Questionable Solar Math at the Wall Street Journal

The Wall Street Journal published one of its Pollyannish green energy articles on Monday, which begins with this photo caption under a photograph of photovoltaic solar panels: "ROOFTOP REWARD With a utility rebate and tax credit, a residential solar system in Los Angeles can save more than $21,000 over 25 years."

The $21,000 figure comes from a chart prepared by Clean Power Research, "a research outfit in Seattle that has designed numerous online solar calculators."  The numbers presented are, shall we say, problematic and consistent only in their exaggeration of the payback period from investment in solar panels. Given that data is available from the Energy Information Administration, it might not have been wise to ask an industry promoter to provide figures.

A glance at the Denver column, for example, predicts a "cumulative lifetime savings (over 25 years)" of $13,099.  After tax credits, the $27,500 solar system costs $19,250. The savings is $6,000 less than the cost of the system, so it seems apparent that you never recoup your investment; the payback period is infinite. Clean Power Research however reports a payback period of 12 years. Neat trick.

The Journal mentions, "It was also assumed that the systems were being purchased with cash," without explaining how capital costs were calculated. A 30-year treasury bond rate of around 2.8% yields a 100% return over 25 years, or $19,250 for the Los Angeles system, making a bad investment significantly worse.

The calculations of lifetime savings is erratic; in every one of the 5 examples, multiplying the first year savings by 25 yields very different numbers than those reported. New York's reported savings is $33,477, but the monthly savings of $1,451 times 25 years equals $36,275. The New York payback period is cited as 5 years, but the math works out to 6 years 8 months.

The $21,000 savings in Los Angeles is actually $31,575, but the 11-year payback period was calculated correctly.

The article also warns:

While Clean Power Research cautioned that tax situations and effects of credits will differ from person to person, it assumed that the homeowner in each example was filing taxes as a single person and had annual income of $140,000.

In other words, in order to take advantage of the $12,000 in tax rebates offered in New York, you have to have a tax liability of at least $12,000.

In addition, no mention is made of the hidden costs of utility rebates and tax credits. The article admits that one of the reasons that New York got the best investment return is because "electricity rates in New York were higher, too, which yielded more savings over the long run." The average New Yorker's electric bill of $2,595 per year was more than double that of Denver and Portland-in part because of the state's insane green policies, renewable fuel standards, and the generous rebates and tax credits. After installing solar panels, New Yorkers pay $1,144, more then three times the $385 in Denver. It is insanity to talk about "savings" and the "best investment return" when the net result is a huge increase in electricity costs.

Solar advocates have overstated the promise of solar power for decades. It is disappointing when a reputable paper like the Wall Street Journal participates in this deception.

The Wall Street Journal published one of its Pollyannish green energy articles on Monday, which begins with this photo caption under a photograph of photovoltaic solar panels: "ROOFTOP REWARD With a utility rebate and tax credit, a residential solar system in Los Angeles can save more than $21,000 over 25 years."

The $21,000 figure comes from a chart prepared by Clean Power Research, "a research outfit in Seattle that has designed numerous online solar calculators."  The numbers presented are, shall we say, problematic and consistent only in their exaggeration of the payback period from investment in solar panels. Given that data is available from the Energy Information Administration, it might not have been wise to ask an industry promoter to provide figures.

A glance at the Denver column, for example, predicts a "cumulative lifetime savings (over 25 years)" of $13,099.  After tax credits, the $27,500 solar system costs $19,250. The savings is $6,000 less than the cost of the system, so it seems apparent that you never recoup your investment; the payback period is infinite. Clean Power Research however reports a payback period of 12 years. Neat trick.

The Journal mentions, "It was also assumed that the systems were being purchased with cash," without explaining how capital costs were calculated. A 30-year treasury bond rate of around 2.8% yields a 100% return over 25 years, or $19,250 for the Los Angeles system, making a bad investment significantly worse.

The calculations of lifetime savings is erratic; in every one of the 5 examples, multiplying the first year savings by 25 yields very different numbers than those reported. New York's reported savings is $33,477, but the monthly savings of $1,451 times 25 years equals $36,275. The New York payback period is cited as 5 years, but the math works out to 6 years 8 months.

The $21,000 savings in Los Angeles is actually $31,575, but the 11-year payback period was calculated correctly.

The article also warns:

While Clean Power Research cautioned that tax situations and effects of credits will differ from person to person, it assumed that the homeowner in each example was filing taxes as a single person and had annual income of $140,000.

In other words, in order to take advantage of the $12,000 in tax rebates offered in New York, you have to have a tax liability of at least $12,000.

In addition, no mention is made of the hidden costs of utility rebates and tax credits. The article admits that one of the reasons that New York got the best investment return is because "electricity rates in New York were higher, too, which yielded more savings over the long run." The average New Yorker's electric bill of $2,595 per year was more than double that of Denver and Portland-in part because of the state's insane green policies, renewable fuel standards, and the generous rebates and tax credits. After installing solar panels, New Yorkers pay $1,144, more then three times the $385 in Denver. It is insanity to talk about "savings" and the "best investment return" when the net result is a huge increase in electricity costs.

Solar advocates have overstated the promise of solar power for decades. It is disappointing when a reputable paper like the Wall Street Journal participates in this deception.

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