[Editor's Note: The following guest post was submitted by Josh Hamilton, a Physician from Texas. It addresses a frequent question people have. While some people will put in a solar system just because they want to help the environment, most of us won't do it unless it “pencils out.” In this post, Josh gives some insight into the financial ramifications of a solar energy system. Josh and I have no financial relationship.]
In recent years the price of photovoltaic solar systems has fallen dramatically, leading to more and more Americans choosing to add a residential solar electric system to their homes. Depending upon individual circumstances, installing a solar system can be very financially advantageous. Obviously, it would not be wise to spend money on residential solar before paying off debt or investing in tax-advantaged savings accounts, but for anyone who has already funded these priorities, who might be pondering whether to invest more in a taxable account or buy into a real estate crowdfunding deal this year, I would advocate at least considering if residential solar power could be a smart use of money.
I recently completed the installation of a 10.9kW solar system on my rooftop, and in the process of deciding to do so, I spent a lot of time educating myself on the topic. While there are strong arguments for renewable energy from the standpoint of public health, the environment, and even global sociopolitical stability, the following is strictly a discussion of the personal financial benefits of adopting solar power for your home. This discussion also assumes the full upfront purchase of a residential solar system.
Solar Lease Alternative to Upfront Purchase
A popular alternative to buying a system is to enter into a solar lease or power purchase agreement with an installer or utility company, wherein the homeowner allows a solar system to be installed on her roof and then must purchase electricity, often at a below-market rate, from the company that owns the panels.
While this does broaden the market for solar energy installations, which helps expand renewable energy capacity and the non-financial benefits thereof, the homeowner is excluded from all of the personal financial benefits available to those who purchase a system. It also may complicate the sale of your home.
The Financial Benefits of Purchasing a Residential Solar System
Federal Tax Rebates
Offsetting the cost of purchasing a residential photovoltaic (PV) system has, in the recent past, been an above-the-line, uncapped federal income tax credit equivalent to 30% of the cost of the system in the year in which it was constructed.
As part of a tax bill passed in 2015 this credit was weakened such that it is to be reduced in 2020 and again the following year before being eliminated completely in 2022. However restoring the credit could be included in future budget or appropriations bills, or in separate legislation in support of renewable energy proliferation. An example is a recently introduced congressional bill HR 2096, the Energy Storage Tax Incentive And Deployment Act, which would renew the residential solar tax credit and also add tax rebates for the purchase of home battery systems.
So be aware of the very latest status of the federal tax credit prior to assessing the finances of a solar installation project. The absence of this credit would be very likely to make purchasing a solar system financially prohibitive.
State Specific Incentive Programs
A number of states and local utility companies have their own incentive programs, including tax exemptions, rebates, and discounts. It is also important to mention that, in my area, solar installations are supposed to be excluded from your property tax assessment, but as a precaution, I was able to file a specific exemption with my county tax office.
Net Metering
The majority of residential PV systems installed will be tied to the local electricity grid. Net metering by one’s utility company is incredibly important to the financial benefit of installing residential solar. It reimburses you for the electricity your system generates in excess of what you are using at any given time. This means that your personal balance of energy production versus energy use is more meaningfully understood averaged over a period of time rather than at any given moment.
For example, while you may need to buy excess power during the summer, in milder weather you might receive a billing credit for generating more than you use. When averaged over the course of a year it may be the case that a relatively small PV system is able to bring your net annual electricity bill close to zero.
As with tax rebates, net metering is a major incentive to the adoption of residential solar and is frequently under attack by state governments and utility companies. It's important to know what the situation is in your area. Should net metering not be available, the financial benefit of adding a home battery system would increase.
Residential Solar Batteries
For anyone able to install a system under a net metering agreement with their utility, the financial benefit of spending an additional $5,000-10,000 on a home battery system is not good. If you’re being paid for all of your excess electricity, why would you spend more money in order to save it?
The main benefit of adding a battery system is to provide emergency back-up power. Many that I’ve talked to are surprised to find out that, without a residential battery system, solar panels will not power your home if the electricity is out in your area. This is a safety requirement to ensure that power is not being delivered to the grid so that downed lines may be safely serviced.
Perhaps the math on this will change in the future as battery prices fall and technology improves, or if the concept of decentralized microgrids ever takes off, but for the present time I consider a home battery to be more of a luxury than a necessity.
Calculations of Financial Benefit
There are several different ways to analyze the financial benefits of purchasing a residential solar system, each taking a different perspective on the cost/benefit analysis.
