Solar Panels Cost Beneift Analysis - Green Energy Alternatives

Solar energy is no doubt one of the cleanest, innovative and renewable sources of energy. The earth’s surface receives about 120,000 Terawatts of solar radiation, which is 20,000 times more power than the entire world consumes (Maehlum, 2018). Our planet is fully capable of only relying on solar energy, however there are some factors that stop our planet from being completely reliant on solar energy. For example, the political factors play a big role on the acceptance and demand of solar energy. There are also oil companies that lobby to oppose solar energy (Williams, 2016). The positive impact that solar energy has on our planet is enough to convince some people to make the switch to solar energy. However, the majority of the public needs more than just environmental benefit to make the decision of switching to solar energy. Which is why we have prepared this paper to dive into not just the environmental benefits but long-term financial benefits. We look at the average hydro cost in Ontario and compare it to the average price of solar panels. Solar panels have an enormous cost upfront and would require maintenance whereas the usual hydro cost does not require any down payment just monthly expenditure. This paper accounts for the initial cost difference and compares the two options on fair ground.  We also take a look at the total cost of ownership, which looks at the total direct and indirect cost of owning solar panels.  This also includes the cost in maintaining the solar panels, especially in Ontario with all the snow. We also take a look at the risks and recommendations. Since solar energy is fairly new and does not have a lot of consumers, it comes with a lot of risks. Usually with hydro energy, technical or any type of support is very easy to come by since it’s widely recognized and used. However, with solar energy you have the risk of not getting as much support as hydro due to its low consumption.
Canada had a very reliable source of energy due to its large number of lakes and rivers. Canada is not the country to look at when looking to solve the source of energy crisis. Millions upon millions of people do not have reliable electrical grid, these people mostly live in developing countries most of which get a lot of sunlight. These countries include India, China, Sub-Saharan countries in Africa and South America. Their electrical problems could easily be solved through solar energy. Since the third world countries do not have the budget not the technology to develop solar panels that could harness solar energy, it becomes our responsibility as fellow human beings to develop a technology that not only benefits us Canadians but also benefits the whole world. Canada has been blessed with a steady economy and reliable source of energy and this gives us a great power as a nation, But with great power comes great responsibilities.        

Cost Benefit  Analysis

A cost-benefit analysis (CBA) is a process used to determine what type of benefits and cost one would incur if deciding to do something over another. In this case, we have conducted a CBA in order to determine the benefits and cost associated with purchasing solar panels and utilizing this method to produce electricity over current means as a homeowner in Ontario. The reason we have selected to only do an analysis based in Ontario, is because there are currently so many variables such as, government rebates and price variations dependent on which province or even country you reside in. We are going to take a look at the entirety of the cost associated with the installation, maintenance, and repair of the panels throughout their lifetime in contrast to the cost of purchasing electricity from Hydro One in Ontario.

Firstly, we will discuss the monthly cost for an average home in the GTA (Greater Toronto Area) and Ottawa, which is to be $201 and $183 respectively (News Staff, 2017). For the sake of this Analysis, we will use the average monthly cost from the GTA, which would make out to be $2,412 a year after taxes. Now let’s have a look on the other end of the aisle, and break down the cost associated with the purchase of solar panels. We must first determine the initial cost of purchasing and installing the solar panels, and to accurately estimate this value we must break down the cost into a few separate categories. We will use conservative values in our calculation to ensure we have the most accurate estimates possible for this analysis. The first value of our calculation is the usage of electricity in Ontario per home (7,500-10,000kWh), the second would be the solar panel cost per watt ($2.50-$4.00), and the third would be the average amount of sunlight hours (1,195/h) (Solar Panel Power, 2018). This would bring us to an estimated cost of purchase and installation to be $33,480 in Ontario. We would also estimate about $798 annually in maintenance fees to ensure our panels remain in quality shape and are maintained in the winter months for the entirety of their useful life (Blanch, 2016).

When conducting this cost-benefit analysis, we really have to consider the useful life of the solar panels, as we want to determine the savings, we may receive during this period of time in going with solar energy instead of the current method. Solar panels tend to come with a 25-year warranty, although this does not mean the panels no longer work after this time period. It’s estimated that solar panels will average a 0.8% degradation per year (Energy Sage, 2018). This would mean that after about 25 years the solar panels would still be able to provide up to 80% of its original amount of electricity, which with technological advancement could be more than enough to power one’s home as electricity consumption gets reduced with the years to come. For the sake of the argument, we will use a conservative useful life with a maximum of 35 years. The monthly cost of Hydro over the next 35 years in the GTA would amount to $120,586.70 including a 2% inflation increase per year, while the cost that these panels would have incurred in the same timeframe would have been $61,410. That’s a savings of $59,176.70 over the 35 years, and if we look at it on a monthly basis that almost $141 a month you save going the solar panel route.

Although, one aspect we haven’t looked at is that if you decided against purchasing the solar panels one could assume, you’d have $33,480 to invest instead. Investing this money into a balanced growth portfolio very conservatively speaking could garner you 5% annually in a Tax-Free Savings Account. The historical average on returns in these same investments is about 7% (Hamm, 2016), and because the future is uncertain, we have chosen to base our calculations on a much more conservative percentage. Utilizing a financial calculator, we would see a future value of $184,345.23 at 5% over the course of the next 35 years. This can net-return us $63,758.53 after deducting the cost of our monthly hydro bill. This would mean that we could come out ahead if we chose against purchasing solar panels for our home by $4,581.83.