By Dr. Rikki Racela, WCI ColumnistYes, I did it, I fell victim to the sales pitch of those door-to-door solar panel salespeople. You may have heard these pitches for solar panels and the financial “benefits” of having such a system installed on your roof. But I’m not sure I should call myself a victim since I went into this decision with a healthy dose of financial skepticism and knowing that I was being “sold” a system. I knew that these salespeople oversell the financial benefits of a solar system because, well, they are salespeople. You don’t make money off purchasing a solar panel system; they do. Rather, there are incentives that offset the cost of purchasing a system.
Let's go over these incentives that were sold to me as a New Jersey homeowner, how solar salespeople oversell the benefits, and the reality of having a solar panel system.
The Solar Panel Sales Pitch
One day, I got a call out of the blue from a telemarketer saying they work with my power company in installing solar panels. I agreed to have them come by my house to go over what was involved in purchasing a solar system. A week later, two salesmen from a solar panel company came over at 7pm (my wife and I are super busy and could only meet late at night). About five hours later (no joke, five hours!) we decided to purchase a system from them. To the salesmen’s credit, they explained everything involved with the process of financing and installing a solar system, but the fact they stayed that long is a reflection of the high commission these guys got for making a sale.
The entire system for my size house would be about $95,000. However, we were told these costs would be offset by:
- A federal tax CREDIT of 1/3 of the cost of the system
- The solar incentive program in New Jersey
- Power that is generated by the system
- The increase in value of the home
- A new roof!
These incentives only manifest when you actually purchase your solar system. Leasing your system or using a “power purchase agreement” does not qualify you for these incentives. A solar lease, similar to a car lease, means you pay a fixed amount to the solar company to use the solar panels. There is no upfront cost to you, but any energy generation benefit is offset by the monthly payment to lease the system. A power purchase agreement is similar to leasing the solar system, but instead of a fixed payment, you purchase the energy that is generated by the system (as the name implies). Again, there's no upfront cost to you for installation, but now you buy the power made by the panels, which hopefully is at a cheaper rate than when you buy from your power company.
My wife and I purchased our solar system outright, but we didn’t have $95,000 lying around. We were offered contractor financing, where the solar power company uses banks it works with to give a loan for the solar system. Because the loan is backed by an asset (the solar panels), the loan terms are usually favorable if approved. Since these loans are not pre-qualified, the salesmen had to do the approval on the spot in our home.
We actually were not approved with the first lender despite my wife and I having credit scores over 800. I suspect a recent HELOC approval and opening new credit cards to hack cashback rewards might have had something to do with the rejection. We were then approved by a second lender for the near $95,000 amount with a fixed interest rate of 3% (pretty sweet given the super high interest rates at the time). The loan was then sold to a different bank. It is a 25-year term, so this loan is just as long as a 30-year mortgage. Despite the sweet interest rate, we went into debt to buy this system. But if it generated significant income like real estate, then fine, this loan would make prudent financial sense.
Unfortunately, we will go over why the financial incentives do not overcome the cost of the system in a significant way.
The Federal Tax Credit
Being a high-income family in the top federal tax bracket, the federal tax credit for 30% of the cost of the system was pretty sweet. That was a significant chunk of change of about $30,000 saved. You could almost look at our loan rate being cut by about one-third—more like borrowing $95,000 at 2.1% or borrowing around $65,000 at 3%. Either way, this was a significant incentive for us. However, the other financial incentives are not as sweet.
The New Jersey Solar Incentive Program
Formally named the Successor Solar Incentive (SuSI) program, the New Jersey solar program gives solar panel owners money for generating power from their solar systems. Under SuSI, there is a subprogram for residential homeowners called the Administratively Determined Incentive where 1 MWh (megawatt-hour) of electricity generated by a solar system is worth $85. As I write this, I have had my system for about eight months, and so far, I have generated 7.6 MWh of electricity. It seems that in an average month, I’m going to be credited $85. Though the salesmen pitched this benefit in their presentation, it's not much of a benefit at all.
Power Generated Offsetting the Electric Bill
If you’ve ever looked at your electric bill before, it can be super confusing. Here is mine:
Yes, it looks stupidly complicated, but if you just look at the highlighted numbers, I can estimate that I used about 600 KWh (kilowatt-hour) costing about $130, so that’s about 4.6 KWh per dollar. If my system on average produces 1,000 KWh a month, that’s around $220 per month off my electric bill. It's not exactly chump change, but when it comes to purchasing a $95,000 system, this is a very tiny incentive.
