Should I Install Solar Panels on My Roof?

And does it make any sense for the government to subsidize it?

Every five years or so I’ll read something online that’ll inspire me to calculate the value of installing photovoltaic solar panels on my roof. After all, the costs of manufacturing and installing panels are supposed to be dropping, and Toronto Hydro’s prices tend to move in the other direction. So it should only be a matter of time before they hit that happy spot where I jump into action.

Spoiler alert: there’ll be no happy spot in 2024 and I certainly won’t be doing any jumping. But asking ourselves why we’re not there yet will raise interesting questions about the government grant and loan programs designed to promote solar panel adoption.

The thing that got me going this year was a recent post by Roger Pielke Jr. Dr. Pielke - who’s never shy about going against the climate “consensus” where necessary - contrasted his pessimism over the future of wind power with his optimism for solar. He felt that solar’s economics and physics pointed to a bright future (so to speak).

But that doesn’t mean solar will make sense everywhere and for every use-case. And I wanted to know how the latest and greatest the market could offer would work right here at The Audit world headquarters. Here’s the background information we’ll need:

• Toronto’s average solar irradiance is apparently 4.5 peak sun hours per day (which = 1,642.5 hours/year).

• My normal annual electricity consumption is probably in the range of 9,800 kWh.

• Over a normal month, Toronto Hydro charges me an average of about $0.11/kWh for my electricity.

With those numbers I can estimate that I’ll need panels with a total capacity of 9 kW to completely offset my normal usage. Of course, the panels won’t produce any power at night, and precious little on cloudy days. But the idea is that the surplus production in full sunlight can be fed back into the grid in exchange for credits from Toronto Hydro. Assuming it all works, such a system could save me around $1,100/year.

From what I’ve seen, installation and maintenance would probably cost around $25,000 up-front and another couple thousand through the equipment lifetime - particularly when the inverter reaches its end-of-life after 10 years. The Canada Greener Homes Grant program seems to be closed as of February, 2024, but there are a number of low-interest loans available from governments at various levels.

Either way, I’m going to be on the hook for $27,000. Now considering how my hypothetical installation is designed to offset my current electricity costs of $1,100/year, it’ll take me around 25 years to pay for my investment. Great. That’ll probably be just a year or two after I’ll have paid another $27,000 to replace the original hardware. Sorry. I really don’t see how that would work.

On the other hand, I could take that $27,000 and invest it in a Vanguard S&P 500 ETF. Historically, the low-risk index fund has returned over 8% annually. So my $27,000 could grow to nearly $126,000. Which certainly does feel like a better plan. And I won’t have to worry about photovoltaic-related fire risks.

But even if installing solar panels on my house makes no economic sense, perhaps I should do it anyway in the interest of climate change mitigation. Well I don’t know how things work where you live, but nearly all of my electricity is generated by low-emissions sources:

• Nuclear (51%)

• Hydroelectricity (25%)

• Wind (10%)

• Solar (2.5)

Only 10% comes from good old (clean) Canadian natural gas. So switching to solar in order to reduce my carbon emissions won’t accomplish a whole lot. And we’d still have to account for the environmental costs of mining and manufacturing solar panel components and then disposing of them at the end of their (brief) lives.

That’ll explain why, at this point at least, I just don’t see any upside to this whole business - at least for as long as I’m still living in Toronto. I have a friend in Johannesburg, South Africa whose solar panels and batteries allow him to live completely off-grid 12 months a year. Which, considering what a complete failure the state-owned Eskom power authority has been, is a very good thing.

But why is Canada’s government - no doubt eminently familiar with our weather patterns and angle of elevation in relation to the sun - pushing so hard for solar? Why, in this year’s transfer payment data, did the Department of Natural Resources budget for $722 million for “Grants in support of Home Retrofits”? Of course, only a fraction of those grants were meant to pay specifically for solar panel installation. But it wasn’t a trivial fraction.

Sure, the grant program has now been shut down. But if the “climate mitigation” value of residential solar panels in northern regions is so anemic, why start the whole thing up in the first place?