The previous post left us in doubt. Is it really possible for the detailed calculation to show such a diminished return from our investment? To search for the answer, let’s look where the difference between the simplified and the detailed calculations lays. I also did the detailed calculation for a set of modified assumptions, arguably better adapted for my location (Toronto, Ontario) and for a small system:
| Cell | Description | Default value | Modified value | Notes |
| D6 | System cost | $8/W | $7.8/W | this is the best offer I got; HST is on top of it! |
| D7 | Utility connection fee | $1147 | $400 | Toronto Hydro is still cheap on this, compared to other utilities |
| D23 | Inverter replacement | $2000 | $1000 | Electronics become cheaper and cheaper, and in 10 or 15 years the inverter may well cost only $1000. |
| D30 | Income tax (marginal) | 35% | 31.5% | 31.15% is probably a better value, being the marginal tax rate for incomes between $40,970 and $65,345 |
Here are the results for the three calculations:
| Simplified model | Detailed model | Detailed model with
modified assumptions |
|
| Solar Income | 57744 | 55082 | 55082 |
| System cost | -27120 | -28267 | -26842 |
| Utility fee | -1730 | -1730 | |
| Insurance | -2978 | -2904 | |
| Income tax | -6823 | -6508 | |
| Inverter | -2260 | -1130 | |
| Net profit | 30624 | 13,024 | 15968 |
Some important observations after looking at the results of the simplified vs. detailed model:
- over 20 years, apparently small values add to significant amounts: the typical 0.5% decrease in output power amounts to almost $3000, a small utility fee of $5.25/months adds to $1730, and a minor $120/year for insurance adds to $2900
- maintainance, usually quickly dismissed as minor (“You’ll probably only have to replace the inverter after 15 years” is a typical statement) , eats a significant chunk of the income ($2660 is 4.1% of $55082)
- taxes are extremely important, as they consume 12.4% of the income.
- we should note that the costs will go up with the inflation, while the income is not indexed
Modifying the assumptions for a more favorable case squeezes only $3000 more in net profit. Even so, we are still far away from the results of the simplified calculation, as the profit is approximately cut in half! And don’t forget, none of the above models does consider financing. Which, obviously, will take away a big part of the already small profit!
The automatic question is if the solar investment is really profitable, considering these new results. But that’s for [another time].
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