Home Value Increase
According to Zillow, solar panels can increase the value of a home by about 4%. I bought my house for $1.2 million; 4% of that would be $48,000. Now we’re getting somewhere! However, this is just an estimate, and that money is only realized if we were ever to sell the home. We aren’t planning on doing that anytime soon.
A New Roof!
Since it would be ridiculous to put solar panels on a 40-year-old roof that could start leaking and need replacement at any time, solar companies will say, “Hey, you get a ‘free' new roof with your solar installation.” This roof replacement is built into the cost of solar panel installation, but it does not change the fact that if you are due for a new roof anyway, this part of the solar system installation was technically a necessary repair. It is difficult to determine the cost of a new roof on your own, but using an online estimator for my size roof would have cost $30,000. This is similar to the cost the salesmen quoted for me that we were getting for “free.”
Since my asphalt shingle roof was already approaching 20 years old, this roof replacement was a nice perk that was likely going to be necessary in the near future anyway.
Summary of Benefits
So, the salesmen pitched the solar panels as a great deal because the system would pay for itself, given all of the above. The federal tax credit ($30,000), the increase in the value of our home ($48,000), and the new roof ($30,000) all make up the cost of the system (and then some). That’s $108,000 of value with the panels costing $95,000. That's not even including the New Jersey solar incentive program and the energy savings value. As the salesmen mentioned, there’s no way you can say no to this deal!
But Rik, didn’t the headline of this post say solar panels were a bad financial decision? Yes! And what follows is why.
More information here:
Principles to Consider When Doing Home Renovations
You’re Going into Debt
We had to borrow money to install this system. Although the interest rate was awesome, that’s more debt that we have to pay down. That’s cash flow out the door that we must budget for now. You might be asking, “Doesn’t the money from the New Jersey solar incentive and the money saved on your monthly energy bill offset the loan payment?” Yes it does, but it doesn’t cover the full monthly payment. The state incentive and energy production benefits total about $300 a month, while the monthly payment is around $320 a month. That's about $20 a month out of our pocket until 25 years from now when the loan is finally paid off.
And what about that “free” new roof? I already mentioned the cost of the new roof was added onto the costs of installing a solar panel system, and that is added to the loan amount. Instead of saving money in cash for a new roof, we essentially borrowed the money to pay for a new roof. Also, homeowners insurance would cover any damage to the roof from, for example, hail, and a roof inspector can often find signs of hail damage to justify paying for replacing the roof. It’s not much of a financial benefit to take out a loan for a new roof when you could either save up and pay for a new roof in cash or make a claim of roof damage to your homeowners insurance company.
And how about the increase in the value of the home? Well, that value is not cash in your pocket, and it can't be used to help pay back the solar loan. It is locked in the house, and the only way to truly realize that extra value from the solar panels is to sell your home.
Our Solar Company Went Bankrupt
The salesmen mentioned that solar companies go bankrupt all the time, but the reason to trust their employer was that it was one of the largest solar companies in the US at the time of our purchase. And they weren’t lying. It actually was one of the 10 biggest companies in the US at the start of 2023. But it still went bankrupt; as per a national newspaper report, complaints from customers included high-pressure sales tactics and the failure to get panels installed in certain towns because of difficulty filing permits. Lawsuits are ongoing, but the bankruptcy means that the guarantee of fixing the system if anything breaks and the regular routine maintenance that was included with our purchase has disappeared.
It costs a few hundred bucks a year to clean and maintain the system, but I am hesitant to get an outside company to clean a system it didn’t install. And if this outside company damages my panels, then what?
The bankruptcy is a nightmare for people who were in the middle of their installation, but it is still somewhat of a worry for customers like me who, despite being lucky enough that the company went bankrupt after the installation was complete, now have no way of having reliable maintenance. Also, now that the company has gone bankrupt, what do you tell potential buyers of my house? What was supposed to be a selling point has now become a potential problem that buyers may not want to deal with. It’s very plausible that these solar panels, installed by a company that's now defunct, might actually detract buyers and lower the price of my house.
More information here:
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The Benefit: More Environmental, Not Financial
Yes, there is some financial benefit to purchasing solar panels, but in the end, you are paying for something where the financial benefits do not offset the cost of the system. What purchasing solar panels does is benefit the environment. That was the reason my wife and I went for the purchase in the first place. The financial incentives were just that—incentives to make the purchase of solar panels more palatable. You will not make money buying solar panels. Buying solar panels will be a step away from the goal of financial freedom.
