RS/SunRun Program Real Cost

2011 June 13
by roma

In order to justify possessing an economics degree, I want to analyze the real costs of the SunRun lease program. We must take the time value of money into account in order to do this.

After shelling out six grand for the system, the homeowner is eligible to receive a $1,500 tax credit from the state of Oregon for four years. First, it must be noted that the homeowner must have a tax liability higher than $1,500 in order to benefit. For someone who has $6000 in cash this is likely not a problem.

Let's say the homeowner shells out the $6000 for the system on April 16. One year later, they are able to pay $1,500 less on their state taxes due to the credit. It must be noted that $1,500 in a credit is not the same thing as cash in hand. But even if we discount this, $1500 today is not the same thing as $1500 a year from now. What is $1,500 a year from now worth today? It's worth the amount of money we'd have to put in a bank in order to get $1,500 at the end of the year.

According to bankrate.com, a 1-year CD from MetLife will get us a 1.29% rate. That $1,500 in one year is worth $1480 now. A 2-year CD will get us a rate of 1.54%. That $1500 two years from now is worth $1454 now. 1.79% for a 3-year CD. The $1,500 in three years will be $1422. Bankrate didn't have 4-year CD's, so I'll just use the 3 year rate ($1397 dollars for $1500 in four years).

-6000 + \frac{1500}{1.0129} + \frac{1500}{1.0154^2} + \frac{1500}{1.0179^3} + \frac{1500}{1.0179^4} = -244

If one were to get higher rates, the present value of the future payments would go down, and the system would be more expensive.

As it stands, $244 gets you 20-year use of a solar array that offsets around one quarter of the average electricity bill. Not bad at all!

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