Installers will be able to estimate sunlight availability from satellite photos of your roof and surrounding landscape, combined with the average hours of sunshine provided by local weather data. Aside from those assumed constants, the biggest variables are then the cost of the project, your current electricity rate, and your recent history of electricity usage. The average installation cost in the U.S. right now, in cost per kilowatt-hour, is around $3/watt (my own cost wound up being closer to $2.70/watt).
Fig 1. I tabulated our energy usage for the recent past and gave this information to the installer to determine an appropriate system size and calculate potential energy production and financial impact. (Our usage trended up after having a baby and then again after getting an electric car.)
Residential Solar Payback Period
Payback period is the simplest and easiest to understand. How long will it take for you to save enough money that the after-rebate cost of the system is fully reimbursed? My project was estimated to pay back in 7.3 years. To increase the accuracy of this figure, it is important to remember that residential electricity usage rates increase over time. If you think of yourself as “pre-purchasing” electricity for the duration of your payback period at the time you buy the system, the effect is that the electricity you generate later in the payback period is worth more, thus accelerating time to payback as it approaches $0.
Internal Rate of Return (IRR)
IRR is another popular way to estimate the productivity of an investment and compare it to alternatives by annualizing the effective compounded return on invested capital. My project’s IRR was calculated to be 15.1%. For comparison, the 10-year return on Vanguard’s Total Stock Market (VTSAX) and Total Bond Market (VBTLX) funds are, as of this writing, 16.05% and 3.69%. To be even more accurate, it is important to remember to take into account the effect of taxes when comparing these investments. Dividends and realized gains in a brokerage account will be subject to taxation, however the solar “dividend” a PV project produces never involves the government and therefore is never taxed, making it compare even more favorably.
Reducing Fixed Expenses (Electricity Bill)
Reducing Fixed Expenses is a goal for many who may want to increase their savings rate, reduce their workload, or aim towards early retirement. Eliminating or greatly reducing your electricity bill would obviously free up cash flow immediately, but it would also impact how much money would need to be saved in order to accumulate a sum that would allow for financial independence.
Home Equity Appreciation
is probably the most nebulous financial benefit to estimate. Exactly how much a buyer is willing to value a PV system depends on your local market and the demonstrable cost savings of your system. There are only a few small reports on the subject, but the average conclusion is that installing solar increases property valuation, in some cases approaching the cost of the system. If true, this renders the concept of Payback Period somewhat irrelevant, as there is not really a sunk cost that needs to be overcome on the way to a system’s profitability.
Fig 2. Our completed rooftop system.
Solar Panel Longevity
A typical manufacturer’s warranties for PV modules guarantees power output to be at least 80% of the original rating at 20 years. In reality, many panels haven’t existed long enough to be evaluated, and the degradation of newer, better designed panels is anticipated to be far more gradual. It is reassuring that many reports of tests from panels deployed 20-30 years ago seem to indicate very minimal loss of power output.
Fig 3. The system can be continuously monitored using an app.
Conclusion
While there are many financial lessons of much higher priority to be learned on a site like WCI, high-income professionals who have accomplished their early goals and are on the right path to financial independence should consider residential solar power installation as part of their personal financial strategy. Depending upon individual circumstances, it may in fact be quite lucrative over a medium-term time frame.
To anyone who might be interested, I would recommend visiting the website, Energy Sage. In addition to hosting many informative articles that will answer most questions you might have, the site also allows you to solicit competitive bids from local solar installers to ensure you get the best possible price. I used it, and to my advantage, I found a very competitive marketplace for solar installation in my area.
Also be aware that the process of bidding, contracting, permitting, installing, and inspecting a system can take several months, which might affect the year in which a tax rebate could be claimed. My own system has not been running for very long, so, unfortunately, I can’t tell you too much about its impact on my own finances, but the projections are very encouraging so it will be interesting to see how this impacts my family and our financial goals over the years.
Do you have residential solar? Do you use net metering? What impact has solar had on your finances? Would you recommend it to others? Comment below!
We recently had a 7 kW Sunpower solar panel system (X21; 350W) installed with a local-based CA company based on referral. We also had them install the Tesla Powerwall2 battery (they still had tax credits available for the battery unlike Tesla which had none). I had talked with this company in mid March and had the solar panels installed in April and permission to operate by first week of May. We had the powerwall2 installed the following month in June. Our solar panels are guaranteed efficient 92% up to 25 yrs. We went with the all black panels (no white grid lines) for aesthetic reasons although we could have gone with the slightly more efficient (22% or X22) by buying the black panels with white grid lines. We bought a bigger system than our past consumption needs because we knew we were planning to buy an all electric vehicle that would consume more energy than our current hybrid electric car. We also bought the powerwall2 battery for back up energy and also because we are forced into Net metering in Southern California with SCE electric company. So we use the PW2 during the Peak hours where SCE charges $0.52/kWh from 4-9 pm and the solar company recommended South facing panels to maximize the “peak hour” production that SCE designates. We love the Tesla app where you can see how energy is being produced by our solar panels and can customize when we want to use power from the battery and how much of the battery should be consumed before we select using power from the grid. I haven’t gone through the exact IRR but I feel like it would roughly be 15 yrs (very rough estimate). We are trying to be “green” and so we chose to purchase the solar panel and battery system. Last month, we received $100 credit from SCE. We will see what our lowest production is during Calif winter months. We paid cash for the system and battery. Expecting total $11K tax credit, $1K rebate from Sunpower and SGIP rebate.
