Is it worth it?
Any advice?
It would depend on how much you plan to consume vs how much you can produce. Even though we now live in a foggy central coast clime, with 16 panels we produce more than we use.
We bought an old house at the height of the pandemic lockdown. Since it needed a new roof we decided to get solar panels and claim part of the re-roofing as well as the panels.
It was probably more of a âfeel goodâ decision than an economic decision since we donât have to make hard choices due to the rising cost of living. We are very fortunate in that respect.
I do derive some satisfaction from paying ZERO to the electric company. We got a credit of $290 for our excess production last year. That will undoubtedly change if our new induction range ever gets delivered, and our gas furnace and water heater expire, and we get an electric car.
My tips: get all you can get if you plan to switch over to electric appliances and cars.
I would like batteries to run our refrig at night, and to charge an EV, and to deal with blackouts if they actually increase as some warn.
Iâd select a big company that you know will be around in 10 years rather than a small contractor who might be gone tomorrow.
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Is it worth it?
It depends on where you live and what your specific situation is.
Many places in the US it is financially beneficial.
But there are some where it is not.
Where I live with $.10/kwh it was worthwhile - paid for itself in ~4 years and will reduce my bills for another 20+
A nearby friend has peak rates of $.26/kwh - worked out well for them too.
A relative in another state has rates of $.06/kwh, and different rules on how the utility credits production. And doesnât have a good location for an array (not much for spots that wouldnât have shadows from trees. So it doesnât make sense for them.
Any advice?
Figure out where youâd put the panels. Do you have a south or south-west facing roof?
Determine what the rules are for your utility. Do you have ânet meteringâ? How is over-production credited to your account?
Determine how many kw of panels you can fit on your roof (or wherever)
Determine what that is likely to produce for power. (how many kwh youâd produce per year)
Talk to a few solar installers about what they can do for you. I would not trust most production numbers a salesman gives you.
Be very very wary of any âno money downâ type contracts. If you are making monthly payments to the solar installer itâs always a bad deal compared to buying the system yourself outright. Sometimes an extremely bad deal, but probably a great commission for the salesman that sold it. The worst are the solar lease / power purchase agreement. A solar system with a PPA probably decrease your property value. But even the loans youâll get from a solar installer are going to be worse terms than if you go to your local credit union. If the salesman pushes a PPA, IMO thatâs a bad sign - you probably donât want to use that company.
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Need more info. Whatâs the weather like where you are? Are there utility rebates?
A good solar company should be able to look at the cost, your rebates, usage history, and project a âbreak-evenâ time. For us it was about 6 years. We passed that several years ago, so now itâs just printing money.
Itâs all about the break-even time, and how long you plan to stay in the home.
It was worth it when we installed in 2017 because: a) perfect southern exposure, b) no shade trees, c) fabulous Oregon tax credit (almost 40% of the cost), d) plus Oregon Energy Trust (another 14%), and e) 33% fed tax credit. Our payback was 3 years. The system generates about 25% more than we use, so will be good if we go EV.
There is a âdevil in the detailsâ though. The incentive is a tax credit. If you have a significant tax liability because you work for someone else, the tax credit will be helpful at tax time. However, if you are self-employed, you will not be able to use the federal tax credit because of the way the IRS structures the 1040 and where Schedule 3 comes in.
This is not to say - âDonât do it.â Just be aware of this. We are retired with little taxable income. I worked around the problem above by doing Roth Conversions to generate a tax liability.
Agree with everyone else - a good company will be able to provide the details.
PW
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However, if you are self-employed, you will not be able to use the federal tax credit because of the way the IRS structures the 1040 and where Schedule 3 comes in.
This is incorrect.
You can not use the federal solar investment tax credit for self-employment taxes (which are the equivalent of what W-2 employees have go to social security/medicare.)
BUT a self-employed person will have regular income tax they owe as well. And it definitely can be used against that. It can also be used as a credit against income taxes on capital gains and/or dividends (which also may be significant for self-employed people)
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Yes, if a person has a tax liability from âregular incomeâ, the tax credit will apply. As I mentioned, I used Roth Conversions to generate regular income.
What I should have written is - the only way to use the tax credits is if your Line 16 (form 1040) shows a tax liability. If Line 16 is a âsmallâ number, adding solar panels for tax reduction reasons might be the wrong decision,
Bottom line - to anyone considering Solar, do your homework so there are no surprises. The sales people make it sound great and that is NOT always the case.