But you will be creating a renewable source of energy. That’s less oil and gas burned, less coal polluting the environment, and less nuclear waste made. My wife and I thought about this planet, which will be the home for our children, our children’s children, and so on during our purchase. The purchase of solar panels is a step toward that goal. Despite being a financial mistake, we would do it all again (just not with the now-bankrupt company we used).
Have you ever considered buying solar panels? Have you purchased solar panels and now regret it? Were you oversold on the financial benefits of solar panels? Or did solar panels actually work out for you?
Sorry about your experience, but this is not typical. Bottomline, you overpaid for your system. I am not sure if the $30K roof cost was part of the $95K cost of the project. But if I assume that the roof was not part, you paid 12.5 per KWh. That is over 4 times what you should have paid. In 2017, I paid $4 per KWh and paind $2.85 per KWh in 2021 (2017 in MA and 2021 in DC). So even if you paid $3 per KWh, your project should have cost you about $23K.
yes that’s interesting I only compared a couple of other solar companies online before signing on the dotted line and preliminary estimates were around the same price. I didn’t actually look at the cost in terms of how much energy my system was producing. I should have talked to you before I bought!
Was the 30k roof included? If so, then you only really paid 35k for the panels (and got 30% off a new roof – which might be questionable for a solar incentive). Then you save $300/month. Doesn’t seem like a horrible financial decision.
yeah no really horrible financially, but definitely we didn’t come out ahead. really the financial “benefit” of solar panels are oversold.
Even if you did overpay by 4x, a net $20 out of pocket per month for the next 25 years is noise and hardly worth losing sleep over. That ought to be noise in the monthly budget of this blog’s average reader.
exactly, so me and wifie are happy with the decision not from a financial standpoint, but from a saving the enviornmen standpoint. It really doesn’t damage our financial position all that much despite the 90k of debt.
Agree with overpaid comment. Wild to not shop around for something that expensive.
Also you don’t need to clean your solar panels! That was a sales pitch too
man, I should have written this post before I bought. but I’m not beat up about the cleaning of the system, but what if it breaks down- sucks that their is no company that want to fix some other companies solar panels. Like finding a new surgeon to fix a botched surgery.
We put some on our house several years ago and it was primarily a financial decision. We are far from tree-huggers but are environmentally aware. The environment use case is a nice side benefit.
Costs were higher than the current market but the utility paid a significant portion. When combined with our utility (member owned Co-op) incentives and the federal tax credit, we had about 50% paid for off the bat. Ours basically offsets just a little bit more than what we use, cash a check each January for roughly $300-500.
We haven’t had any issues at this point besides our west facing panels not being on a steep enough roof to shed snow easily. Not a big deal since the west facing array doesn’t generate a whole ton in the snowy months anyway. South facing array typically sheds snow quickly, and produces effectively year round.
When people ask me about them, my suggestion(s) are: being in a net-metering state/utility is essential, and I’d probably only put the south facing ones up again.
Awesome seems like you are generating a good bit of power from your panels. Yes the financial benefit is there for you it seems pretty soon you likely much sooner than me given 50% of the system basically paid off initially.
Regarding the cost comments, I too have experienced the downside of not getting multiple quotes and agreeing same day when making a purchase for a big home improvement project (in my case replacement windows that turned out to be poorly suited to my climate). I think we forget as physicians who have multiple motivations to do the best for our patients that others do not share these incentives and frankly most are swindlers, whether they be insurance salesman, politicians, car dealers or home improvement companies. It stinks, but we are fortunate enough to be able to overcome getting cheated more easily than most (still doesn’t make it right obviously). As someone who has also been toying with the idea of getting solar, this article is timely and reminds me to be careful.
Dude I’m glad this helped! yeah definitely don’t do solar panels for the financial benefit- it’s hard to come out ahead such as Druggedzebra above, takes time and not worth the angst for most docs. makes sense though if you want to help the enviorment though.
Oof, sorry about the sales scam but you’ll probably almost break even despite the deal. I think In most states now you can get solar for well under $3/watt. It’s almost always a good financial move if one can afford it.
yes it will actually takes time to come out ahead need to have the system run a long time. you are definitely right that the more you can absorb that huge loan on the system and it doesn’t cramp your lifestyle the better, such as in my situation.
