Earlier this year, I started to explore whether going with solar power would save me money. The research was very general, whatever I could get from keyboard. Living up to my pseudonym, I hadn’t gotten off my tuchus to get real data from some local companies. Thanks to a post on My Journey to Millions, the topic of leasing solar panels was explored.
Finally, I emailed two local solar power companies to get some estimates. While waiting for those appointments, I found this solar calculator by Mr. Electricity. It looked very detailed and, since it only took a couple of minutes from my keyboard, I figured well worth a shot.
I pulled my electricity bill and averaged my energy use over the last 12 months. We use 718kwh a month, which went straight into the calculator. Having done the research before, I knew my state offers grants of $1.25/watt… big item in the calculator. Though I still need to consult with my tax advisor I am going to presume that the Federal tax credit applies. Living in New England, I assumed the worst energy producing scenario – cloudy.
The results:
Mr. Electricity allows you to do two scenarios, so I created another case where the energy production was better. However, in this scenario, I estimated that we’d need more energy (two baby boys will use more electricity as they get older). I put a more expensive rate for installation, the one thing that I really couldn’t calculate without talking to vendor directly.
The last third of the calculator contains the results that I want to focus on. We pay some of the highest energy prices in the country and the cost of that energy is going to be at least $30,000 over the next 21 years… the calculator’s expected life of the solar panels.
It’s worth noting that Mr. Electricity does not adjust the cost of electricity for inflation. He doesn’t do this on purpose… it balances the opportunity cost lost in paying for solar. After all, I could take the money and put it in the stock market for 21 years and make it grow, right? Still there’s something really refreshing knowing that solar would protect me from electricity inflation for 2-3 decades.
The end result is that with this calculator, I’d pay around $13,000 and break even at year 9. I’d have the state grant and federal tax credit to thank for effectively cutting the cost of solar in half.
You’d take $17,000 in your pocket, right? Me too.
However, this was just an internet calculator. It doesn’t take into account the type of solar panels I’d get, the efficiency of my roof (whether it faces south and has an optimal pitch) and what the sun is really like in New England.
So what do the local vendors say about my specific situation? While I was at a conference a couple of weeks ago, one vendor came to my house to do some tests. My roof faces south and while the pitch is far from perfect (I’m used to hearing this, but not with roofs) it is still a great candidate for solar.
Here are some of the charts they sent me in an email proposal.
The above image shows the spike of electricity usage in the summer. This is normal in New England, due to the need for air conditioning. (Side note: Maybe I need to start working at the library?) The winter months obviously don’t produce a ton of power, but I think this next chart gives a better view:
I’d essentially have a bill to pay in September through March (I’m not going to count the $1 in August), but I’d receive solar credits by selling back my excess power to the grid in other months. The credits that I earn in spring and early summer will subsidize much of those winter months. This is called net metering in solar circles.
Finally there’s the solar payback graph:
This looks pretty close to my estimate using Mr. Electricity’s calculator. One thing of note is the year one bump of due to the Federal tax credit. At the 21 year mark it would save ~$20,000, remarkably close to Mr. Electricity’s calculator.
I know they’ll be less efficient over time, but it is easy to see that the longer they last, the better the payoff. At the 30 year mark it looks to save almost $40,000.
These panels are guaranteed to be 80% efficient through 25 years and also to only lose 0.7% efficiency per year. While I need to read the fine print on the warranty and claims, if true, I can expect savings past 25 years. It’s not like the product is timed to die right after the warranty expires a quarter decade down the road, right? Even if they are 50% or 60% after 30 years, it
Finally, there are several financing options available. A bank they deal with says that their best rate is around 4.99%. Another bank I looked at has the same rate. The bank I have my mortgage with has a special 2.99% rate they are pushing on Home Equity Line of Credit (HELOCs). I have contacted them and set up an appointment for later this week. I think when they hear that I’m putting the money towards an investment that pays for itself, they’ll have little difficulty in extending the line of credit.
After receiving this proposal, I had a meeting with the solar vendor. We made some changes to the proposal that I’m really excited about. That will be post for a little later this week.
Nice analysis. I have direct experience with this and paid much more for a 9.9kw system and am happy. Its a long term investment with high initial costs, but very worthwhile if you are stable and can afford it.
I have thought about this as well. You maybe covering this in the next parts of your articles, but here are a few things you need to consider:
1) Net Metering. You will be selling your excess back to the power grid, find out how much you will be getting (usually $0.01/KwH)
2) Storage. If you want a truly effective system, you have to have storage of power (ie. marine batteries) so that at night when the sun is down you have power for the house and are not using the grid.
3) Conversion Prices. You have to think about the costs involved if you want to convert your house to other items which are more power friendly. Examples would be switching to a gas (from electric) stove, hot water heater, furnace, clothes dryer. You don’t have to, but it will put a lot less stress on your system.
Again – a few random thoughts you might want to consider.
