Saving with Solar
Part 1: Solar is Sexy
Hello again everyone! Today I want to help you all save some green by going green. You might think I’m a bit off my rocker here, but allow me to formally introduce you to the idea of residential solar panels. Solar is sexy! It’s a trend that has been catching on big time in recent years. Saving with solar is not only great environmentally, but also financially.
I will post “Saving with Solar” in a three part series, one post each week. This week’s post, Solar is Sexy, I will be introducing you to solar panels, dispelling some common myths, and answering some common questions. Next week’s post, Solar Cents, will be on the financial considerations with a detailed analysis on my situation and decision process. And the third post, Solar Power, will be on the installation process, what to expect, and actual results (energy and dollar savings to date).
While you might think this is really only an option if you live in Arizona or Nevada, think again. Solar panels can be a smart financial decision even for folks who live in northern states such as New York or Minnesota. As you may know, I live in North Carolina, not necessarily a super sunny state, and I bought solar panels in September 2015 and it may be one of the best financial decisions I’ve made.
You can view this sequence of posts in a similar fashion to the decision making process I, and others, went through. First, I had to fully understand it. I investigated solar panels very thoroughly and now can say comfortably that I know all the ins-and-outs of the process. But I had to dispel all the myths myself, all the reasons it wouldn’t work, etc. And once I did this and was satisfied with the answers, I had to convince my wife of the idea…and that I wasn’t crazy. Once I got her on board with the concept, step 2 was making sure it made financial sense and justifying such a large purchase. I put pen to paper to see how the numbers came out. Once we cleared that hurdle, we were ready to make the decision to buy. And, lastly, step three has been the follow-up. Now that I’m through all the hard work as part of the decision making process, I can help prepare you for what to expect with regards to getting county approval, clearance from my utility provider, inspections, and ultimately how it has performed to date. But don’t worry, the installation process isn’t all that daunting. For me, the solar installer handled everything and it was very seamless, it just took a bit more time than I expected to get hooked up and producing electricity.
First, let me mention that I bought SunPower solar panels. They are some of the best performing panels, but there are many other quality U.S. manufacturers you can choose from. I’ll get into that more in a future post, but I would recommend SunPower to anyone not only because they are the best performing panels in terms of producing the most electricity per panel (no, not all solar panels are created equal), but also because they have the best guarantee, they are best-in-quality in terms or resisting damage, and they look great! All-in-all, I consider SunPower the best in the biz. And for the record, SunPower is not paying me to say this.
So what are some of the first things that come to mind when I mention solar panels? Solar is too expensive, solar wouldn’t work where I live, solar will get cheaper so might as well wait, they will look ugly on my roof, they are hard to maintain, if I move I won’t get my money out of it, etc, etc. Allow me to dispel some of these myths.
Myth #1: Solar is too expensive
Not true, solar has become much more economical in recent years driven by economies of scale in terms of both manufacturing the panels as well as installing the panels. In other words, as solar has become more popular, it has become cheaper to manufacture and install as the fixed costs of those operations are spread among more solar panels.
Additionally, the technology continues to improve, allowing more electricity to be efficiently captured per square inch of solar panel (meaning you can buy fewer solar panels today to generate the same amount of electricity).
Lastly, there continues to be significant federal and state tax incentives for buying solar, although they are beginning to disappear. Currently, the federal tax credit for solar panels amounts to 30%. However, this expires on December 31, 2016 at which point it drops to a 10% credit. Could this change, and perhaps the 30% is extended another year? Maybe, but that is a political decision. There are advocates for it to be extended as well as for it to be dropped. But I wouldn’t count on politics or Congress getting it done. If you are seriously considering solar panels, get them in 2016 otherwise the financial aspect could material change.
How about from a state perspective? It is all over the board so check your particular state. For North Carolina, they offered a 35% tax credit on top of the federal credit! This was one of the best state tax credits available. The bad news is this has now expired, effective December 31, 2015 and there is no sign from the state government that it will reinstate it (at 35% or even a lesser amount).
While the tax credits are a huge part of the financial decision, there are other important considerations that vary state by state such as “net-metering”, the cost of electricity, property tax exemptions, and sales tax exemptions.
Myth 2: Solar wouldn’t work where I live
This was surprising to me, but this myth is busted. Obviously, the further south you live and more exposure to longer days and more sunlight, the better, but the difference is pretty marginal. What actually can make the bigger difference is the direction your roof faces and the slope. For example, if you don’t have a southern or western facing roof (the two most important directions to catch sunlight), than you are not a great candidate and it may not make sense to pursue solar panels (you can still call a solar rep to come out and make the ultimate judgment).
Some of the northern states are actually more solar friendly, making easier and more convenient for residences to install solar. Solar Power Rocks provides an annual ranking by state for the best solar incentives. In its 2016 rankings, the top 7 states are all “northern” including (in order) Massachusetts, New Jersey, New York, Maryland, Connecticut, Oregon, and Minnesota. This has led a significant number of residences in these states to buy solar and, as such, a larger installed base of solar power.
Too cloudy where you live? Maybe, but solar panels can still produce electricity on cloudy days. Take a look at the snapshots below showing my energy production on a cloudy day compared to a sunny day. Yes, performance is down, but they are still producing and saving me money!
And yes, these are pictures from my phone app. SunPower has a great app that allows me to monitor the performance of my panels in real-time! Bonus!
