Massachusetts is located in the North-eastern region of the United States and also it is one of the smallest states in the country. Let us know the complete financial feasibility of the residential solar in Massachusetts. The state receives an average solar radiations of 4.44 KW-hr/m²/day. The risk free return in the state is 2.9% per year (20 year bond yield). If the system offers higher return than the risk free return then it is a feasible option otherwise it is not.
I mentioned the breakeven cost of the system as $ 20,782. It is that cost of the system at which you get risk free return from the system that is 2.9% per year. If for any reason the actual cost of the system exceeds the break-even cost then the solar power system becomes unfeasible. You can say that break even cost is the benchmark for determining the feasibility of the system in the absolute terms whereas the risk free rate of return is the feasibility benchmark in terms of percentage. The more is the difference between the actual cost and the breakeven cost, the higher is the return offered by your system.
The internal rate of return is the return offered by the system and it is 5.3% per year in this case. The IRR is higher than the risk free rate of return, making the system feasible and acceptable. Also, the cost of solar electricity will be less (11 cents) when compared to the cost of grid electricity (20.6 cents).
The state receives the maximum solar radiations in the months of June and July and the minimum in the months of November and December. It means that the energy will be in excess in the months of higher solar radiations while there will be shortage of energy when the solar radiations are low.
The payback period of the system is about 15 years. It means that you will recover your investment of $ 16,350 in 15 years and profit will start thereafter and finally giving you the net savings of $ 15,118 in 25 years.
The overall feasibility score of residential solar in Massachusetts is 81 out of 100 without any tax rebate. Although the state receives the moderate amount of the solar radiations but it is the high electricity rate and its escalation, making solar a feasible option in the state. If I do consider the tax rebate 30% for the system, the return offered by the system will be 9.2% and cost of the solar electricity will be around 6 cents per unit, making it a attractive destination for the residential solar power system.
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