Does Tesla Solar Make Sense?
The Quick Answer: It can make financial sense. While obviously appealing to my “let’s get power from the sun rather than a less-than-perfectly-clean power plant” side, I’ve also calculated I can receive a roughly 12% cash-on-cash return on an investment in Tesla Solar Panels. This does not factor in the additional fuel savings realized by driving an electric car vs an internal combustion vehicle.
The Situation: My wife and I recently purchased a new construction home in metro Denver. Having an interest in sustainability and renewable energy, we chose the roughly $800 option to add a conduit inside the wall to allow for seamless integration of solar energy from the roof to our electric panel. As a Tesla fan, I’ve done a deeper dive into does Tesla Solar make sense for my house.
The Simple Math of Energy Produced: The current solar panel (Septmber 2022) offered by Tesla is roughly 3.5’ by 6’ and is rated at 400 Watts. An online search will show slightly smaller and slightly lower wattage from other companies. The 400 Watts translates to lighting four 100 Watt lightbulbs on a perfectly sunny day at the perfect time of day. (Note, if you are currently using 100 Watt lightbulbs in your home, I would highly recommend you switch them out for LED or similar bulbs that are leaps and bounds more efficient.) The sun obviously goes down at night and the amount of energy produced at lunchtime is different than that at sunset. Many online calculators will estimate the amount of sunlight hitting the panel equates to four “perfect” or “peak” hours each day. If your panels are facing south (ideal orientation in the northern hemisphere) with no trees or neighboring properties obstructing sunlight, you might push that to five. So one panel rated at 400 Watts * 5 combined hours of peak sunlight each day = 2000 Watt hours produced each sunny day by one panel. How many south facing panels can you fit on your roof? In my case, I can fit around 12 panels. So on a perfectly sunny day, my home could produce 2000 Watt hours per panel * 12 panels = 24000 Watt hours or 24 kilowatt hours (24kWh).
The Simple Math of Energy Used: The US Energy Information Administration states the average US home consumed 893 kWh of electricity in 2020. Divide by 30 days and the average use per day is 30kWh. For Colorado specifically, the average use is 706kWh each month, or 23.5kWh per day.
The Cost of Energy Produced (aka the Solar Panels): Tesla has streamlined options for install. Rather than calculate an exact number of panels that can fit on each specific roof, Tesla offers a few different options in 2.4kW increments. The smallest option (4.8kW) makes sense for my house. The 4.8kW is calculated by the max energy produced per hour per panel (400W) * the number of panels (in this case 12). 400W * 12 panels = 4800W or 4.8kW. Tesla shows the price at $11,616 excluding sales tax but including installation. While previously 26%, with the passage of the Inflation Reduction Act in August 2022, the federal tax credit, retroactive to the beginning of 2022 and extending through the end of 2032, is now 30% of total cost. $11,616 - (30% * $11,616) = $8,131. The tax credit goes down to 26% in 2033, 22% in 2024, and 0% in 2025 and beyond. $8,131 / 4800W = $1.69 per Watt. Note, I’ve seen other installers charge closer to $4 per Watt.
The Cost of Energy Used (aka Your Electric Bill): The Energy Resource Center states the average cost of electricity in Colorado is $0.115 per kWh. So 706kWh consumed each month by the average Colorado homeowner * $0.115 per kWh = $81 electric bill per month for usage. Note many utility providers will charge a base connection fee, peak usage charge, etc. that prevents your electric bill from being $0 unless you go completely off grid.
The Return on Investment: In my situation, I believe that solar panels on my roof (south facing, no obstructions) could achieve five hours of peak sunlight per day. As stated above, this equates to 24kWh per day. Assuming I use all of the electricity produced by the solar panels each day, I would save $2.76/day (24kWh * $0.115/kWh = $2.76) or $82.80 per month or $993 per year. $993 annual savings / $8,131 initial cost = 12% cash-on-cash return beginning day 1.
What If I Buy an Electric Car: For easy math, assume I buy a new Tesla Model S with a 100kWh battery. The car can travel an EPA estimated 396 miles on the 100kWh battery, or roughly 4 miles per kWh (note, this 4 miles per kWh is similar to other models built by Tesla as well as other manufacturers). If one were to travel 1,000 miles per month, that would equate to 250kWh used. 250kWh per month * $0.115 per kWh = $28.75 increase in electric bill each month. Assuming a comparable gasoline car gets 25mpg at a cost of $4.49/gallon (national premium average according to AAA in September 2022) and the same 1,000 miles traveled each month, it would cost $180 (1,000 miles per month / 25 mpg = 40 gallons needed each month * $4.49/gallon = $180) in gas.
Other Things to Consider: How much electricity do you actually use? With my new construction home, I am averaging about half of the normal monthly usage for a home in Colorado. Because of that, some of the power generated would go back to the grid and be credited to me in future months until it resets annually. In my situation, buying an electric car would benefit me because I could make better use of the energy produced. If the system does produce more than you use, how does the utility company handle that and does that arrangement have the possibility to change in the future (for either side’s benefit)? Some might issue a kWh credit or actually issue you a check at a wholesale rate (aka lower than the $0.115/kWh that you pay). What’s the age of your roof? Solar probably doesn’t make sense on a roof that will need replacing in the next few years. What other options exist? Tesla now offers a Solar Roof where the actual roof shingles have solar panels inside. This comes at a higher cost but is also more comparable to higher end roof like slate or clay. Utility companies might also offer an option to receive all your energy from a renewable resource. You might pay a few more bucks each month but that money supposedly goes toward investments in wind farms, solar farms, etc. Community solar might also be an option. How might future roof damage caused by a hail storm affect the situation? In my situation, my insurance carrier would charge roughly $10 more per month if I were to get solar panels installed. How does maintenance work? If one panel breaks, what happens to the energy production of the other panels? Different systems by different companies differ on this point. Some have a setup where other panels continue to work whereas others have more of a Christmas lights setup where one bad bulb renders the others useless. Are there other necessary costs? Tesla appears to require the purchase of a Tesla Powerwall Battery with each solar install. At an additional cost of $11,500 (before federal tax credit), it makes the financials less appealing but does offer a way to store that extra energy produced rather than sending it back to the grid and offers a bit more peace of mind if there were a power outage in the neighborhood. What other forms of financing exist? There are lease programs and loan programs. I have not looked into each different financing option, but I know seeing that there is a lease or loan that must be assumed during the purchase of a home is rarely something potential buyers get excited about. For me personally, I’d preferably pay with cash and be very weary of other options presented by solar installers. How long do you intend to live in the home? In my experience, most home buyers aren’t doing a financial calculation to see what kind of savings (and thus potential value) is created by the solar panels on a home they are considering to buy. In most people’s mind, solar panels represent another system that could break down and thus cost more money. For me, my wife and I plan to live in our home for many years and see the pros outweighing the cons when it comes to installing solar panels.
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