The only negative process I encountered during the process was the sexist-like question I got from Sunrun when I was asking them for quotes. They asked me if I wanted to talk about the quote with my husband after I talked with the rep. My husband had looked into solar panels a year ago and he said he rarely got asked if he would like to ask his wife before purchasing. But in defense of the rep, I had mentioned that my husband had talked with a Sunrun representative a year ago and was not impressed with the company (they were late for appts) so maybe he mentioned my husband because I mentioned him. But I did tell the rep early in the conversation that I was taking over our solar panel project and was calling companies for quotes and giving Sunrun another chance because our neighbor had a good experience. Later, Sunrun (through Costco) gave me a quote on REI (? exact name) solar panels but they didn’t mention that. I told them I wanted their Panasonic panels (I did my research and REI panels are much cheaper than Panasonic and lower quality/efficiency). Tesla solar was even worse experience. Talked with a Tesla rep and didn’t hear from them for a month (right around the time of layoffs) and I had to call and got a different person. We had a consult visit by someone from Tesla installation and they used a drone to check out our roof, etc. Then, a month later the original rep emailed me a solar panel system plan that included solar panels (6kW) on the east, west and south facing roof and asked me to sign the contract without even talking about my goals-7kW system. I politely declined their contract.
I loved the EnergySage website. Recommendations if thinking of purchasing solar panels: use more electricity the year before you plan to get quotes from companies because they have a limit of how big the system can be based on your PAST annual usage. We had to push to get a bigger system because we knew we were going to use more energy next year when we get an all-electric vehicle.
Thanks for your recap Gina. I’m in southern California and looking to install a similar system with Tesla power wall. Would you mind sharing your installer since you had a good experience?
We went with Solar Forward (Santa Monica office). I contacted Andrew Hoesly directly 707-239-1220 or [email protected]. They use only in-house labor (no contractors). Andrew is very knowledgeable. He helped me understand Time of Use plans for SCE once u go solar.
FYI I have west facing panels (not south for optimal late sun) I also had them give me a lien release after they completed each job (solar panels and powerwall). The PW2 comes out to be more expensive with solar forward then Tesla because Tesla dropped their price but I knew solar forward could install PW2 much faster than Tesla and I Am not sure if u need to buy battery at time of solar system purchase to get rebate. U get SGIP rebate and FITC 30%. Tesla quoted me 3-6 months for install of system. I really like the Tesla app for looking at how my system is producing and whether it is sending back to grid or my PW2 and my home. Can customize when u want PW2 to come into play. I don’t use sunpower online site.
Roof warranty for 15 years. PW2-10 yrs. Panels-25 yrs. I like sunpower panel system because they use microinverter system instead of the string inverter system (like Christmas tree lights). With microinverters, if one goes down (which it will at some point per Andrew), the company will replace it but the system is still functional. If string inverter system, if something goes wrong, the whole system is down until company can fix it.
Andrew said a lot of people getting 2 PW2. But it is a pure luxury and no cost benefit. I can’t afford that luxury now :)-
I added system to my home insurance too.
Timeline: sign contract, site visit, and install=4 wks.
Cheaper to pay cash. Credit card: 3% added cost (they pass along credit card fee onto buyer)
Good article. In NY we also increasingly have “community solar” for people who cannot or don’t want to install panels on their roof. A third party builds solar panels on a farm, the electricity we use is “metered” as if it came from the panels directly to our house (it goes into grid) and the third party investors get the tax credits and subscription fees. If we move, we can opt out without having to sell leased rooftop solar panels. We pay 10% below market rate on our electricity delivery rate.
Jim…could you foresee a post on investing in community solar or other large alternative energy projects like it?
I was considering going solar several years ago. I forgot the kWh system that was recommended but the whole project came in at around $90k. I haven’t priced it recently so it may be far cheaper now.
