Lazy Man and Money

Moving Forward with Solar Energy (Part 1)

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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:

Solar Power Calculation

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.

Expected Solar Production vs. Usage (Click for Larger)

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:

Expected Monthly Bills (Click for Larger)

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:

Expected Solar Payback (Click for Larger)

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.

Should You Lease Solar Panels?

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A couple of days ago, I read an article on My Journey to Millions by Evan about how he is considering leasing solar panels.

The arrangement is such that another company, Vivint, ponies up the cash for the equipment and Evan would agree to buy energy from them instead of his electric company. On the surface it sounds like a win-win. Evan would pay less money per month and he doesn’t have to come up with $20,000 or $25,000 for equipment. Presumably it pays off for Vivint too, because, well, let’s just assume that they are pricing electricity at a point that it is profitable.

(Before I go any further, I think “leasing” is the correct word as I’m not sure if he’d own them after 20 years. It could be a rent-to-own situation.)

The article particularly caught my attention because a few months back, I also explored saving money with solar power.

My research was mostly dedicated to buying the solar panels. “Research” may be too strong a word. Truth be told, I didn’t venture off of my keyboard. I realized that one of my first steps would be to determine the age of our roof. If it is old then it doesn’t make much sense to put solar panels just to pull them down again. It looks like our roof is old enough where I put the research on the back-burner.

However, should I have explored leasing as well? While I pitched it as a win-win above, I’m a little skeptical if it optimal. As I said above Vivint wouldn’t offer it unless they making money. So if I could find a way to fund that equipment myself, I could enjoy the benefits of a greatly reduced or perhaps even zero electric bill.

Let’s start by presuming that we don’t have a spare $25,000 in our bank account, which is fair considering we have activated “ultra-frugality mode”. And for sake of argument let’s presume that $25,000 is a fair cost of the system (it could be more). I’m also going to use some of Evan’s numbers for how much he pays for electricity (around $170 a month).

Let’s start with the tax credits. As Evan explained Vivint would take the $7,500 federal credit and he’d get to keep a $500 state credit. However, if you bought the panels you’d get to keep both, well presuming that your state offers a credit. I did a little quick look-up and it seems that the federal credit is 30%, which does turn out to be $7,500. Because we are talking about a tax credit instead of a deduction, the value is a full $7,500. Since I don’t know if your state offers a credit, I’ll conservatively assume there is none.

So now we are paying $17,500 for our system. That’s still a lot of money and you have to wait for the tax credit.

This is where a little of my past experience helps. This past year we put in a central air-conditioning system that was around $15,000. We found that they offered 0% financing for a year. If we can do this for the solar panels it helps buy time for the tax credit to kick in. In addition, during this time we wouldn’t be paying for electricity so we could funnel the $2000 we spend a year on it to paying down the bill. Our $25,000 system is now a $15,500 system.

Unfortunately, I can’t seem to come up with any other ways to lower it from there. However, we spread the payments out just like we do with our current electricity bill. Our local bank is offering a Home Equity Line of Credit (HELOC) at a 3% interest rate. Using the this helpful loan calculator we see that it will take 107 payments to pay off the loan – just about 9 years.

If you lease the solar panels over 20 years you save right away, but this way you’d get 11 free years of electricity presuming a 20-year lifespan. The efficiency of the panels probably get worse over time. In year 20, they probably don’t produce the same amount of electricity as they do in year 1. However, since electricity will likely be more expensive in year 20 than in year 1, it may be possible to save the same amount of money.

I found another article covering the types of calculations that need to be done to determine if it’s right for you. It’s helpful in that it covers some of the basic, important calculations that I glossed over such as, how much electricity we actually use. The numbers in the article’s example are much, much bigger, perhaps reflecting more expensive systems from a few years ago. An expert there suggested that a good payback time is between 5 and 10 years, so this estimate would fit right into that range.

One thing that Evan and I share is living in the northeast. According to these government solar maps it is pretty much the worst for solar power. So if it looks feasible here and is better just about everywhere else in the continental United States (sorry Alaska readers), it seems like many people should be jumping on board, right?

So why haven’t they? The only thing I can think of is that the cost of solar power is getting cheaper every year. You wouldn’t want to commit to a laptop for 20 years would you? I see it as kind of the same thing.

So what do you say? Lease or buy solar power? Have you looked into it? Can we use it to eliminate one of our necessary expenses? Can I get through this whole article without mentioning the awesome environmental benefits? Nope, but I came very close.

