Solar Panels – Is It A Good Investment? – 1 Year later

Solar Panels

Solar Panels – Is It A Good Investment? – 1 Year later

hey everyone

So I have officially had our Solar Panels on our roof for a year now. I can finally figure out our exact return after one year of it working. The system was installed right before new years last year. It was very exciting for us, as it is something I wanted for a very long time.

From the start of the process to the end was a very long process. It didn’t take to long to get approved by Hydro One, but all the paperwork and building permits made the process constantly drag on.

Since the system has been up though, I have literally done nothing. The money just gets deposited in our account every month and once in a while I log into the system to see if all the panels and inverters are still working properly. That’s it.

You can read about the whole process and the system size here. Basically it consists of 30 panels. 10 facing the south and 20 facing south west. The government was trying to promote green energy and created a way to boost the industry. If you were to spend the money on a system, you would get a 20 year contract to sell the hydro you generated to hydro one.

I got it the final year of the program, unfortunately the rates were a lot lower than initially offered. But still offered .2880 cents per kwh. Higher than we pay to get our hydro, but in 20 years maybe it wont be. At that time we renegotiate a new contract or maybe just keep the power for our self.

Sunny Days?

When we got the system we were told we would roughly bring in $2800-3000 per year from the system. Unfortunately we didn’t even hit the bottom number. We have a big maple tree that is blocking the 20 panels for a certain part of the day, so I definitely think that is what contributed to the lower than expected returns.

Since we get paid a month later, we were finally able to see exactly how the system did in 2018. This month we got $64.22 which was actually quite nice because it doubled our November total. Although halfway through November we got a lot of snow and that blanketed the panels, so that’s most likely why. (A big disadvantage to a solar system here in Ontario)




So How Did The System Do?

Well we ended up bringing in a total of $2,580.18 in 2018. Which means our system generated 8958.95 kwh of power. Pretty dam cool! This easily covered our hydro bills for the year. We average a bill of $110-130 a month for hydro. Yeah it’s under what they expected it to bring in, but I guess when your dealing with weather anything can change.

Here are the stats from the system.

System Installed January 2018

Total System Cost ——–$32,396.46

Total Income Received ——–$2580.18

_____________________________________________

Amount to Breakeven —- $29,816.28

So if we figure out our total return as a percentage it works out to 7.96%. Pretty good. I was hoping for a 8-10% return on investment and we are in that ballpark. Now the argument could come up that maybe if I invested that in dividend growth stocks, it would be a better investment. That could be true especially at the end of the 20 year contract, but I love being part of the green movement and having the Solar Panels on our roof.

I’ve stated it before how I think every house should be mandated to have panels on them. It would be so good for the planet and the income generated could help cover some of the costs of the mortgage and bills. California just mandated it on new builds, starting in 2020!

Borrowed Money

I’d also like to point out how we borrowed money for this system. Would I want to borrow money to invest in the stock market? Maybe, but its a lot more comfortable knowing that you have a 20 year contract to get paid back for your investment.

In the middle of 2017, we decided to refinance our house and use some of its equity to invest in various streams of passive income. The solar panels were one of them. So we didn’t actually get a return of 7.96% if we factor in the refinance.

We refinanced our house at a new rate of 2.59% so we need to take that off that total return.

7.96% return – 2.59 Refinance = 5.37%

So we ended up with a total return last year of 5.37% last year. Not bad, considering we used other peoples money! The Solar Panels also boost the value of our house and help diversify our passive income streams.

The income is taxable though, but we can write off the additional costs of house insurance and Generally, costs associated with the purchase and installation of renewable energy property are considered as capital costs of depreciable property, which are deducted over a period of several years, based on a prescribed percentage.This deduction is referred to as capital cost allowance (CCA). Generally, amounts paid for legal, engineering, installation, and other fees that relate to the acquisition of the renewable energy property, would be included as part of the capital cost of the property.

The CCA rate for Class 43.2 (Our system) is 50% per year, computed on the declining balance basis, and is subject to certain CCA deduction limitations as discussed in Question 7 below. (Source Cra)

To be honest I don’t quite understand what exactly that means. But I’m sure our accountant will. haha Maybe one of you accountants know.

Solar Panels Stats

1 Year co2 offset from the solar panels

Conclusion

So there you have it, the results of one from our Solar Panels on our roof in Ontario.  A 5.37% return on investment from borrowing money from the bank. The system has had no problems, the roof hasn’t sprung a leak. All systems are normal. Just another monthly source of income, that we do nothing to get. Got to love it!

Cheers!

What are your thoughts? Do you have panels? Did you get a higher return? Do you understand the tax write offs?

20 Responses

  1. Thanks for sharing the details, Rob. Too bad the ON guv scrapped the deal 🙁 Its something that I was always interested in doing, but couldnt justify spending $30K last year or the previous years.

    Good to see that the investment is paying off pretty well.

    Heres to sunny days 🙂

    R2R
    Roadmap2Retire recently posted…Baby R2R’s Portfolio Update – Q4 2018My Profile

    • Rob says:

      hey Road

      thanks man. Yeah its pretty crappy, but i could see why they would. Doesnt make sense to pay a higher rate than what customers pay.

      They should do a breakeven price for new systems.
      Politics always blows me away though, how much some leaders resist the need to go clean energy.

      cheers Road!

  2. Team CF says:

    Pretty cool Rob, hope they will continue to give you some income in the coming years. Do you (plan to) clean the snow off in the winter months? Do they also increase the price of your property?
    Team CF recently posted…Minimalism Declutter ChallengeMy Profile

    • Rob says:

      hey Cheese

      Yeah they increase the property value and supposedly can make the house sell faster if we were to list.

