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BuyingSolarPanelsforaResidence

DylanMarks
KevinImada
JaniceDavis

EGG307EngineeringEconomics
October14,2014

StatementoftheProblem
Recentsocietaldialoguehasfocusedonclean,renewableenergyasameanstoreduceglobal
greenhousegasemissions.ThepopulationofEarthisover7Billionandcontinuingtoincrease,witha
largeportionofthatpopulationembroiledinorpoisedtoenterlocalindustrialandtechnicalrevolutions.
Globalenergyproduction,inordertokeepupwithgrowingdemand,willhaveuntowardconsequences
ontheenvironmentandtheeconomy,withthecostofsuppliedenergycontinuingitsupwardclimb.In
theUnitedStates,thereareconcernsaboutchangesinclimatepatternsthataffectregionalwater
supplies,agriculture,wildlife,andproperty.Somehealthconcernsareattributedtobyproductsof
othermethodsofenergyproduction.U.S.dependencyonforeignsourcesofenergycontributestoa
tradedeficit,andcreatesvulnerabilitytotheindirectinfluenceofsuppliernations.
Economicallysuppliedsolarenergy,especiallyinregionsthatwouldrealizehighenergyyields,
havethepotentialtomitigatesomeoftheseglobalissueswhileprovidingadirecteconomicbenefitto
thelocalinvestorintheseapplicationsandstabilizetheinvestorselectricitycosts.LasVegas,Nevada
isinoneofthemostsuitableregionsofthenationforsolarenergyproduction,averaging210sunnydays
peryear.Weareexaminingalocalresidencewhoseaverageelectricitybillisover$300permonth,
guaranteedtoincreasetotheeconomicdetrimentoftheresidentsgivenenergypricetrendsgreaterthan
wageincreasetrends.Agridtiedsolarphotovoltaicsystemwillputmoremoneyinthisfamilys
pockets,putthemingreatercontrolovertheirenergycostsovertime,makeapositiveimpactonthe
environment,andcontributetonationaleconomicsecurity.

Objective/MotivationforStudy
Ourobjectiveistoprovideelectricitytoaresidentialhomewiththeuseofanonsitegridtied
solarphotovoltaicsystem,therebyreducingourcarbonfootprintandbenefitingtheenvironment.Our
teammemberseachshareaninterestinrenewableandsustainableenergy.Itwaseasytocometoan
agreementregardingtheprojectscopeaftermeetingwiththecourseinstructorandbeingdirectedto
scaledowntoamorepersonalandrealisticapplication.Anothermotivationtopickthisparticular
projectwasthattherearemanyresourcesavailableforresearch,design,andimplementationofaviable
solarpanelsystem.

PotentialAlternativeSolutions
Wewillexaminethreealternativesolutionstotheproblem.OptionOnewillbetopaycashat
timeofinstallationforagridtiedsolarphotovoltaicsystem.Thiswillbealargeinitialoutlayforthe
familybutifproperlysizedthesystemwillnetzeroenergyusagefromthelocalutilityandpaythemback
overtime.OptionTwowillbetofinancethesystemoverthelifeoftheequipmentwithasecond
mortgageorhomeequitylineofcredit.Thecostofborrowingisstillnearrecordlows,andpaying
backovertimemaybeabettereconomicdecision.OptionThreewillbetoinvestthecapital
elsewhere.Thecostofelectricity,thoughtrendingupward,maynotprovidethehighesteconomic
return,andagreatereconomicreturnelsewheremayoutweighlessdirectbenefitstothefamilygiventhe
largeinvestmentandpaybacktime.

Methodology
Weintendtoprovidearecommendationbasedonabenefit/costanalysisandareturnon
investment.Indoingthebenefit/costanalysiswewillexplorethreemethodsofapproach.Thefirstwill
betoanalyzetheeconomiccomparisonofmutuallyexclusivealternatives.Wewilldetermineand
calculatetheminimumacceptablerateofreturn,theinternalrateofreturn,thebenefit/costratio,and
paybackperiodmethods.Wewilldiscussthejustificationandfeasibilityofrealisticimplementationof
theproject.Returnoninvestmentwillprovideafinancial,environmental,andsocialvalue.

Thedatarequiredincludeselectricbills,amountofsolarpanelsrequired,costofsolarpanels,
energysavings,costperkwhofelectric,loaninterestrates,servicelife,inflationrates,investopportunity
interestrates,andincreaseincostofkwhovertime.ThepotentialsourcesofdataareNevadaEnergy,
SolarNVsocietymeeting,previousbillingstatements,www.wholesalesolar.com,andtheU.S.
DepartmentofTreasury.