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Our home in Kailua, on the island of O’ahu is an energy-neutral residence. The photovoltaic (PV) solar electric system and solar water heater (WH) system we installed produce all the energy we need. My wife and I have discovered that becoming an energy-neutral home in Hawai’i is a sound investment.
Before we installed my renewable energy systems, we were paying an average monthly electric bill of $170. With the installation of a 2.8 kW (kilowatt) PV array and an 80 gallon solar hot water system, we now only pay the $18 monthly connection fee required by HECo, the electric utility on O’ahu. HECo offers a net metering arrangement so that customers only pay for the “net” HECo power used after the residential renewable energy system power has been accounted for. That net balance accounting is done once per year.
With the current Federal and State credits, our PV system will provide a simple payback in 6-8 years, depending on assumed HECo tariff escalation and possible bank loan rates. Bigger systems with excess capacity will increase the payback period, but considering that energy costs will only be increasing, even a 8 – 10 year payback is well worth the investment, regardless on whether you intend to be in your home for the long term or not.
The State credit for PV systems is currently 35% of the system cost up to a maximum of $5,000. The Federal credit for PV systems is 30% of the system cost with no maximum. These credits are realized on your tax returns by reducing net taxable income on a dollar to dollar basis. For folks without State tax liability, refunds are generally available, The effective cost of the PV system installation of $19,040 was therefore reduced to 19,040 - 5,000 - 5,712 = $8,328. The solar water heater installation cost was $3,500 -$1,500 = $2,000, after Federal and State subsidies.
After accounting for our systems installation costs (after credits) and the continuing monthly HECo connection fees, we project that, after a 25-year life of the combined solar PV + WH system, we will have made a net total profit ranging from about $25,000 to $56,000 (depending on HECo's tariff escalation rates between 0 and 3%/year, respectively, while contributing to reducing Hawaii’s dependence upon imported oil along the way. That’s certainly a win-win situation for us, our State and the environment.
More details on how we arrived at payback times, money saved and compounded and annualized return on investment are explained in the full paper, which includes a free spreadsheet[1].
Here’s a profile of our 1,200 sq.ft., 3-bedroom 2-bath, non-air conditioned, 2 occupant Kailua residence before and after we installed our solar PV and WH systems:
Before:
- Average HECo power consumption: 540 kWh (150 kWh for water heater (WH))
- Average monthly electric bill: $170 ($47 for WH)
- Air Conditioning: None
- Primary Electric Appliances: Refrigerator, range, mico-wave, dishwasher, washer, dryer, chest freezer
After:
- Average HECo power consumption: 0 kWh
- Average monthly electric bill: $18 (connection fee only)
- Assumed electricity cost escalation rate: 0 to 3%/year
Air Conditioning: None
- Primary Electric Appliances: Refrigerator, range, mico-wave, dishwasher, washer, dryer, chest freezer
PV System Profile:
- System Cost before State and Federal Credits (2009): $19,040
- System Cost after State and Federal Credits (2009): $8,328 paid w/o a bank loan.
- Oahu effective electric rates: $170/540 = 0.3148 $/kWh (average, 2010)
- Simple Payback for the PV system alone: 6.5 years (or 8 years with a 6%/year bank loan). The combined PV + WH payback would be 5.5 or 7 years, respectively
- Compounded annualized Return on Investment (CAROI) 7.11%/year for 20-25 years(comparable to interest bearing bank CD) with tariff escalation of 3%/year and zero bank loan. With a 6%/year bank loan, the CAROI = 6.16 %/year; same but with a 0%/year tariff escalation, the CAROI = 4.58 %/year.
- Average monthly PV electricity production: 390 kWh, matching average non-water heating need
- System Size (Peak Production): 2.8 kW
- PV Panels: 16 each Suntech STP175S Modules
- Inverter: 16 each Enphase Micro-Inverters
Solar Hot Water System Profile:
- System Cost before State and Federal Credits (2002): $3,500
- System Cost after State and Federal Credits (2002): $2,000
- Monthly savings in electricity to produce hot water: $47.2 (average)
- Simple Payback: 3.5 years
- Solar Hot Water Panels: 2
- Hot Water Tank: 80 Gallons
Conclusion -- Residential renewable energy systems such as photovoltaic solar PV electric systems and solar hot water systems are good investments in Hawaii for long-term homeowners because we have very high electric rates (making the investment payback period reasonable), ample sunshine, and the availability of Federal and State renewable energy credits to substantially reduce system costs. Compounded, annualized ROI range from 4.6 to 7.1 %/year, i.e. much higher than any presently available bank CD (Certificate of Deposit) saving yields.
It is feasible for homes in Hawaii to profitably become “energy-neutral” like our house in Kailua, O’ahu. Producing power from clean, renewable energy systems provides a real return on investment and reduces our State’s dependence upon imported oil.
Fig. 1. Our solar-powered system in Kailua, Oahu, Hawaii. Twelve Photovoltaic (PV) panels shown in the foreground, and two solar hot water panels shown in the background. Four additional PV panels are located out of view on the main roof. The two white objects on the right are skylights over our back lanai. |