That is painful. We paid just over $2/watt in the upper Midwest back in 2021 and with an entirely South-facing system, net metering, and a time-of-use plan the system is paying itself off very quickly. I got 3 different quotes and 1 of them was more than double the other 2, which they claimed was because “micro-inverters” were present at every panel. Definitely shop around.
definitely great advice, and defiitely also have to make sure that the solar company is large enough and doing well financially so they won’t go bankrupt!
I joined a solar farm instead of putting panels on my home. No up front cost and easy to quit if you join with the right company. I also keep my solar allocation if I sell my home and stay in state. It doesn’t make any difference if you generate the electricity on your roof or 200 miles away. No up front cost, no messing with my roof, no maintenance, saves 10% off my monthly electricity bill comparatively, easy to quit, nearly all of my electricity usage is clean solar because you get as big an allocation as you need- you’re not limited by the size of your roof. Having my own panels didn’t make sense to me, financially or otherwise.
cool! I had not heard of that option!
In 2015 I Installed 40 panels on my house in New York State (near Syracuse); After a generous 33% federal and 25 % state incentive I paid $27,000 for a 10.2 KW system, with net metering into the electrical grid. It was estimated to cover 85% of my electrical costs, and in 11th year into the install, it has done everything I hoped for. Install including a couple trees in the way of the array and replacement of the roof shingles prior to install. It was about a 7 year payoff, and I figure I essentially have free electricity into retirement for as long as we live in the house; negligible decline of output, and no problems with this sustainable investment. Would do it again in a second! Snow on panels in middle of winter is irrelevant as the greatest draw is in the 8 “warmer” months. Have never needed to clean panels…
that’s freaking awesome that you started coming out at 7 years! It is cases like yours where you did everything right that these companies harp on when selling a system.
Would also be nice to see a series of income/expenses by date to do an IRR calculation. Could always make assumptions to future cash flows to see what IRR would be after 25 years.
true . . . but as I write this I have to leave for my MMA class and then go to work after, and then hang out with my wife and kids it’s pizza night tonight.
This is the main reason me and wifie should maybe have not bought this system- too busy even to do an IRR calculation! but in the end the environmental reason is still cool for us as a reason to have.
Honestly the most surprising part of this article is you said “My wife and I purchased our solar system outright, but we didn’t have $95,000 lying around.”
and then went on to say, “Being a high-income family in the top federal tax bracket…”
I am honestly curious, I don’t mean this to sound sarcastic, but how are you a writer on this blog on finance, you have a very high income and I would assume a good saver/investor, so how do you not have $95,000 to spend or what you thought would be an investment? I’m honestly curious. I know $95,000 to most people is an unrealistic amount, but for readers of this blog, its not that much to come up with.
Thanks for the informative article, I learned a great deal. I’ve been on the fence about solar panels for over a decade and some pitfalls you didn’t mention bother me about them:
– Degradation over time
– Complication of roof maintenance and replacement
– Increased insurance cost for damage from storms (hail, wind, leaks, tornado,…)
– 25-30 year unpredictability of equipment reliability and obsolescence
– 25-30 year commitment when most people move much more often
– Dubious benefit to the environment (Chinese coal plants, minerals mining, theoretical and emotional nature of climate beliefs)
– Effect on curb appeal (and potential negative effect) on resale value of a house
– Reliance on government assistance, with attendant bureaucratic effect, to make them financially viable.
I know you can come out financially with them, its just the shear complication of it all that causes me to intuitively avoid them. It seems there are too many undefined risks for such a large and lengthy financial commitment. I’m sure it works for some, its just not my cup of tea.
Go with a community solar farm. Addresses all your concerns about making changes to your house
dude these are all great points! but yes I didnt’ mention them as I don’t have a good guage on answering these questions as I hope not to experience these pitfalls! but that’s the point- the financial benefit takes time and with all these potential pitfalls, don’t get solar panels for their financial benefits.
Kai,
It’s a good question.
The WCI columnists have a wide array of salaries and net worths. One columnist is in a dual-physician couple and getting close to retirement. One columnist is getting ready to FIRE in their mid-40s. One columnist is on the lower end of the income scale with young kids and has to pick and choose where he spends his money. One columnist just got back to broke a year or two ago. Not everybody writing for WCI is a multi-millionaire, especially when (and Rikki will be the first to tell you about his) they’ve made financial mistakes in the path These kinds of disparities are hopefully helpful to different swaths of the WCI community since I’m sure there are a bunch of our readers who make high salaries but don’t have $100K just lying around.