Even with the 30% tax credit for installation at the time, the numbers did not make sense for me. I live in an area where electricity is fairly cheap (9 cents/kWh, 24/7). So the payback period was a lot longer than if I lived in an expensive electricity area (or one that has different peak rates).
Also where I live I probably could not take as much advantage of the sun as someone who is in Texas or Hawaii, I forgot where I went to look but there is an interactive map that tells you estimated sun exposure for your address that helps determine how effective your panels will be.
Hopefully prices will continue to come down and improvements in solar panels will boost power even more. One of the issues was looks as well for me. Tesla seemed to have solved that problem with their solar tiles that look like roofs, but I am sure it is a very expensive upgrade over regular panels.
@Xrayvsn: If you got an estimate more than 2 years ago, I’d recommend getting another one. At $90k, your system was likely 15-25kW ($4-$6/kW), pretty large for a residential system. Nowadays you should be able to get a system of this size installed for under $3.00/watt, maybe even $2.50/watt depending on location and added costs (that size system will potentially need a main distribution panel upgrade).
Of course with $.09/kWh energy, you likely won’t see anything close to 15% IRR, but if your cost is low enough you might see 6-10% on a very low risk investment (assuming you don’t move).
@Aurelien Windenberger. Thanks for the advice. Yeah, I think I was looking at going solar in 2015, right around the time when I bought an electric vehicle (Tesla Model S). I think that is why the system was a little more robust to handle charging the car as well as handling household things.
With my 9 cents/kWh I pay about $300-450/mo (summer/winter) which seems high but does take into account the vehicle charging (before I went electric, my commute caused me to spend probably $50+/wk in gas alone).
Definitely get a new bid. I love our solar system and was way less expensive than anticipated.
I paid 24.7K tax free (WA state incentive program at the time) in 2017 for a 11.9 kW system. Prices have gone up due to inflation and tariffs and my state incentives aren’t as good anymore so when I recently added another 7.3 kW system, I paid almost the same at 24.6K (22.2K pre-tax).
I am very happy with my system. My initial system breakeven was 5-6 years give the tax incentives, federal tax credit and energy savings. The newer system breakeven calculation was longer, (I think about 10-12 years), but ultimately I didn’t go solar for just financial reasons. We have two electric cars and a large house with a/c which is why we have such a large system. We way over produce in the summer and get net metering credits which are then used in the winter. Haven’t paid anything but taxes/fees (~$16 per month) on my electricity bill since we added the second system.
Not sure I know enough to write it, but the guest post policy is here:
https://www.whitecoatinvestor.com/contact/guest-post-policy/
Nice article regarding your process to evaluate an investment in your own residential solar system. As a solar system designer, here are some additional things to consider for any of you thinking about solar:
1. The costs and returns on a solar investment are very location and utility dependent. Obviously the more sun an area has, the better, but an expensive utility cost of energy will usually make a bigger difference than sun exposure.
2. Battery systems can make a lot of sense if you are in a state with the right incentives. In California for example, I believe that most residential installations will see a good return by adding a battery. Here in Iowa on the other hand, a battery only makes sense if you want the backup it provides in an outage situation.
3. If you are even slightly considering buying an electric car over the next few years and plan to be living in your same home, I would suggest having the solar installer take it into consideration when designing the solar interconnection into your main distribution panel. Adding any additional components required to later add a charger can easily be bundled into the cost of the solar, so you’ll benefit from taking the tax credit on the cost, and you won’t need to have expensive rework (such as up-sizing the panel) done later when you want to add the charger.
4. Since most of you reading this are doctors making a high income or about to make a high income, you’ll definitely want to purchase the system yourself and take advantage of the tax credit. Any unused credit can roll over up to 20 years, but with your income levels, you’ll likely be using it up within 2-3.
If you’re in Iowa or Northeast Missouri, I’d love to give you a proposal for solar. Around here it definitely doesn’t always pencil out, but the IRR can be better than 10% if you are serviced by certain utilities.
Any recommendation re NV tax incentives, we have sun pretty much year round
As mentioned by AW above, the financial impact of solar is very state/location dependent.
I have had solar…also in Texas, for 7 years now. I would love to know where the 15% IRR number came from. That seems VERY inflated to me living anywhere in Texas. In California, where the utility rates are outrageous maybe I could believe that…but in Texas I have a hard time believing it.
I did the calculations prior to getting my system, and despite multiple tax credits and friends and family discounting, my return has been about 5-6%/year on an 11 kW system. The financial “benefit” is actually quite small. Despite this I have thought about adding to the system this year prior to the Federal Tax credit being weaned. Even with lower solar costs today compared to 7 years ago, I would be doing it not for the financial return as this is fairly small, but more for the clean energy aspect. I have this option because of my financial situation, not in trying to get a return from it. In my location I would not recommend adding solar to improve your financial situation. It will not.
