electricity bill. Assume a discount rate of 5%.

What is the annual expenditure on electricity without the solar panels?
b. What is the dollar equivalent of electricity generated by the panels, and how much would our average monthly electricity bill change?
c. Set up a spreadsheet and compute the total NPV of the investment in the solar panel array over a 20-year period. Show columns for time (use the annual time scale), the nominal investment (or nominal savings), and the present value of net investment in each period.
d. Repeat the calculations in part c, but now suppose I get the old 30% federal tax credit, an additional $0.06 per watt state rebate, supposing the cost of the array is only $12,500, and using a 4% discount rate. How each of these changes affects the NPV of the investment and ultimately whether this is a good financial decision.

Answer rating: 100% (QA)

a The annual expenditure on electricity without the solar panels is 1500 kWh x 010395kWh 157425 ... View the full answer