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Note: In this analysis, we have assumed a certain set of conditions, such as wind regime, maintenance costs, etc. Your analysis will differ for your set of circumstances. This case study is for illustration purposes only.

A New England homeowner is considering taking out a 20-year loan to purchase a $10,000 wind home wind power system (turbine, tower, inverter, and battery storage) for generating her own electricity, instead of paying her full electricity bills for the next 20 years.

Assume that the home wind power system she has chosen is rated at 3 kilowatts with the turbine 80 feet (24 meters) above the ground, and that she lives in a Class 4 wind regime (average wind speed of 12.5 to 13.4 miles per hour [5.6 to 6 meters per second] measured at 33 feet [10 meters] above the ground).

Given these assumptions, the home wind power system can produce an estimated 9000 kilowatt hours (kWh) per year, or 750 kWh per month. Also assume, for the sake of simplicity, that she will use all of the electricity herself and will not sell any back to the utility. Therefore, the value of the electricity to her is equal to the retail price she pays the utility; in this case, 12 cents per kWh.

Continuing to Pay Electricity Bills

If she continues to pay her electricity bills without the home wind power system, the retail value of the electricity is $1,080 the first year. In later years, the price of electricity increases. For this analysis, we assume that the cost of electricity increases at the same rate as inflation— 3% a year. Thus, the 9000 kWh will cost $1,112 in the second year, $1,146 the third year, and so forth, until the total inflation-adjusted cost of electricity for 20 years is $29,020.

Purchasing a home wind power system

She can obtain the least-expensive loan by taking out a second mortgage on her home. She can borrow $10,000 at 8%, and make payments of $1,019 for 20 years. But she can deduct the portion of her payments that go toward interest at her 30% combined federal and state tax rate. Thus, after taxes, her annual payment is $779 for the first year, and increases to $996 as the interest deduction decreases in later years.

However, there are other costs to owning a home wind power system. Her property taxes will be higher because the wind system increases the value of her property. She will pay additional insurance since her standard homeowner’s policy does not cover liability from the wind tower. And she will hire a local mechanic to climb the tower and grease the bearings every year.

Altogether, she figures these operations and maintenance (O&M) costs will be about 1 cent/kWh or $100 per year in today’s dollars. Let us assume for this analysis that taxes, insurance, and labor rates increase at the same rate as inflation. Thus, annual O&M costs increase to $175 in the 20th year. So, over 20 years, her total inflation-adjusted cost for buying home wind power system is $19,678.

Net Present Value of Both Options

However, our example is still not complete. Economists tell us that future dollars are worth less than present dollars. It is better to have money now, rather than in the future, so we can use it to invest and earn more money.

Even though inflation increases her annual electricity payments after 20 years to $1,894, those are future dollars, so they are worth less than today’s dollars. Economists refer to this devaluation as the net present value factor, the rate at which future dollars are discounted compared to present dollars.

This discount rate is equal to the rate of return that she could make on an investment of equivalent risk and liquidity to a home wind power system. In this evaluation, assume her opportunity for return on investment with today’s dollars (i.e., the discount rate for her future dollars) is 10% a year.

Therefore, projecting her electric utility payments into the future to, say,the end of the first year, the dollars are worth 90% of what they were at the beginning of the year. At the end of the second year, the dollars are worth 90% of what they were at end of the previous year. (Notice the value of her future dollars depreciates at a compounded rate.) Considering these adjustments, her annual electricity payment in the 20th year is actually worth  only $156 in today’s dollars.

Thus, her total cost of buying electricity for 20 years, adjusted for inflation and present value factors, is only $8,927 in today’s dollars. Another way to think of it is that her payment in the 20th year is really a deferred payment. She does not have to pay $29,020 today.

Since the utility company allows her to pay her bills as she uses the electricity, she does not have to make any large capital expenditures. So she has more of her money to invest for 20 years. This would not be true if she had to pay for 20 years of electricity up front.

But net present value factors also apply to purchasing a home wind power system, because she is making deferred payments on her loan. Her payments of $1,154 in year 20 are really worth only $95 in today’s dollars, for instance.

Therefore, her total cost for buying a home wind power system, adjusted for inflation and net present value, is only $6,426 in today’s dollars.

The Final Analysis

So in real terms, she saves $2,501 over 20 years by purchasing a home wind power system, as opposed to continuing to pay her electricity bills. An added benefit is that she would avoid the release of 40 tons (40 metric tons) of carbon dioxide, 800 pounds (363 kilograms) of nitrogen oxide, and 280 pounds (127 kilograms) of sulfur dioxide into the atmosphere—the amount of pollution that a utility company in the Northeast would emit to supply her electric load for 20 years, on average.

Looking for Sustainable Energy?

The words ‘renewable’ and ‘sustainable’ are being knocked around quite a bit, and both are strongly associated with energy conservation. Renewable forms of energy constantly replenish themselves with little or no human effort.

Solar energy is just one example — no matter how much you use, the supply will never end (okay, it may end after billions of years, but your using solar power won’t make

the sun burn out any faster).