Net Metering is coming up in the next article. The way it works for my state is that you sell it back to the grid for exactly the same price you pay to draw it. There are still costs such as a flat fee to be connected to the grid.
Because of how net metering works, there’s no need for storage or batteries. The meter literally spins backwards during the day, and goes forward at night. I asked about storage and the cost/maintenance with it is not recommended.
I asked about producing power when there is a power outage and the unfortunate thing is that, even when there is sun, I wouldn’t have power. I guess the way it is wired to go through the grid, it prevents power from being delivered to my house. Seems odd, but I wouldn’t have power in an outage now, so I don’t really lose anything.
I have gas in most everything in the house. I even switched to gas clothes dryer as the previous people didn’t do it. Now, it’s almost worth asking the question if I was better off with them being electricity since that will be aided by solar. It seems like gas is cheap, so I’m not going to sweat it too much.
I think I do need an updated furnace. I’ve been told what we have is really old and not efficient. It looks so clean that I would guess it is new, so I don’t know if vendors are just trying to screw with me. Fortunately part of the deal with getting the state credits is that you have to have a free home energy assessment from the energy company. It is something that I should have done before now anyway, but it will give me an unbiased professional opinion on the furnace.
Good for you! Your state’s net metering is great, paying the same amount you pay…my utility pays less than 25% of what I pay in. Doesn’t quite cover the fixed monthly fees for my new solar array (3kW).
The reason you won’t get power from your array during an outage is because inverters are now designed to sense an outage, in order to prevent electricity from being sent out when workers might be repairing the lines.
Looking forward to hearing how your installation and experience goes!
Thanks for the comment Janet. I’m shocked how much people know about this stuff. I thought I was only one researching it. I don’t know anyone who has solar power and I don’t see it anywhere in my neighborhood.
It’s almost made me think that they all know something I don’t :).
You’d think they’d have a way to trap the power in the home rather than send it out in an outage.
Glad it is working out for you! I think the difference between our experiences is the solar leasing vs buying the system. In my leasing example I was always going to have a bill – there literally could not be a $0 month so it didn’t offset as much the winter months.
I’ll still have a bill, but I’ll be paying the bank to finance the panels and installation. The net metering my state has seems to be big deal, I didn’t realize that everyone didn’t have the same.
Great post, I’ve been thinking about it myself and the research you did here and the links are awesome. I know my situation is going to be different since I’m not in the US.
Didi the supplier give you any hints on what you could do to improve the cost return?
Have you looked into companies like Solar City?
Keep following, because I’ve got a few more articles on the topic.
The best hints they gave were to trim trees. Really you can’t do too much else. It’s not like you can move your roof or change the amount of sun you get. I suppose you could improve the price you pay through good financing, but we’ll talk about that soon.
I haven’t looked into Solar City. I’m happy with the two companies I’ve looked at. They are well reviewed on Angie’s List.
The net metering for my power company is pathetic (it is not dictated by the state). It is 1 cent a kwH (which they charge 11.3 cents for their power to us). Thus there is very little draw for anyone to “over produce”.
The biggest issue I have had with solar overall is that during the winter, you are drawing a lot more power (basically the whole normal bill) because you are not home during the “sunny” part of the day, and run your stove, hot water heater, etc. during the part of the day when it is dark. And during the summer you don’t run a lot when you are not home (however it is brighter longer, so the evening peak can be hit w/ solar).
This all assumes you use timers on your hot water heaters, and use a programmable thermostat.
@Big-D,
If I wrote that net-metering was determined by my state, I didn’t mean it. I think my power company services something huge like 95% of the state’s customers, so I don’t really distinguish the two.
I think an equal net-metering plan goes a huge way to making it work. Being able to build up equal credits during the sunny part is important. You could probably a whole $2 a month by making all your meals in a slow cooker during the day when it is sunny… reducing your stove usage at night. So, not a big deal.
I live in a state that has really cheap power, no state subsidies, and lousy weather during the winters. It really makes zero sense financially to do solar. If you want to do it here it is for financial independence or a sense of environmentalism …
However if they pass the new carbon credits laws for the EPA to fine coal firing electric plants, we will be in a world of hurt ….
Unless you have a free full analysis, you can’t be sure. However, there are alternatives like hybrid electric hot water heaters which could be a better energy investment for you. They have heat pumps mounted on top which take heat from the air and can cut electric water heater costs by 50%.
I also asked about the heat pumps. Our water heater is run by gas, which is a cheap source of heating energy (at least for now).
Looking into heating hot water with solar was something we considered, but it is more difficult to determine our hot water costs. With two kids under 28 months, neither the wife nor I are taking an abundance of hot showers.
The reason you won’t get power from your array during an outage is because inverters are now designed to sense an outage, in order to prevent electricity from being sent out when workers might be repairing the lines.
Seems like a good reason. It also seems like there might be a way to prevent electricity being sent out in an outage and just have it stay in use at the house.