This week we signed a contract with a solar contractor to install a photovoltaic system on our home in 2014. Ideally it will be operational sometime in the spring, to take advantage of the peak generation through the summer.

Details are still being worked out, but right now the plan is to install 20 modules with a total capacity of 5.4kW. Half of these will be over the garage (facing Southeast), and half over the house (facing Southwest). This is not optimal placement, but it's not too bad. We expect this system will produce around 4,700 kWh/year of electricity, which is enough to offset about half our power consumption.

Our financial projection is that the system will break even after 15 years, and over the 30-year lifetime of the system it will generate an internal rate of return of about 5.7%. That return includes all the current solar incentives, namely the 30% federal tax credit and a production credit from Excel Energy expected to be $0.08/kWh for the first ten years.

It's worth noting that even without the incentive payments--which are substantial--the system would still generate a positive return over its 30-year life. In this scenario, our system would have a 30-year IRR of only about 1.9%. That's not really worth doing on a strictly financial basis (though I think it's still worth it for the environmental benefits); however, it's close enough that solar will pay for itself for people who pay a little more for electricity than we do, or who have somewhat better conditions for generating power.

The next steps will be to finalize the design and submit it to Xcel Energy for approval to participate in their solar program. Then we will be ready to install the system once the snow is off our roof in the spring. If all goes well, we could be starting work in April and be online shortly after.