@NapoleanDynamite: What did you pay per watt for your system 7 years ago. The OP paid $2.70/watt, and may be on a higher cost utility than you. The 15% IRR might be using somewhat inflated annual inflation assumptions, but even if they were aggressive he’s still looking at 12-13% baseline IRR.
Is the $2.70/watt number you all are using before or after the Tax Credits? Prior to tax credits the cost was around $4.00/watt and after credits it would have been about $2.30/watt.
Energy costs in my area are “cheap” but tiered. And the net metering from solar in our area is not tiered. Also, despite the summer sun in Texas, the heat actually decreases the energy output from the solar in the summer which was completely counter-intuitive to me. This decrease in solar output during the Texas summers when energy consumption is the highest due to air conditioning and the weird tiered pricing structure makes the return far less than what was initially discussed by the solar companies. These are all things I learned after the fact. I’m happy with it because the financial return was not vastly important to me. But trying to sell solar as a great financial return on investment may not be entirely truthful depending on the situation/location.
$2.70/watt was before the tax credit.
I have not put in solar for two reasons, somethings not mentioned in the article. That is fear of roof leaks, and subsequent fixing of blame for the purpose of who caused them. I understand the solar companies say they will fix it if it is their fault, but 20 years after installation of the solar it will be a dogfight between my lifetime warranty roof and the solar company (assuming still around) as to who caused what and who pays for what. #2 fear is fires caused by electrical. The #4 cause of home fires in the USA is electrical. I actually had a house burn down once so to me this is a real fear. Having a bunch of solar people messing with my house electrical system is worrisome. IF i install solar it will be inspected by the most anal electrician i can find. Other than those two things, i would install it.
I have the same concern about damage caused to the roof, thank you for addressing. Also, I don’t have a lifetime roof, and so the asphalt shingles definitely have a finite lifespan and will need to be replaced. How do you replace the roof when there are solar panels? Finally, I live in the NW where moss on the roof is a constant battle and needs to be addressed continually. Will moss grow under the panels and thus be inaccessible to treatment?
4 years after installation of my solar I had a hail storm come through and got a leaky roof (the north side of the roof not the solar side). Ironically the solar panels were perfectly fine without damage. But when the roofers came through they recommended the whole roof be replaced (asphalt shingles). My insurance company agreed. Because I had the solar added to the homeowners insurance after installation, the entire roof replacement was covered. But it necessitated removal of the solar panels by a certified installer and then re-installation after the roof was replaced. It was about 5K additional cost to the insurance company. So, if you get solar added contact your homeowners insurance to increase your coverage.
Hope that helps.
It’s definitely an issue to think about. I won’t install another one on a roof that already exists. Planning into the build, fine, but I’ve had to many issues with it after the install. Thankfully, in AZ rain is sporadic, but when it comes down, I expect to replace some roof tiles and pull the fans out to dry things again. No one can find the issue now, but it never happened before the install.
In my home state of New Jersey, the financials are even more compelling.
The utilities are required to have a certain percentage of their electricity generated from renewable sources. They accomplish this by buying renewable electricity certificates (SRECs) from people who produce renewable electricity. Each certificate represents 1000 kWh, and sells on the open market for $200 – $215. The PV system on my roof cost $28,000 before tax incentives, $19,600 after, and generates 9 certificates per year. So the SRECs add around 9% per year to the ROI.
Additionally, my utility offers Time of Use pricing (TOU), which can be combined with net metering. The bulk of electricity generated by my PV system is generated during peak rates. My residual consumption from the utility is mostly off peak, which is inexpensive.
Finally, I was able to finance the system with a 10 year loan at 4%. So I’m able to get a roughly 15% ROI on money I borrowed at 4%.
So yes, environmental benefits notwithstanding, it’s very attractive financially.
TOU peak hours will start changing soon as more solar comes online and there is a glut of power in the afternoon. Already happening in CA.
I have solar system for about 1.5 years. Financial part was not a major goal for the installation. Actually the numbers they showed were way overestimated. For instance, projected inflation was 5-7%. Well, for the last 4 years in Idaho based on my bills it was 0%. So, it is really depends which state the system installed: cost of electricity and inflation.
Last, don’t forget about investment returns. If you able to pay upfront 20+K you can invest same money in market for 25 years (life of solar system) and the return can be actually bigger.
That was/is the same for me. Initially I thought it would be a 7 year payoff, but then I started noticing how much the solar program estimates I pay for electricity. In the summer it can range from 7 cents to 28 cents per Kwh. They estimated it at 28 cents per Kwh all year. In the winter the max rate is 11 cents per Kwh, low is 6 cents. Basically it took the payback period from 7 years, to over 20. This doesn’t include time value of money etc.
