We are considering putting solar panels on our new home and I am trying to work out the arithmetic of costs/benefits. I decided to blog through the process so that we can learn together, dear reader. As always, I welcome any expertise you already have!
There are two options for solar panels on your home: purchase them or lease them. Let’s discuss the distinction.
Leasing Solar Panels
Leasing panels is the easier of the two options. It means you do not own the panels and you do not own the power they produce. You still pay for power but you pay a lower price per KWH (kilowatt hour) than you would with your traditional power company. This savings could be anywhere from 2 to 10 cents per KWH, which can have a significant impact on your bill.
Since you do not own these panels, you also do not typically pay for installation and maintenance. That is a perk for anyone that does not want to invest money in the system but it can be problematic if you plan to move or sell the home because new buyers do not necessarily know/want/understand solar. You would hope they do but I have heard of this being a sticky situation with selling properties so keep that in mind.
Another major drawback of leasing panels is that you do not reap the tax benefits from solar energy, which include a tax credit and solar credits. The company that leases you the panels gets these benefits, which is how they make a significant portion of their money. I will explain both below but just keep in mind this can be significant.
Purchasing Solar Panels
If you’d like to purchase solar panels for your home, then you do in fact own the panels. They are yours to bask in and so is the power they produce. They are also yours to maintain so make sure your equipment has a strong warrantee.
Installation of the panels is NOT CHEAP. We were quoted about $45,000 to purchase and install. Choke! That is $45,000 for a 13,000 kilowatt system, which we estimated would power our entire home, including my husband’s electric Nissan Leaf.
If we own the panels, we are eligible for a tax credit of 30% the installation cost. This tax credit was extended through 2019. Remember this is a CREDIT, meaning you take it off the bottom line of what you owe the government, dollar for dollar. For our $45,000 install bill, this would mean a $13,500 tax credit. Nothing to sneeze at!
In addition to the tax credit, we are eligible for SRECs, or Solar Renewable Energy Certificates. One SREC is equal to 1 megawatt hours of solar electricity. Our 13 kw system would give us 13 SRECs, which we could sell to the government every year for 15 years at market rate, much like a stock. Current SREC values are around $250 in New Jersey. So if we get up to 13 SRECs per year and sell them at current value, this gives us back another $3,250 per year. If we get this for 15 years, this would total $48,750, which is MORE than the total install cost. So that math alone works out!
Next we add up the cost of having NO electric bill each month since we are not paying the power company for energy any longer. We have only been in this house for 3 months but these are the hottest months where we run the air conditioner A LOT. (I would make apologies for this but I am 8 months pregnant and it is 100 degrees outside which is a special kind of HELL!) Our electric bill has been about $175/month for the last three months so assuming that average for the year, this is $2,100 per year that we do not spend.
So let’s add up the savings in the first year alone:
|Tax Credit||30% of $45,000 installation||$13,500.00|
|SRECs||13 SRECs per year at $250/SREC||$3,250.00|
|Energy Bill||$175/month for 1 year||$2,100.00|
According to my math, we would save $18,850 in the first year and then continue to save $5,350 per year for the next 14 years assuming SRECs remain at the same approximate value and we pay nothing more for our energy bill.
Okay, two more costs to consider!
If we do not use the amount of energy we produce with our panels, the power company harnesses that energy with an inverter that puts that energy back into the power grid. The company can sell that to our neighborhood and we get a check for the amount at current value per KWH. I am not going to add this into my equations because I can’t be sure we will have extra and how much it would be but it is possibly a big perk! That money comes in the form of a check every month from the power company!
Now about the thing that can make this potentially very costly: financing the installation!
The company that quoted me the install offers financing packages with interest rates of 5.99% for 20 years. Hm. That’s not terrible but it is not awesome. We could also use our Home Equity Line Of Credit which is currently at 1.99%. I am going to experiment with financing but let’s assume I use the worst option for financing, which is the company’s package. According to my trusty loan calculator, this means I pay over $32,000 in interest over the life of the loan. Let’s work out how this would shake out in the span of the 20 year loan.
|Tax Credit||30% of $45,000 installation||+$13,500|
|SRECs for 15 years||13 SRECs per year at $250/SREC||+$48,750|
|Energy Bill for 15 years||$175/month for 15 years year||+$31,500|
|Cost of Loan for 20 years||Interest on $45,000 financed at 5.99% for 20 years||-$32,312|
|Cost of Panels||Panels + Installation||-$45,000|
A Few Other Considerations
Clearly the math still works in our favor given the life of the benefits! So now I have to play around with our finances to see how much we can put down and what our best option is for financing. I doubt I’ll use a 20 year/5.99% loan but I want to be prepared for worst-case scenario.
There are a few other things we are still contemplating. One of my husband’s concerns were whether or not the panels would ugly up our house. Fortunately our house faces in a direction where the front side of the roof is unsuitable for solar panels so the back side is where the panels would reside. They would not be in the line of sight for the house whatsoever so this is not a concern.
Also, consider that you can buy a battery to connect to your system that acts as a generator if the power goes out. The Tesla Powerwall is one such product that converts and stores your solar energy to run your house sustainably if the power goes out in a storm (like it did yesterday in my house). This is an added cost of around $5,000, which I kept it out of my equations for simplicity sake.
And this goes without saying: solar energy is sustainable and clearly better for Mother Earth! And for a hippy like me, this should be reason enough but clearly the math helps!
Okay so anyone who has done this research, what did I miss? And for anyone who has not, what are your lingering questions? I’d love your thoughts!