We pride ourselves on being the best source on the web for clear, straightforward information about the process of installing solar panels. That’s why we jumped at the chance to help out our friend Andrew, who was looking for some hard data about what he can expect if he chooses to install 3.5 kW of solar panels on his home in beautiful Portland, OR.
He had gotten an estimate from an installer for a 3.5-kilowatt (kW) system for $14,000. He was running the numbers, and he saw that our figures differed from his, so he contacted us for help. We broke out our spreadsheet skills and laid down some clear information to give him an idea of what to expect. Here’s how it went:
Question 1: How much electricity will my 3.5 kW installation make in a year in Portland?
In Portland, even with our reputation for being a rainy place, we get enough sun to power a home for a year with this size installation. We calculated that Andrew’s system would produce around 3,549 kilowatt-hours (kWh) in the next year.
You can find out how much energy your system will produce by looking at the map below and performing this simple calculation: System size in kW x (Map region number x 0.78*). For example, Andrew’s calculation is 3.5 x (1300 x 0.78) = 3,549 kWh.
*The map above shows kWh-per year-per kW system size. We multiply that number by 0.78 based on the following facts:
PV Energy delivered as % of manufacturers rating: 95%
Wiring & power point tracking losses: 9% (91% delivered)
Inverter Efficiency: 90%
Total Energy Delivered 95% x 91% x 90% = 78%
Question 2: How much will Oregon electricity prices increase over the life of my system?
Based on data for historical price increases in the United states, we calculate a 3.5% annual increase in retail electricity prices. The U.S. Energy Information Administration is a great resource for this type of information. Here is their chart of average retail price increases in the last 12 years:
Electricity prices in Portland are right around $0.11 per kWh now. If they follow the national long-term trend, they will rise 3.5% per year. Over the 25-year expected life of a solar power system, that’s a lot of savings for Andrew, who will have paid for his electricity production now. But what if electricity prices don’t rise as quickly as they have in the past? See our answer below.
Question 3: With the solar incentives that are available in Oregon, what will my payback time be, and what is the internal rate of return (IRR) in my investment?
Here’s where we really get to break down the numbers. For Andrew’s system, this is what we came up with:
A 3.5 kW system @ $4,000/kW=$14,000 initial outlay
- Energy Trust rebate of $950*3.5kW= $3,325 off the price.
- Federal ITC (after ET rebate) of 30%*$10,675=$3,203
- Oregon state tax credit of $1.90/watt*3,500 (max $6,000), paid over 6 years=$1,000/year (assuming your annual state income tax burden is at least $1,000)
- Electricity savings of 3,549kWh*$0.11/kWh=$390 in year 1, increased 3.5% annually
Using these numbers, Andrew’s final cost after 1 year will be $6,082 with a 7-year payback and 16.81% IRR. Total profit at the end of the 25-year system life expectancy is $13,733.
If you change some things around, the numbers look this way:
- Assuming a 2.5% increase in retail electric prices: 7-year payback, 16.02% IRR.
- Reduce the state tax credit to three-quarters ($750/yr): 9-year payback, 12.24% IRR
- Reduce the state tax credit to half ($500): 11-year payback, 9.24% IRR
That’s it! The state tax credit is what really makes solar make sense here. The rebate is nice, too.
Here’s our page with detailed information about solar rebates and incentives in Oregon.
And don’t forget—you can get you own personalized solar quotes from our expert partner installers by filling out our simple form.
Last modified: July 24, 2018