I’m sure it’s better and more efficient now, but it’s rare to see a system that has good returns on the money side of the equation. Peace of mind, battery backup in emergency, feel good helping the environment, etc. are all things that solar does achieve though.
We are installing solar panels next month. However, the solar installation company stated that the deteriorated condition of our roof (25-year-old cedar shake) was an unacceptable base/ support for the solar panels. Thus, the roof would need replacement in order to install solar. That brings up the controversial question of whether the 30% solar tax credit can apply to replacement of the roof.
IRS form 5695 instructions state the following:
“Qualified solar electric property costs. Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home doesn’t have to be your main home.”
I consulted my CPA, and spoke with another CPA, and given that the solar installer is going to replace the roof with metal and install solar simultaneously, we may have justification for claiming 30% credit for that portion of the roof. Any thoughts?
I have heard of people claiming the 30% credit for the roof for this reason. However, I am not a tax professional. Would be interested to hear other’s experience as we just had the same scenario (recommended to replace roof before installing solar, got metal roof, then solar)
I’m not a CPA, but 2 of our solar systems are on either metal supports in the yard, or part of a large metal awning made to support the panels. The entire structure qualified for the rebate. I know a few people that installed them on their business to have covered parking, and the entire structure was included in the rebate. But, if you need a new roof, and solar is requiring it, I don’t see the harm in using the credit and if they audit, I’d feel comfortable defending it. If they say no, then you are in no worse situation than having to replace the roof anyways.
We did replace our roof shingles prior to installation and rolled it into the tax credit. Most solar companies we talked to were agreeable but some of them did say to consult our accountant
We built a home 5 years ago and looked into installing solar. As I recall I think it would have cost around $60K. We passed since it just didn’t make financial sense. I recently read an article about an electric company curtailing paying back owners for electricity generated. I fear that those who invest in this are at the whims of the electric company down the road and that some of the financial assumptions may not hold true as time goes on.
I am surprised to this article. I am in CA in a sunny area, and have done a lot of research on this because we do want to put in solar power.
Here, in my area, at this point in time, it only makes sense to buy a solar system with batteries outright. Then you have to factor in the cost of replacing the batteries. We have calculated that we will come out ahead, but it won’t be by a huge factor. Mostly we have known many people whose elderly parents bought in to the solar panel sales pitch, and when they passed away it has been very difficult to sell their homes. Either the solar lease would have to be taken on by the new buyer, or the purchase or lease had to be paid off in full before the house could be sold – not like a typical loan on a house. We purposely avoided purchasing a home with leased solar – and we are not alone. Those houses take much longer to sell. These solar companies that are working here in CA are very predatory and definitely take advantage of elderly buyers. I urge your readers who are considering solar to go through the contracts and be very sure they understand what they are committing to, and to watch out for your elderly parents as well.
I live in Utah and have had a 6750 Watt system since October 2013. It was about $24K before state and federal incentives and about $14k afterwards. Our power rates are pretty reasonable in Utah unless you use a lot. 8.5 cents/kWh for the first 400 kWh, then 11.5c for the next 600 then 14.5c above 1000 kWh. In the summer, I’d hit around 2400 kWh/month, which was getting unpleasant.
My estimated payback, based on 2 years of historical data at the time was about 8.5 years if power rates didn’t change. The 6750W system was estimated to replace about 83-85% of my total usage.
Last year, I added another 3720W on the east roof, since I had no more south roof. It’s not quite as efficient on the east, but I’m now replacing over 100% of my usage. That’s okay, since I’ll get an electric car sooner than later. Also, our local utility changed the net metering agreement and made it somewhat less favorable. But existing systems were grandfathered in on the older, better contract. If the utility ever does do away with net metering, then I’ll consider batteries. But for now, batteries aren’t worth it unless I wanted to go full survivalist off-the-grid, which I don’t.
My maintenance costs have been zero. As in, not one thin dime. Most months, my power bill is $8.99, which is the connection fee.
Don’t forget about the “a penny saved is a penny earned” side of the energy equation. Replacing the halogen lights with LEDs, replacing the 30 year old fridge/freezer with a modern one, and improving the insulation on your house are likely to be a better roi than solar….but solar is awesome too.
I can’t walk into Home Depot or out of Costco without being accosted by someone trying to sell solar panels. It actually has the opposite of intended effect, giving it a very scammy feel. My instinct, right or not, is to run the other way!
Tell them you already have solar and they’ll leave you alone. I agree that the door to door guys and similar solicitors are questionable at best.
