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Converting sunshine into electricity via Photovoltaic (PV) Panels simply costs more than burning fossil fuels. However, grants and tax incentives from governmental and other organizations now make it more cost-effective. Per the Energy Policy Act of 2005 (EPACT), Tax Credits will equal 30% of qualifying expenditures for each purchase of qualified photovoltaic commercial property. The same incentives exist for residential properties but there is a $2,000 cap, so commercial properties have a significant advantage.
The ROI Calculation is based on a 5kW system for a small office building with at least 300 sq. ft. of southern roof exposure. The base cost is $35,000 less $10,500 in a tax credit. You will most likely want to 'net meter' the system so that you can sell it to your local power company as you create it, which would allow you to buy it back if you need it in the future. This two meter system reduces your need to buy a battery, and you may also be eligible for a one time $1 per Kilowatt Hour payment from your power company on the total energy that you generated over the first year. The total on a 5kW system would be $5,000. Your net cost comes down to $19,500. Based on current electrical rates and conservative 6 percent annual inflation, you may save $60,000 over the 25 to 30 year life of the system.
The ROI Calculation does not factor in an increased property value which is projected at 20% of the gross cost or $7,000. This boost in value is naturally subject to market and buyers, and if it were factored in, the payback would come in under 10 years.
Payback Time in Years: |
Added Cost: |
Annual SAVINGS |
5 Year SAVINGS |
Return on Investment (ROI): |
16.3 | $19,500 | $1,200 | $6,000 | 6.2% |