Save Money on Utilities

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When I visited my family in Boston last week, Sunday surprised us with nearly of snow. It completely ruined our plans for the day. However, I couldn’t help but think about much money I spent on heat when I lived there. It wouldn’t be uncommon to have a $250 heating bill for 900 sq. ft. townhouse. I recall my mom saying that her 2200 sq. ft. place was around $700 or $900 last year during the coldest months. I know that’s a big difference, but at those numbers I became a little numb and my ear stopped working. I know the cost of oil is down, but with February lurking just a few days away, heating bills are on a lot of people’s mind.

How can you save money on Utilities? Let’s look at it two ways (note this isn’t going be a comprehensive list of tips – it would simply be too long):

Short-Term Ways to Save on Utilities

  • Get a Programmable Thermostat – This is one of the no-brainers that everyone will tell you. It’s such an easy way to wake up or come home to a nice warm home – yet you don’t have to spend an arm and a leg heating it while you sleep or at work. That’s around 16 hours a day of saving heat for some people.
  • Switch to CFLs – This is another you’ve heard 1000 times. I just include for completeness and the two people out there who haven’t switched.
  • Know How Much Electricity You are Using – Sometimes I wonder how much power I’m using. I don’t need surround sound to watch Thomas the Tank Engine do I (not that I watch Thomas the Tank Engine because there are no kids in my home.) How much power does that surround sound use? Plug in a Kill A Watt Electricity Usage Monitor
    and find out. If you don’t want to buy that, you can usually find some version of estimated power rating in the manual or on the manufactures site. I’ve read that they aren’t always accurate, so you might find that your mileage varies.
  • Kill that DVR – I love my DVR, but one thing that didn’t know is how much power they use. CNET.com has an article about DVR electricity use.
  • Put a Bottle of Water in your Toilet – Instead of going out and buying a whole new toilet, this is a way to use less water. Simply take a bottle, fill it up with something that will weight it down and put in the water tank. This will lower the amount of water that it takes move the bulby-thing (yes that’s my handyman technical speak) to the place where it shuts off the water. You’ll have to experiment with this, because obviously toilets are set to use the amount of water they do for a reason.
  • Save money on your landline phone
  • Cut the cable television

Long-Term Ways to Save on Utilities

There are some changes you can make to you home that will have a large up-front cost, but will start to pay for themselves over time. Some of them may never get there, so you may have to do some research. For instance, if you live in an area of no wind, setting up a windmill isn’t going to do a whole lot for you – other than waste your money.

  • Downsize Your Home – It’s not easy to heat a McMansion. Sure you can shut off some rooms, but you’ll need to heat them at least minimally so the pipes don’t freeze. And if you aren’t going to heat the whole McMansion, why buy it? Not that saves on utilities, but my wife is quick to point out, “Who is going to McClean the McMansion?” Having a McMansion is certainly not the Lazy way.
  • Insulate Your Home/Attic – Heat rises so why not trap it in by insulating your home. If you are staying in your home for a good length of time (and you live in a cold climate), it should pay off for itself in a few years.
  • Get Some New Windows and Shades – They are doing some amazing things with windows these days. You get triple pane glass with gas, and probably some other technical advances I don’t know about yet (since I rent). I looked into this a few years ago for my condo and it seemed like it might be worthwhile. If you are lazier like me, you could look into weather-stripping your windows. Another cheaper fix for the windows may be to get some insulating shades. They make some hexagon shaped shades that you can get at Home Depot. They are much easier to install yourself and can really make a difference.
  • Solar and Wind – A few people are starting to install windmills, but I’m not sure the technology is there yet. Plus your neighbors may not appreciate the view of a windmill (but maybe if it’s done right…?). Solar panels are starting to make sense in some areas. If I knew I was going to live in Silicon Valley for a number of years and it made sense to buy a home, I’d definitely look into solar power. I’ve even seen them pop up in places not known for their sunshine – like Boston.
  • Get a Dual Flush Toilet – When I was in Australia you couldn’t find a toilet without this feature. For some reason, I’ve seen it in the United States only once. If you don’t know what a dual flush toilet is, I’ll just say that you can choose to use less water if your “activity” required it and more for other “activities”.
  • Move to a Better Climate – It may cost you more to move to a place with less drastic changes, but it could be worth it. We moved from Boston to Silicon Valley and instead of paying around $150/mo. or heating and air conditioning, we pay closer to $50/mo. Those are estimates… during extreme months like February and August, the difference seems a lot more pronounced.

For more tips see: Porch.com’s advice on utility bills