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What I should have written is - the only way to use the tax credits is if your Line 16 (form 1040) shows a tax liability. If Line 16 is a âsmallâ number, adding solar panels for tax reduction reasons might be the wrong decision,
We had a significant same year capital gain on the sale of our home, so tax credits for solar and converting to an energy star furnace on the new home was a slam dunk decision.
Does anybody know offhand if a storage system (power wall) can be included in ones tax credit claim, or is it just the panels?
Does anybody know offhand if a storage system (power wall) can be included in ones tax credit claim, or is it just the panels?
Definitely not just the panels.
If the storage system (ex. power wall) is part of the solar install, IMO it is just like other items that were done as part of the solar install like replacing a breaker panel or re-routing plumbing vents. And therefore an eligible expense.
If itâs a storage system installed after the solar install, the IRS has given a private letter ruling about that:
https://pv-magazine-usa.com/2018/03/05/irs-rules-energy-storâŚ.
And it was eligible in this case, where all the energy going into the battery was from solar power.
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And it was eligible in this case, where all the energy going into the battery was from solar power.
Thank you. If I hit the jackpot on another tech stock itâll be a
couple batteries.
Itâs worth it just to get this invoice every monthâŚ
Your Pacific Gas and Electric Company (PG&E) energy statement(s) is now available on [pge.com](http://pge.com).
The amount of $0.00 for account number ******00**-1 is due on 06/29/2022.
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Late to the discussion, but I put solar in ayears ago and a friend of mine just put in the new GAF solar shingles. Everything is installed and the inspectors should activate the system next week. Tips:
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Get several companies involved and look at different technologies (e.g., panels & shingles). Each company should give you site plans showing how many panels or shingles, where theyâll be placed, what wattage should be produced, etc. Be sure each includes info on all the discounts, credits, etc. for which you qualify as well as whatever âcatchesâ apply. (For example, one utility I know of gives a good credit, but requires all power goes back to them.)
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Be really sure you understand how connection will work with respect to your utility. What will they pay? Is there a surcharge of any type for personal power generation? Can you siphon power off for a powerwall/battery system to power your home during a grid outage or do you have to send all power back to them so the system is no good when the grid is down? What is the rate at which they pay for your power, who can change it, when, and by how much?
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Look for companies which say theyâll guarantee a level of production, not just how many panels or shingles theyâll install.
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If you have acreage, look at a ground mounted system & compare costs.
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Know exactly what is warrantied and for how long: installation labor & parts; solar panels (roof files); electrical connections; power inverters; powerwall/batteries if you get them; status reporting device. [The devices vary, but they allow you to monitor the systemâs performance and health. I suggest getting a demo for the specific system you buy as thereâs lots of variation.]
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Keep in mind that anything someone tells you about your system may not apply to you (and vice versa). In my neighborhood, for example, being north or south of one cross street means you change electrical companies and the two are very different in how they treat solar.
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Be extra sure you understand whatever zoning restrictions apply (including HOA), what permits are required (city, utility, HOA, etc.). Make sure your agreement with the solar company includes what theyâll do with each of these, their responsibilities for each one, what happens if thereâs a non-compliance, etc. Donât wind up on the hook for expenses on a system which winds up never being activated because someone shut it down.
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A lot of folks talk ROI, so hereâs the method I used:
Effective cost: Retail cost minus whatever credits, subsidies, etc. minus your best guess as to the residual value at the time you sell your home.
I think my system retailed for about $24K, with a $4K rebate from the utility. Of the remainder I got maybe a 30% federal tax credit for an effective cost of about $14K. I took a wild guess of a residual value of $10k. That left me with $4K to buy back through savings.
Yearly Savings: savings from buying on the grid minus any extra charges (like a special âgrid connection feeâ exclusive to solar homes). I suggest using the worst case scenario â that your power cost will not increase from today. [You know prices will go up and the payback period will be shorter, but weâre just trying to ballpark it.]
My system covers about 40% of our power needs over the year, saving about $500/yr in the cost of electricity (not including fees, taxes, etc.).
My breakeven point came out at roughly eight years so for the last four or so Iâve been purely on the plus side. But now thereâs more data available and it shows solar homes sell faster and lead to a (nationwide) average price increase of 4%. Iâm not at all sure I accept that, but if I did then there was ZERO payback period as the $4k effective cost would have been less than 4% of my homeâs value back then.
As an aside, Iâm in central Texas.
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3) Look for companies which say theyâll guarantee a level of production, not just how many panels or shingles theyâll install.
I disagree strongly with this.
Look at what theyâll install and not any âguaranteeâ that they give.