We had solar panels installed on our two largest clinic buildings in 2013. 200 panels each building. We got a pretty good rebate from the state on that deal. At the time, the installer also took contracts for any clinic employee who wanted to get solar. It was a separate contract per person, but we all got to take advantage of bulk pricing for panels and inverters. As I recall, the installer bought around 650 panels. About 8-10 physicians in the group got them installed.
Go with a solar vendor who has lots of commercial experience. Some of these fly by night solar people are sketchy.
Good informative article.
We installed a 13.4 kW system in Dec 2015. We use a lot of electricity because we’re on a deep water well and the 6.5 HP pump has to run about 30% to 40% of the time in the summer. Our electric bills were pretty expensive. We are also on propane because we can’t get NG in our area. We installed a heat pump at the same time to reduce our propane expense. It’s been a good decision for us because it immediately reduced our net annual payment for electric/gas utilities by about 30% – utilities pmt vs. loan to pay off the solar/heat pump.
The biggest concern that I would advise potential buyers is that even if you have a $1 for $1 net metering arrangement, your local utility/government may change the net metering terms of your agreement https://gosolargroup.com/solar-panels-reno-nv/nv-energy-and-net-metering/
I live in Utah and our net metering terms recently went through a major overhaul for new buyers as well as existing owners. Fortunately, most existing owners will be able to keep the original terms of their net metering credit up through 2035. At that point instead of dollar for dollar it will be sell-your-excess at wholesale to the utility company and buy back at retail so it will be much less equitable.
Because of the possibility of significant changes to net metering rulings it’s not a slam dunk, no-risk financial decision even if you live in a sunny area with good net metering and can take advantage of tax credits.
Hi. NJ here. Love solar. Already sold some SRECs (described above by another poster). Question though. My understanding is that the battery systems count towards the tax credit but the article seems to suggest that the Tesla PW2 would not. Anyone gotten the credit yet federally for the power wall?
I installed two Tesla PW with my install earlier this year and really like the system. I was told by my installer that these do qualify as a tax credit when combined with a solar system, but it won’t be till next April when I try to claim it. Hopefully this is in fact the case.
We pay 9 cents per kWh for electricity, and an analysis of solar panels for our home by our electric company indicated that it would take approximately 20 years to break-even. For a very illiquid investment that we might lose on significantly if/when we sell our home, I’m not at all interested.
I wrote a very detailed review of my experience with solar with contractor and hopefully it will be useful for you.
https://www.yelp.com/biz/energy-service-partners-torrance?hrid=nfmBWROxVLwt41CTbKzPvg
Interestingly, the linked Bloomberg article about Sunrun and their complicated rental contracts struck me as very similar to the complicated mess that is whole life insurance. Complicated, expensive, 20 year deals, and quite possibly coming out way behind.
I have had solar panels since 2015 on our then 9 year old house in Connecticut. Around 10kw system producing about 17,000 kWh per year. Covered 100 percent of our home electricity use plus around 20,000 miles for 2 electric vehicles. CT has state rebates too. Net price was around $40,000. Bought a premium panel called Sunpower 335, Environment was our main reason. Payback period will be around 8 years. Modest investment return at best. Moved into the house in 2011 with plans to live here long term. Could not imagine buying solar otherwise. Seems like most people locally go for the lease where there is no upfront cost and the fixed monthly electric rate is 15-25 percent less than market rate so people save some money immediately.
I just got quotes for approx 8kW system in southern CA area from Tesla (~$1.95/watt after tax credit), and Clayco (~$1.92/watt after tax credit).
Timely article for me, because I have one installer coming on Friday (Southern CA) to get a quote for Solar and a Powerwall 2. I was talking to an SCE linesman who said that with the fires lately and the PGE bankruptcy, the electric companies may be way more likely to cut power in bad weather (and he said they have to physically patrol every power line before turning the power back on in each area which can take days for a large outage), so I think the convenience aspect of having energy storage and being able to continue charging the battery and using the solar power during blackouts will be worth the extra costs over the next 10 years.
One of the quotes so far was $2.70/watt for the solar portion (and microinverters) but they only install the LG chem battery which is about 33% less power, with less 10 year remaining life guarantee (Powerwall was 70% for unlimited cycles while LG was only 60%) and worse usable temperature range.
