Re: "More details on solar investments" (Letters, June 15)

Several weeks ago, I posted a letter reviewing the economics of the solar panels on our house in Anacortes ("A local example of solar investment numbers" June 9). Using the actual performance of our panels and the cost of the panels, the economics show that the system will deliver a 2.2% rate of return. Not great but acceptable for a low risk, tax free investment.

A reader recently posted a letter questioning the economics. This reader suggested there was an error in the calculation as perhaps depreciation was not included. In fact there was no error.

In calculating internal rate of return (IRR), depreciation is not included as depreciation is a non-cash event. In my calculations, the economics did not include any residual/salvage value for the panels which provide worse case economics — kind of like full depreciation.

As many modern systems have a 30-year warranty, I used this as the life and assumed the system would stop working the day the warranty ended. Probably not true, but again worst case. Selling our house early would not impact the IRR if we assume the new buyer would pay more for the house with panels equal to the remaining value of the energy produced — something that is of course unknowable at this time.

The reader then went into all the incentives we have received which make the actual IRR well above 10%. These were basically a repeat of the original letter (May, 24) which convinced me to provide economics which excluded all state/federal incentives.

I just want to make sure readers are not confused about the actual rate of return that could be expected without any incentives.

Mike Lytton


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