Anything they guarantee is going to be well below realistic production. AND the guarantees Iâve seen take the amounts over the guarantee from previous years and roll them forward. So if you have 10MWH for year 1, 9.8MWH for year 2, 9.6MWH for year 3 as your guarantees, but you produce 11.2MWH, 10.6MWH, and 7.7MWH, you get nothing from their guarantee.
The rest of the points I think I would agree with.
For âROIâ - IMO ignore anything the salesmen tell you. Most likely theyâre wrong.
Also, I wouldnât count on much for residual value when you sell. And if you get conned into doing a PPA or âsolar leaseâ - itâs very likely to be a big negative value when you go to sell.
On a system that cost $24k to install (up front) with rebates of $10k, I think $10k residual value is optimistic. $4k to $7k (25% to 50% of the cost for newly installed) is a more likely residual value to buyers IMO after 5+ years. Possibly even less if prices for installations continue to come down.
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Great post, thanks.
âŚand a friend of mine just put in the new GAF solar shingles.
I have been asleep at the wheel. I didnât realize any company besides Tesla made a better looking solar system. System would have to go street side, so want to preserve curb appeal.
IP
When the singles are the roof and not over top of existing shingles Iâll consider it. By then hopefully they can gather and produce more energy as well. Things are looking better all the time.
On the ROI, Iâd take a closer look at that residual value. Solar systems donât last forever. Theyâve got some finite life span. After something like 20-30 years, the system will be at the end of its useful life and basically worthless.
If you have plans to sell the house in some near term time frame - maybe up to 5-10 years - then a residual value of some kind would be reasonable. If not, I would not use a residual value at all.
âPeter
After something like 20-30 years, the system will be at the end of its useful life and basically worthless.
The solar panels should keep producing for well beyond 30 years. At 30 years itâs likely theyâll be producing about 75% of their original output. (1% annual degradation at 30 years = 73.9%)
The inverter is likely to need to be replaced every 10-15 years.
So if the system has been maintained (ex. replaced the inverter, repaired any issues) itâd still have some value at year 30.
But personally I would want the entire thing to âpay for itselfâ by year 10 if not sooner. I would look at total amount Iâd have to pay and divide by the annual savings. If itâs 7 or fewer years, go for it, 10 is iffy, and 13+ is not worthwhile. So if I pay $35k, get $15k back in tax credits, rebates, etc, I have $20k I had to pay. And if my annual savings is $3k, it pays for itself in 6.7 years and is worth doing. If my annual savings is $5k, it reaches breakeven point in 4 years and Iâm effectively $5k/year richer every year after that.
OTOH if I will spend $20k and will only get $1k/year out of that, I probably would not move ahead - especially since thereâs always uncertainty in those projections and there will be maintenance needed in 10-15 years.
You can get a lot fancier in your analysis with time value of money calculations and projections of what utility rates will do over next N years, and looking at alternative investments and what their ROI would be.
But IMO that is more detailed than necessary to have a good idea of whether you should do it or not.
The solar panels should keep producing for well beyond 30 years. At 30 years itâs likely theyâll be producing about 75% of their original output. (1% annual degradation at 30 years = 73.9%)
Thatâs basically my point. No one will pay much of anything for 20-30 year old panels when theyâre no longer producing what they used to. And itâs likely that the technology will advance over that time, reducing the value further.
And your calculation does exactly what I suggest. You donât include any terminal value in the solar system. Itâs got to foot the whole net installation bill. Not some reduced portion based on the future value of the system.
If - and only if - the system is being put into place for a little short term savings and expected marketability of the home in the next 5 years or so, then I might consider the added value from the solar system at that point in the future. But even that might be realized in a quicker sale rather than a higher price.
âPeter
The Solarworld panels I had installed 5 years ago supposed carry a guaranteed performance through 20 years of at least 95% of original generation. In 15 years, it will be hard to prove the panels are or are not performing as guaranteed since so many factors go into generation.
I track production every day as well as flow to and from the PGE grid. So far, our max production was 31 kW in 2017 and it is still 31 kW. Only hit that 10-15x per year due to factors like humidity, dirt/pollen on panels, hazy/clouds, length of day, etc⌠It is very hard to monitor instantaneous generation unless you get the software upgrade to do it (which I did not).
I agree though that donât plan on any residual value. Besides, the panels themselves are not terribly expense to purchase by themselves.
Also need to remember that the inverters have a finite life - usually around 10 years although some will last longer).
Also have to remember that, if your panels are mounted in an asphalt shingle roof that needs replacing, the panels will likely have to be removed. Better to replace the roof before putting on panels or wait until the roof needs replacing??
PW
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