Other examples of renewables include firewood, water (through hydroelectric dams), and wind power. Note, however, that firewood is notoriously polluting; the term renewable does not necessarily imply good environmentalism.

Firewood also has another potentially severe drawback in that people go out into forests and cut down trees, often without much thought to the overall health of the forest (a good example of not seeing the forest from the trees).

To make sure that resources last, humans need to focus on conservation, recycling, environmental restoration, and renewable energy sources. Sustainability is commonly associated with such a holistic approach to personal lifestyle.

Not only are sustainable forms of energy renewable, but they also have the ability to keep the planet Earth’s ecosystem up and running, in perpetuity. Sustainable energy, such as solar, is nonpolluting to the greatest extent possible.

The basic notion behind sustainable energy sources is that by their use, society is not compromising future generations’ health and well-being, nor their ability to use their own sustainable resources to any less capacity than we have. Who can argue with this very fundamental version of the Golden Rule?

Understand Why Solar Is King

Solar power has historically been more expensive than other energy options, but that’s changing fast because of government investment in technologies, as well as the simple fact that many more people are investing in solar, which results in economies of scale. Solar energy equipment increases your financial standing in basically two ways:

• Savings on your monthly bills.
• Appreciation of your home’s value.

The following sections cover reasons why solar is a great investment, both financially and environmentally.

Reaping financial rewards Solar is an investment; you must actively go out and purchase solar equipment and install it at your home. However, after the initial costs, not only do you save money from lowering your energy bill, but you also may see the value of your home increase.

Comparing savings

So how does investing in solar compare to other investments, such as the stock market, a savings account, or a new kitchen?

To compare, you need to calculate your payback period. Payback period is a measure of how long it takes to recoup your upfront investment with the costs you save. If you install a solar water heater system for $4,000 and it saves you $50 a month on your power bill, the system will pay for itself in 80 months, or 62⁄3 years. (Though you may easily cut that time in half if the price of oil skyrockets and utility rates double, for example, during a war in the Middle East.)

Now consider other ways you can spend that money. With investments in remodeling, such as a new kitchen, you get no monthly cost reductions at all unless you’re installing new appliances that are more energy-efficient.

If you put the same $4,000 into an interest-bearing bank account, you may get $20 a month in interest. After 80 months, you’d make $2,000 in compounded interest, or half your investment. And if you put the same money into the stock market, you may enjoy a return of $3,400. Of course, you can also lose the entire thing and drive yourself nuts with regret!

To play it safe, choose a variety of investments and decide how much you want to put toward solar power. Stock portfolio managers consider hedging an important facet of a good portfolio.

In short, if you install solar, you’ll be relatively risk free from exploding energy costs. Showing a little appreciation When you go solar, your home appreciates. Realtors can give you statistics that estimate how much the value will go up, given the type of investment and the area you live in.

According to the National Association of Real Estate Appraisers (NAREA), for every dollar you save annually in energy costs with solar equipment, the value of your home increases by up to 20 times your annual energy savings, depending on the type of system you install. For a solar water heater investment of $4,000, the value of your home may increase by at least that much!

How can this be? Solar is catching on, and homebuyers are willing to pay more for solar homes that promise energy savings.

Check this:

Wind power actually works in a very similar matter to hydroelectric power. In both cases, all you need is a driving force to create kinetic energy. In the case of hydro-electricity, that force is water. In the case of wind turbines, that force is the wind. A wind generator consists of three basic parts.

Rotor blades: Rotor blades are used to transfer energy from the wind into kinetic energy.

Shaft: When the rotor blades rotate, they rotate the shaft, which transfers the mechanical energy into the generator.

Generator: Generators operate on the principle of electromagnetic induction. When magnets are rotated around a conductor, they generate electricity.

It really is that simple. Electricity is created by magnets rotating around an electrical coil and generating electricity.

The wind power is simply used to rotate the magnetic field around the coil, causing atoms and electrons to be displaced, thus creating kinetic energy that is then translated into electricity.

Buying a Wind Turbine

All wind turbines have 5 things in common. They all utilize a generator, blades, a mounting to keep them in the wind, a tower, and a control system.

If you’re looking for a solution that provides a viable replacement for the majority of your energy needs, than you may want to look into prefabricated wind turbines.

A wind turbine large enough to provide enough energy to power an average sized home can run anywhere from $6,000 to over $20,000. They currently reduce utility bills by 50%- 90% on average and typically pay for themselves after 8-15 years.

You can also build one, or multiple windmills to obtain similar results for much cheaper then $6,000.

In order to calculate whether or not a wind turbine can be cost effective for your home you’ll need to consider energy costs and wind speed. A basic rule is that you want the average wind speed in your area to be at least 10mph and if money is a concern wind turbines start to make economic sense at about 10 cents per kilowatt hour.

Wind turbines are becoming less costly to produce, and are continuously becoming more and more efficient. Soon seeing wind turbines powering rural homes, more turbines running in windy areas, and even turbines on the ocean will be a common occurrence.

Are Wind Turbines Noisy?

Here is some footage of Wind Turbines at Fenner Wind Farm and the sounds we are surround by everyday. You be the judge.

So, what is your current excuses?