President Donald Trump is reportedly now considering a new method to funding the 1,300-mile wall he intends to construct along the U.S.-Mexico border: lining the wall with solar panels. But such a plan may be bound to fail.
On Tuesday, Axiosreported that President Trump spent some time in a meeting at the White House today with Republican Congressional leaders talking about how the wall could be covered with solar panels and the electricity generated would pay for the cost over time.
The president envisions a wall between 40 feet and 50 feet high, Axios reported. And according to the Associated Press, a wall covered in solar panels was submitted among the original proposals due in April.
But in the eyes of at least one longtime solar analyst, there's little chance U.S. taxpayers will ever be made whole by such a wall.
Using some assumptions, Gordon Johnson of Axiom Capital detailed in Thursday research note what the likely cost of lining a 1,300-mile wall-- the 2,000-mile border minus roughly 700 miles of already present fencing --and the number he came up with was $27.6 billion.
The original estimate of the wall is $20 billion, but assuming the wall will be 40 feet high and span 1,300 miles, Johnson suspects covering the entire wall in photovoltaic panels will require 13.4 million panels, or 4.6 gigawatts, and cost an additional $7.6 billion-- a 38% increase to the original $20 billion estimate --including a $6 billion project sales price and an additional $1.6 billion cost to the government for funding its 30% investment tax credit.
Per year profits would pale in comparison. By taking the average solar irradiance of 1,500 hours per year and an energy off-take price of 7 cents per kilowatt hour, as well as a 45% Ebit margin, 4.7 gigawatts of solar panels would yield $221 million per year in operating profit to the government, the solar analyst said.
So before factoring in inflation, it would take the government 125 years to pay the American taxpayer back $28 billion with $221 million a year in profits, according to Johnson.
After factoring in the time value of money, however, the math gets even worse. Applying a 10% discount rate indicates annual profit would fall to less than $1 million by year 58, meaning in 215 years, the present value of the $221 million in cash flows would total just $2.2 billion, versus the firm's estimated cost of $27.6 billion.
Simply put, taxpayers would never recoup total construction costs, the analyst argued.
"There is NO way this works," Johnson said in an email to TheStreet. "Not only does this not work under any scenario, but the gap is so wide, it's a rather outrageous suggestion by the President."
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Editor's Pick: Originally published June 8.