Probably because he got the call from the telemarketer and had them come to his house the same day. Good saver or not, high earner or not, most people don’t simply have $95,000 sitting around for “whatever comes along”. It has a specific purpose (emergency fund, quarterly estimates, money planned for the 401k, etc.). To simply have $95,000 sitting around for no other reason than to spend cash on “whatever” (like solar panels) is actually and UNWISE use of money. It’s akin to dry powder (generally not the investing philosophy of most people on this site). It actually means you AREN’T spending your money deliberately. It makes more sense to me that the writer DIDN’T just have that large sum of money ready to go (with nowhere already set to go).
exactly!
I had the same exact thoughts when me and my wife first became attending doctors. I will write a blog post on my budget in the future, but basically every dollar we make is accounted for. We do have $50,000 lying around as an emergency fund, and solar panels are not an emergency. We make about $1mil per year, and the money goes out the window like this generally:
– $200,000 to save for retirement (pay yourself first! 20% of gross income is the WCI rule)
– $375,000 income taxes (federal and stupid state of NJ)
– $40,000 for nanny
– $30,000 kids 529’s
– $25,000 property tax
– $72,000 escrow for our house
– $20,000 insurance (TERM life, disability, car, home owners)
– $50,000 Mia’s dance (I’m not kidding)- includes summer camp
– $25,000 Jackson’s soccer (includes private coach, summer camp)
– $50,000 sinking fund for new car (wife want a new Toyota sienna)
– about $100,000 to spend on vacations, other fun stuff
as you can see every dollar is bascially accounted for, but I’m not going to lie, we spend a crapload of money! No matter what your income, it’s very easy to grow into your income. Just make sure you pay yourself first 🙂
Rikki, you have a set on you to throw your income into the internet. I don’t think I could be half that brave lol. Thinking about panels on my house because I’m a tinfoil hat kind of guy and don’t trust our local municipalities (nor the stranglehold that Alabama coal has on our local power producer –> Southern Company) and like the idea of energy flexibility. But Alabama has a lot of tornadoes, and I’m worried I’d be creating a series of glass and metal missiles to be hurled into the surrounding homes. Also, we don’t have net metering because of local coal producers; they actually charge you to produce electricity for the grid. If I went solar, it’d have to be large enough to completely remove myself from the grid, which I’m loathe to do. Hopefully your panels act as a buffer against energy inflation and prove a better investment financially in the future.
Cheers,
DS
We’ve had ours for about 3 years now and paid SunPower $3/kw installed capacity (capacity is the sum total of the generation capability of the panels, not how much energy they estimate your system will produce in a year).
Based on your numbers, it sounds like you might have a 10kw system installed at a net cost to you of $35k ($95k – $30k tax credit – $30k roof), so about $3.50/kw installed. If that’s the case, that’s not way out of line imho.
The real challenge is the payback, which is driven by how much energy you use in a year, how much the sun shines where you live, and what type of solar incentive/rebate/offset program your utility offers.
Here in Northern California the sun shines constantly. Our little 7 panel 3kw system generates enough to completely cover our 4700KwH/year usage. Our utility offers a 1:1 KwH offset, so each KwH we produce reduces our bill by one. Our meter literally runs backward when the sun is shining and we’re using less power than we’re making.
Am I worried about the fact that SunPower went out of business? No. This is a solid state system with micro-inverters and no moving parts. In other words, highly reliable. There is no maintenance requirement, and if something goes wrong, it’ll likely be a failed micro-inverter, which is an easy enough thing to replace (at low cost).
I’d pay down your loan early if you can and enjoy getting free power and doing your bit to save the world.
Hey Tom nice! awesome you enjoying the sunshine in northern CA- not seeing much sun here in NJ which unfortuantely affect how much power the solar panels generate 🙁 I don’t think I am going to pay down the loan early as I choose to invest given the great interest rate 🙂
We installed 8.1 KW in 2014 for about $27000. With state and federal tax credits refunding 65%. We probably broke even after about 7 years.
However I would not do it again, though we’ve come out well.
1) I don’t believe it increases the sale value. Maybe the buyer likes them, maybe not. But I don’t believe most buyers can translate lower utilities into a higher sale price (at least not in NC).