      The 10 panels are steep so the snow slides off. The other 20 are almost a perfect fit on that part of the roof, so i dont want to risk breaking anything or falling off and breaking myself… lol

      cheers!

  3. DivvyDad says:

    Thanks for sharing your recap. It is really interesting to see feedback from someone that has panels, as I don’t know anyone personally that has done it. Lately I’ve been watching some of the country living TV shows like Living Alaska or Building Off the Grid and many of them are using solar panels, although they aren’t selling it but rather using it for themselves.

    In your install, are you selling all of the power back to the company? I would have thought it would allow you to eliminate your bill and sell the excess back, but based on your description it doesn’t sound like that is how it works. Either way, not too bad to be getting a 5%+ return!
    DivvyDad recently posted…Get Out of the F*@#ing ShowerMy Profile

    • Rob says:

      hey dd

      There was a couple options but we chose to sell it all. Considering we get .2880 cents and power here ranges from 16-19 cents depending on the time so it made sense to sell it all.

      Solar is definately a nice option if your going to live off the grid.

      cheers dd

  4. Hey, Rob. Interesting that you pay your bill at the lower rate, but get to sell back what you generate at the higher rate (assuming I understand correctly). Sounds like a great thing. Any worries about your consumption rate going up over time and exceeding your fixed sell rate?
    In any case, it sounds like you are very happy with the solar panels and your decision one year later. That’s great.
    Any thoughts of trimming that maple tree to maximize the sun for the panels?
    Engineering Dividends recently posted…2019 Portfolio GoalsMy Profile

    • Rob says:

      hey ed

      yeah you got it correct. It was to entice people to invest in solar panels. When it first started they got about 82 cents per kwh. That would of been insane!

      No worries. Everything tends to go up in price, clearly power will too atleast these panels will subsidize the cost. after 20 years we can negotiate a new higher rate contract =)

      As for the tree I doubt we will trim it, the wife loves it! (i do too, but could myself liking it 10 ft shorter too!)

      cheers ed

  5. Fantastic that this actually works as a source of income and a decent investment – I just love the concept of renewable energy and might even be happy without the solid returns.

    Hopefully the maple tree won’t need too much trimming as ED suggests – I’m loathe to attack any of our trees, they add so much to the garden…

    Cheers, Frankie

    • Rob says:

      hey Frank

      Renewables are a great thing and im happy to be part of the movement for sure. The extra money is nice too!

      That tree is safe. Maybe i just need to do an addition on our house and raise the roof! lol……

      cheers

  6. Thanks for this post, it’s interesting to see how much the solar system produced electricity in a year instead of rough estimates. Looks like it was a good investment, because solar panels have a long technical life span and most likely you only have to replace the inverter in the next 25-30 years!
    Dividend Deluge recently posted…Recent Buy – Canadian UtilitiesMy Profile

  7. German says:

    Solar panels was a great way to diversify your source of income. If it was a good investment or not, well, the yield is the same as the stock market, but what is the lifespan of those panels? What happens after the 20 year contract? Will you able to use generated power for yourself and sell the rest? As for the tree, maybe you can trim it a bit or tie up the branches so they are not overcasting as much. And for the snow, you can probably use a long ladder and a long broom to clean the snow off your panels. That’s what I would do. I don’t want any snow on my goddamn solar system 🙂

    • Rob says:

      haha German.

      I did that the first snow storm and cleared maybe 10 panels. Was kinda crazy and dunno if it really did that much as new snow blowed bVk on them.

      The panels should last a long time and are guaranteed 20 years.

      After that we will see what the new rules are. Id love to keep selling it to the grid, but who knows what will happen then.

      cheers man

  8. Darrell says:

    Hey there. Also from Ontario. Was nice to find someone else that had installed this system. I put in a 10 kw roof mount system for 37k. Also borrowed the money. Still 22k owing. We were up and running May of 2014 at .396 cents/kw. First full year $4141. Averaging about 3800/year. I was putting the interest and loan insurance premium back into my account from the generation but last year I started covering that and putting 100% of the generation income into the debt since the interest rates on the lines of credit started increasing. A worthwhile investment. The following year, we installed a 10kw net metering system, ground mount. This essentially cancelled out our hydro bill. Well, we still have to pay around $25 /month for delivery and line maintenance. This system was 28k with a 10-12 year payback. Also worth while because we are now immune to price increases.

    • Rob says:

      Oh man Darrell, this is all kinds of awesome. Congrats guys!

      First off welcome to the site.

      Nice work getting the system in the earlier years, as you can see you generate a higher return because of that.

      I didnt even know you could have 2 different systems. I guess it was one microfit system to sell to hydro one.

      Net metering sounds interesting but i think we could gain sooo many credits we would never use. (our hydro bills are about a 100 a month)

      What do you do with the excess? or does it just keep adding up? Can u gift it?

      Anyways great to hear man, gotta love the green factor. Your place probably looks pretty sweet too. (with 2 seperate systems)

      cheers Darrell

  9. Darrell says:

    Oh, and just so we could really stick it to hydro one, we also bought and are still buying shares of the company. Somewhere around 1500 so far. They now pay us more than we pay them.

    • Rob says:

      lol just killing it man. love it.

      We used to own hydro one shares but got rid of them a while back because I hated how political they are.

      well all the political interference.

      Anyways that is a solid quarterly payment to go with those solar cheques.

      keep it up!

  10. Jordan says:

    Hope to see a 2 year update on this soon!
    Jordan recently posted…This Canadian REIT is doing all the right things.My Profile

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