Something Doesn't Add Up Here

I recently had cause to look up some articles on solar farms, and came across this one about a small-scale solar farm built by an apartment complex in Indianapolis. I noticed these paragraphs:

The electricity generated by the panels won't be used at the complex, but will be sold back to Indianapolis Power and Light instead.

"It's really an economic decision on their part," said John Haselden with IPL. "The 24 cents (they are selling the electricity for) is probably better than the than the eight or 10 cents that they are purchasing it for."

That doesn't add up at all. Why would IPL be willing to pay 24 cents for electricity when they're only selling it for eight or 10 cents? You simply can't pay more for your wholesale product than you sell it for retail without going out of busines. I bet if the reporter had dug just a teeny, tiny bit deeper he would have found out that IPL's purchase price for green energy is government-subsidized.

As was the cost of the solar farm itself.

The farm cost $345,000 and will generate expected revenues of $20k. That's a 17.25 year just to break even on the initial investment, which is pretty damn crappy in my book. And there's all sorts of things that can happen over the course of 17.25 years to extend that period: acts of god, vandalism, changes in the purchase rates to match market realities (If the subsidies or incentives or whatever's allowing that 24 cent price end, then the power company is surely going to want to pay less than the eight or 10 cents they're selling for -- which would bring in as little as 1/3 the expected revenue.

Of course, the apartment complex doesn't have to worry about the full ROI because it was built with government "stimulus" grants. In other words, they spent taxpayer money on a private project, and the taxpayers ain't ever seeing that money again.

Would you as a private citizen give money to someone to build something that's not going to see a profit for 17.25 years, if ever, and for which you'll never see a share (remember, it's a grant, not a loan)? No, of course you wouldn't. That's why they had to take the money from you whether you like it or not.

Even if everything goes as planned, after 17.5 years, the panels could last as little as another 13 years after that (they're estimated to last 30-50 years in the article). Is that 30-50 year estimate accurate? Not according to other articles I found:

"Solar photovoltaics slowly lose their generating capacity. Although some solar panels are still working satisfactorily 40 years after installation, the conventional view is that most will dip below 80% of their rated capacity within about 20 years. This will vary slightly between manufacturers and between different types of silicon"

"Typically, the warranty given by solar cell manufacturers covers just 80 percent of power output. All this means that it may make economic sense to substitute older panels with newer panels before they are 30 years old."

If true, then not long after the $345,000 investment starts to get paid off, the owner will have to start re-investing in replacement panels, thus reducing the long-term profit potential even further.