I purchased a 23 panel system from a local Southern California contractor (NexGen Construction) in 2015 and consider it to be one of the best financial decisions I’ve ever made. With annual usage at 14,000kwh my bill from SCE topped $3700/yr. The annual savings vary a bit with a) my usage, b) SCE’s rate structure, and c) the weather. My total annual bill last year was $8 so I’m seeing a near 100% savings from the system. It looks like I’ll recoup my costs at the 6 yr mark (would have been 5 but I financed the purchase). With SCE’s current rate structure and net metering, I clearly don’t need a battery wall yet. My greatest risk is changes to SCE’s rate structure. With the rate plan I’m on, if they change the peak pricing period from currently 2pm – 8pm to the 4pm – 8pm that PG&E imposed in Northern California most of my financial benefits will disappear overnight.
I have scanned the bulk of the comments following the base article and offer the following:
History: I installed a 25 panel, 6.38kW panel array in 4Q2013 in south Louisiana in a gated subdivision for $25K taking advantage of the 50% state and 30% Federal tax credit in effect at that time. My out of pocket cost was $5k. The system was advertised (by the installer) to produce 770 kWh/mo estimated to be worth $78/mo w/ a project ROI est of 18%. A battery bank was not included. The system was set up for netmetering w/ my local utility.
Location: The proposed panel layout was analyzed to meet a certain minimum sun exposure (south facing roof in my case taking into account adjacent trees) in order to qualify for the Fed/State tax rebates. I would caution that a proposed array location visible from the front street/ neighbor facing view are highly likely to draw scrutiny and require possible approval from the subdiv HOA if in force. (Historically, solar panels were not mentioned in the initial terms and conditions in my covenants but now may be typically addressed in newer subdivisions. ) My array is not visible from the front of my house and it is not a developed area behind my house. Part of my array is visible from my neighbor’s back yard.
Initial installation: The house was built in ’96 and had 30 yr wty arch asphalt shingles. (Good luck w/ getting 30 yrs in south LA.) At age 17 they were already losing grit in significant quantities. I was not comfortable w/ installing this array over that age of shingles, hence had the roof replaced. The entire section of the array roof had an extra ($ to my account) sealant overlay installed (typically called ice and water shield/membrane) to mitigate/seal against the myriad new leak paths of the panel roof brackets lag screwed to the rafters. The panel co installed the brackets and the roofer then installed the balance of the shingles and associated flashing. The brackets were 316 stainless steel as were the lag screws and the system was rated for 140 mph wind (allegedly). To date we have not had more than a Cat 1 storm come through the area. (full disclosure, I am a retired Shell Oil Co engineer).
Operating/Maintenance: Panel arrays are not maintenance free. I have to water/detergent wash my array 2-3 times in the spring to remove accumulated pollen and dust using a extension soft brush/window mop and 1-2 times in the winter months. Failure to keep ahead of the pollen (mostly pine tree) resulted in multiple cleanings this year using a pressure washer w/ a 40 deg tip and hot/warm water coupled w/ a detergent. I just bought a extension brush that can be hooked up to a water hose to facilitate this cleaning process plus the detergent the installer co uses. More OpEx, My array uses individual microinverters (Enphase M215 w/ 25 yr warranties). To date I have had to replace 8 failed inverters (Enphase covered the replacement units under wty, the installer co will do two replacements for a $150 call out charge). The first failures started happening at yr 4 +/-. Very disappointing in terms of performance. Allegedly the newer Enphase units are more reliable. I have since found out from the installer co that squirrels, if they have proximity to the roof in question (adjacent trees which we have) have a proclivity to set up nests under the panels and have been known to chew thru the insulation of the inverter/pwr cabling. To date I have had no nests under mine but some skinned wires. Installed a rodent barrier (essentially a mesh fence sealing the underside of the array to the roof). +$1250 OpEx.
Economic performance: To date, I have never realized the monthly unit power generated (770 kWh) estimated by the installer co. I developed a simple xls to evaluate eco performance. It uses the kWh published monthly by Enphase for my specific array times the unit cost from my pwr co monthly bill (as part of net metering it also shows a small monthly credit (we have always consumed more pwr than the system generated)). At full year 5.5, I am still underwater on my $5k CapEx contribution. If I penalize the project w/ my wty – service costs, I have actually gone backward and only have recovered about $2500 to date.
Did not consider a battery storage system. In 2013, cost of it would not have been eligible to be included as part of the tax rebate program. That program was capped at max Capex of $25k. Storage of and safe maintenance of a lead acid battery array was a non-starter from an OpEx perspective as well.
I don’t get it. Why do you need to clean panels? in Louisiana?? Rain takes care of any pollen/dust. I don’t see rain for 3 months , panels are quiet dusty but productivity drops for 5-10% (outside temperature is more important).
There are many stories about faulty microinverters so I went with single central inverter in garage. Time will tell if it is a good idea. I thought single point of failure is safer than 25 points of microinverters.