2) We had to replace our roof due to hail damage. The cost to remove and reinstall the panels was $8000. Because we owned the panels, this expense was covered by the insurance claim. But if they had been leased insurance would not have covered that expense.
As someone else already remarked. There are better ways to creat solar power than on your own roof.
Steph excellent points and glad you came out ahead.
I ran the numbers about 10 years ago. At that time, what the local utility company in Utah paid to buy the electricity you generated was even better than what they pay now. I could not make the numbers work. Take that $95,000 and put it into the market and you see what I mean. Bottom line is, do it if you feel like you are making a difference for the environment. Strictly from a financial standpoint, it is not beneficial for most people. The prices we are charged are absurd. These systems, other than the panels themselves, are actually simple and parts are relatively inexpensive.
Absolutely! my point exactly 🙂
I am just curious as to what happens when you need a new roof with the solar panels. What would be the cost of taking them off the roof and having to reinstall them?
See Stephen’s comments above- was about $8000 on top of roof replacement cost. better hope insurance is covering!
What an odd article. The tax credit, new roof, and home value more than paid for the (extremely overpriced) system, plus the other credits basically pay for the monthly payment, but $20 a month for 25 years makes it a bad decision? This seems like a great value despite getting scammed into paying too much.
Hey JR, that’s exactly how it got sold to me, but really the only tangible money that I saw an immediate return on borrowing $90k was the tax credit. the new roof, again, could have been covered by home owners insurance due to hail damage. The home value increase is sort of ? how much benefit it is and is only realized if I sell the home. So not terrible financial decision, but I am not coming out ahead for sure unless I keep the system for a long time.
“Being a high-income family in the top federal tax bracket, the federal tax credit for 30% of the cost of the system was pretty sweet. That was a significant chunk of change of about $30,000 saved.”
The biggest scam in the whole transaction may be the tax subsidies received by wealthy taxpayers.
yes, the government can really incentivize you to do certain things through the tax system. Really worked in my case with these solar panels.
My neighbor across the street installed solar panels on his house so I asked the contractor how much it cost and what was the government rebate. He replied about $30,000 with a 30% rebate therefore making it an approximate $20,000 investment. My total electric bill for the year, excluding taxes and all the other fees that they tack on(that remain no matter what your electricity use ) is about $1000. It would take 20 years to recoup my cost. It would take away from the architectural appearance of my house. As others mentioned, it would add cost to roof repairs if the panels had to be removed. It is also important to remember that these solar panels do not have an unlimited lifespan (and from what I have read that limitation is about 30 years )at which point I suspect they become landfill. Either way, I would suggest taking the $20,000 and investing it in the stock market using the proceeds to pay your electric bill. I think you would be way ahead. From an environmental standpoint, I’d rather see more nuclear plants, providing our electricity rather than covering arable land in the Midwest with solar panels because of huge government incentives. I am pretty sure the solar farms would not be viable without huge amounts of government subsidy, which makes for some very expensive electricity.
Everyone’s situation is different. Some people have an EV or two, a heat pump HVAC and a heat pump water heater and live in a climate with extreme seasonal temps. Add to that huge differences in cost per kwh and you end up with the only answer to the question should I do this: “it depends.”
If you’re getting quoted $30k and only spend about $1000/year, I’m guessing you’re in a very low cost per kwh area.
We’re have 7 panels and our electricity rate is around $0.45/kwh – one of the highest in the country. We don’t have an EV or heat pump, and barely need to run heat or air conditioning for 6 months of the year due to a mild climate. Even with a relatively low consumption rate (about 4700 kwh/year), our system has an IRR of around 24% and a simple payback of a little over 4 years.
We have neighbors who have similar sized homes with 20 or more panels on their roof. Why? Heated pool, heat pump, extra fridge in the garage, wine coolers.
Point is, the right answer is very dependent on a lot of variables.
Rikki,
Your post reminds me to vigilantly expect the unexpected: large companies can and will go bankrupt; and blog comments can and will be potentially harsh, encouraging, and everything in between. I appreciate the WCI community, and the transparency Dr. Dahle, you, and others, bring to the table in rehashing the good, the bad, and the ugly truth in your personal finance decisions. Thanks for honestly sharing your Solar Panel saga. I could see my husband and myself going through the same scenario with solar panels, and with other environmentally friendly purchases as well. Have you considered financing a Tesla (or even a Mclaren 570s) lately? It would be so worth it, purely for the joy of sharing what you learn with naive WCIers like myself. I look forward to reading your next post!
