Question

Julie is considering installing solar photovoltaic panels on the roof of her house. Her monthly electricity bills currently average ​$83. The cost of installing a photovoltaic system is ​$​18,000; ​however, she expects a45 ​% reduction in this cost due to tax credits and local rebates. Assuming all of her electrical needs are met by the new system and neglecting possible revenue when the system puts electricity back into the​ grid, what is the approximate payback period for the photovoltaic​ system?

Answer 1

Julie can expect a payback period of approximately 10 years for her solar photovoltaic system after accounting for a 45% reduction in upfront costs due to tax credits and rebates, and based on her average monthly electricity bill of $83.

Step-by-step explanation:

To calculate the payback period for Julie's solar photovoltaic system, we need to consider the initial cost of the system, the cost reduction due to tax credits and rebates, her average electricity bill savings, and ignore any extra revenue from electricity generation.

The initial cost is $18,000. With a 45% reduction from tax credits and rebates, the effective cost becomes $18,000 - (0.45 × $18,000) = $9,900. Her monthly electricity bill is $83, thus her annual savings from the solar panels would be $83 × 12 = $996.

To calculate the payback period, we divide the effective cost by the annual savings: Payback Period = $9,900 / $996 ≈ 10 years. So, Julie can expect to recover her investment in approximately 10 years.