The Death of a Thousand Cuts | Searching for Green

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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