I can do a blog post about a McClaren. Although I only rented it for a couple of days. Fun to drive, but not that comfortable and incredibly impractical.
Hi Angela thanks so much but no, I have not considered financing a Tesla (have to ask Josh about that one) or a McLaren as I have a classic ’98 Merecedes SL500 that’ve I drive to work 🙂 I pretty much blow my money on the kids and vacations and yes, that’s a great point maybe my next post is what me and wife blow our money on.
This was a pretty hot topic on the forum. Lots more discussion here: https://forum.whitecoatinvestor.com/general-welcome/479437-discuss-latest-wci-blog-post-solar-panels-a-bad-financial-decision-for-me
ahh man, I just checked the link . . . not sure I will have time to respond on here and on the forum . . . I didn’t know solar panels would be such a hot topic! I should go buy more stupid expensive stuff!
I decided years ago to avoid a solar panel for one main reason, that there was no storage capacity. We get a fair number of power outages and I would want a battery backup to fill in those gaps. I did not see the point to incur 30-40k in debt with a finance plan when my monthly power bill is under $150 a month. Everything in our house is already low wattage consumption. I converted to LED long ago.
When the solar sales people come by, I ask if they have battery storage capacity and if I can buy outright without financing. Nobody has ever answered yes to both and they get the message and don’t come back.
Joey nice that you know it defiitely doesn’t work for you. well done on the low power consumption as well!
Rikki,
I do not think you should feel bad about your purchase at all: and it does not feel like you got scanned. Though the company went bankrupt (apparently for overly aggressive sales tactics) I am sure you did your due diligence, and it looks like he ran the numbers appropriately. You would not have been able to put together this article (with the numbers above) if they did not make sense to you on some level, (i.e. the environmental credit, the money saved each month by selling a power back, etc.)
One thing to note, however: I do not really think that point 4 and point 5 really belong in this list of “positives”. Here’s why:
I do not believe it can be assumed that this will increase the value of your house. In most of my research I have found that this is a flip of the coin, at beast. A new home owner/buyer may not want the solar panels. And if you leave/sell your house prior to the 25 year contract, the new owner we will have to take over the contract if they want the panels (unless you want to continue paying for them when you don’t even live there anymore). They generally can’t be removed without destroying the roof. This could absolutely be a deal-breaker for the new buyer and could decrease the future selling power (or cost you a lot of money on the sale, decreasing your profit substantially). Many reviews that I read online (I was in the same boat about 1 year ago and was heavily considering solar power and was shopping around) stated that most new home buyers are actually deterred by solar panels. Many people simply don’t want them. Few consider it a “bonus” when buying a house. Consider also if or when you would be selling your house: If you would be keeping it for 10 or 15 or 20 years, there is going to be significant wear and tear on those panels. Some of them might even have failed by then. Even though these things generally have a very long half-lives, (or some form of guarantee of replacement), they will absolutely NOT be generating the same amount of power in 25 years that they are making now.
I think it is also not surprising that the company went out of business. I think one should perhaps even ASSUME a solar company is going to go out of business, at some point, when buying these things. Think about it: you’re getting a lease/loan/warrantee for 25 years. What percentage of companies are still around 25 years after their inception? What about the percentage of company’s specific to this industry? They have not really even been around for 25 years, so no one knows. I think it should be safe to simply assume that the company will not be around, and to simply go off the life span of the existing panels when you make your plans. Or become comfortable with the idea of hiring a sub-par third party company to maintain them, as the odds that this will happen at some point seem so high.
Additionally, one should consider the wear and tear on the roof itself. In most of what I have read, simply having the presence of panels is going to decrease the life span of your roof. And some homeowner’s insurance policies actually go UP due to the presence of solar panels. So that is money lost.
So even though you are getting what you describe as a deduction by having the new roof rolled into the price, that roof is unlikely to last as long as a roof that did not have panels attached to it.
All this is, of course, predicated on the idea that this is not your “forever home” and that at some point you plan on selling it and making a profit with what you determine was a new “asset” added to the house. But in stating that this is not the case, and you’re unlikely to sell this house anyway, this makes point 4 moot. I guess that kind of addresses point 4 and 5 at the same time, because even though you are getting the new roof, it will not last as long.
Also, let us consider a situation where something happens to your house. Let’s say, God forbid, a fire or a massive hurricane. Your homeowner’s insurance will usually pay for the repairs/replacement of the HOUSE itself, but it will NOT replace the solar panels. So, you now have a $95,000 loan for an asset you no longer have.
Bottom line, I do not think you will ever really come out on top, from a financial perspective, with these. Solar panels should be considered more of a “consumption item”, then an asset. The homeowner’s equivalent to buying a Tesla. If your reasons are strictly for the environmental, then good for you. Feel good about it. You did a good thing. But for anyone who is trying to do this as a smart financial decision, I think it will be a losing game.
dude well said. Yup, I am not moving out of my house anytime soon, likely going to stay here for the long haul, depending on where the kids go and start a family. yeah, the solar panels are almost like a swimming pool (which we also put in- that’s for another post) where it likely does not increase the value of your home as there is more liability risk, maitenance, etc. Luckily we did just think of this purchase from more an environmental standpoint. The incentives were just helpful in justifying purchasing the system and not ruining our financial lives.
I was excited about a roll out (rubber like) panel that fit in wider spaced metal roofs and opted for that type of roof when I put on the metal roof. (Price for roof about the same.) Then after that was done the roll out panels were no longer for sale- company TU. Local green guy (dunno if he has a day job separate…) I met through ecological talk did solar, and HVAC ducting cleaning, and… They came out and said our roof would suck for solar and we should put panels out in our 3 acre yard. IMO they could do the yard but not the roof themselves. However he educated us fully on the flaws for AL solar installers- need insane separateness from power company so they are 1000% certain our system won’t electrocute their linemen doing repairs after power outages (in part a way for AL Power to block solar), no net metering, no state subsidy (50 miles away in FL would cost half as much), etc. So we ended up not bothering.
On a pitiful note when I ran for State House and asked AL Power for a donation, their lobbyist told us (as we also asked as homeowners and customers for them to do a subsidize solar onto private homes plan), with a bless his heart straight face, “There’s just not enough sunshine in Alabama for solar to work.” BTW lobbyists donate AFTER and IF you win the election so you can pay off campaign costs. And AL Power is building solar farms all over the state.
Just comes to show the solar panel incentives are so nuanced! I would have though Alabama would be a no-brainer compared to cold NJ up here!
Mistake #1: You purchased a solar system from a telemarketer who contacted you out of the blue. If the company is spending resources on salespeople to cold call you and sell you a product, the cost of those resources is coming from somewhere (i.e. commission off your purchase)
Mistake #2: You committed to a $95,000 purchase in one evening, ON THE SPOT. It boggles my mind that you would commit to such a significant and permanent renovation on your $1.2 million home without doing weeks of research and obtaining numerous quotes from competitors (that YOU sought out instead of the other way around).
That said, if SunPower is the company you went with, they are (well, “were”) one of the most reputable companies in an industry that scammers dominate. They usually have the most efficient and highest quality solar panels on the market (and also the most expensive). Either way, I hope the panels work out well for you in the long run.
I’ve had solar installed twice, at my previous residence and last fall on our current home. This last time we paid $2/kWh for our system–which is drastically lower than the quotes I received from 5-6 other companies–as we went with a small local contractor we know personally who gave us a “friends and family” discount. We also had two Tesla powerwalls installed for backup, which were quite a luxury during Hurricane Helene. We use a ton of energy (4,500 sq ft home, 3 A/C units, 2 water heaters, 1 pool heater, and a Tesla charger), so it is a very large system and still ended up being rather expensive. Fortunately, Florida is a very favorable state for solar due to the amount of sunshine and state-wide 1:1 net-metering.
Even with all those benefits, the cost is only justifiable when including the 30% tax credit. If it weren’t for that, the return on investment would almost never pay off from a financial perspective.
One MASSIVE incentive you didn’t account for in your article: locking in the cost of electricity at “today’s” prices for the next 2-3 decades. That $300 or so electric bill that you’re mostly offsetting with solar might be $1200 per month in 2045, but your solar loan payment (if you haven’t already paid it off early) will be the same $320/mo.
In our service area, there have been multiple 8-10% price hikes by our electric company since the pandemic. From 2019-2023, their cumulative increase in charges for electricity is >60% — with another 7% increase about to take effect, with additional increases anticipated in 2026 and 2027.
Steve excellent point! didn’t think about that one! So if energy suddenly inflates and become very expensive, I will be smiling. thanks man.