Myth 3: Solar will only get cheaper
While I can’t totally dispel this myth, I can tell you this: A lot of the economies of scale have been squeezed out of the process at this point, and while solar prices have declined historically, they have begun to level off. Technological advancements have also come a long, long way. The two major cost components of buying solar is the manufacturing cost of the panel, and the labor. While there may be some additional benefit on the manufacturing side, it may not be that meaningful, and it may be offset by increased labor costs including the labor of installation. But more importantly at this point in time are the tax incentives. With the prospect of those declining or going away entirely, there is very little incentive to wait for cheaper, more efficient solar panels.
Myth 4: They look ugly
Wait, isn’t the title of the post Solar is Sexy! I guess it’s a matter of personal opinion. Sure, if I had a preference, it would be to put them on the back side of my roof so as to not be visible from the street (which is actually where it worked best for us to place them). But I know many folks that do have solar panels on their front or side sloping roof and they aren’t a huge eye soar. Start paying attention to it and you may begin noticing other houses with solar panels, and it is not that big of a deal.
The design and aesthetics of solar panels have actually improved a lot in recent years. They are much more slim and low profile to the roof. They also come in a more slate black look, making the honeycomb pattern of the panel itself more discrete. This gives them a more appealing and stylish finish.
Lastly, even if they are visible from the road, who is going to give you grief about it? Your neighbors shouldn’t care. Not only are you doing your part to help preserve the planet, you can just tell them this is the new look of saving money and get used to it!
Myth 5: They are hard to maintain
Nope, they pretty much just sit there. While they do get dirty, dusty, or covered in pollen, periodic rain is enough to clean them off. They are also built to withstand hail, sleet and snow. My system is connected to my utility which is the most common method of installation. However, if you bought a battery-based system, there may be a bit more maintenance required.
Myth 6: Getting my money out of it if I move
This is a very interesting point, and one that I battled with quite a bit. Ultimately, I plan on staying in my house for years to come, so I don’t plan on encountering this issue in the near term. But if and when I decide to move, how can I be certain that my home value will go up to account for the money put into the panels? In recent years, as the base of installed residential solar systems has increased, there are increasing examples of this being true. This has been proven out study after study after study. Appraisals have verified the inherent value of panels, and folks have been willing to buy houses with solar panels. Some folks even go out of their way to search for homes with panels. And it makes sense, if you can demonstrate the value of not having a utility bill, that is worth something to potential buyers.
But how much? That can vary from property to property based on the location of your home, the size of your installation, and the value of your home. But multiple research reports and testimonials have shown that each $1 in energy bill savings is worth $20 to your home’s value. So if your system saves you $1,000 per year, the solar panel system will add about $20,000 to your home value. This more or less allows you to get your money out of it entirely, especially if you benefit from tax incentives on the front end. My next post will show this in more detail.
In the next post, I will get into the specifics of how much my system cost and all the financial considerations. But high level, before tax incentives, my system cost about $18,500 and I got a relatively small system. You may look at that number and wonder how you will be able to afford that. Let me calm your anxiety and let you know there are options, although the exact specifics differ state by state. Many solar manufacturers offer an option to buy or lease or other hybrid financing choices. I will note, however, that North Carolina and a few other states do not allow leasing of residential solar panels. Generally speaking, whether you buy with cash, get a home equity loan, or lease it through the manufacturer, the numbers still work. Meaning year-in and year-out, you will still save money after the financing costs. How much is a case by case situation. With that as a teaser, I will promise to go into more details in the next post (I apologize for sounding like a broken record!).
My solar panels are connected to my utility. So the excess energy I produce gets pushed onto the grid and I’m credited for that amount (“net-metering”). Meanwhile, if there are days I produce less than I used, I can pull additional electricity from the utility to supplement. On a monthly basis, the amount generated is netted against the amount used 1 for 1 (true for North Carolina and many other states, but it does differs state by state), and if there is a resulting bill payment due, I pay it (typically in winter months when there is less daylight) or if there is a net credit, I pay no bill and the excess credit is carried over to next month’s bill (primarily the spring, summer and fall months).
Most solar panels have a guaranteed useful life of 25 years, and SunPower has the best guarantee offer from any other manufacturer I looked at. Beyond the guaranteed 25 year period though, solar panels can still be producing solid energy for 30 or 40+ years.
Some of the very first solar panels manufactured in the 1950s are still producing energy today! And rest assured the panels manufactured today, about 65 years later, are a little higher quality than the very first panels.
I must tell you, it feels pretty good knowing my house is basically self-sufficient in terms of energy production for decades to come! Solar is sexy, isn’t it?
While the primary focus for many, myself included, is how to go solar and save some green (cash that is), the other huge benefit is “going green”. Yes, it is a huuuuge (Donald Trump voice) benefit and something to feel good about. For my relatively small system, in the month of March (not a huge production month compared to others), my system saved 905.21 pounds of CO2 emissions which is the equivalent of 10.53 fully grown trees for 10 years or 945.55 miles not driven. Over the lifetime of my system (4 winter months at this point), my system has saved 2,690 pounds of CO2 which is the equivalent of: 2,905 miles not driven, 137 gallons of gas not used, 1,310 pounds of coal not burned, 3 barrels of crude oil not used, 31 mature trees grown, or 964 pounds of garbage recycled. Think of the impact of this year after year…for decades to come! More people need to get on this bandwagon pronto! Solar is sexy, isn’t it?
Solar is sexy! All-in-all, I consider this a pretty creative way to save some money, don’t you think? Living frugal isn’t all about cutting back and cutting back some more, it’s also about finding unique ways to save money, but not sacrifice lifestyle. That’s The Green Swan way of life in action. Work harder, work smarter, retire earlier and find your beach!
What other questions do you have? Any other myths I can bust for you? Leave a note in the comments below and I’ll be happy to address.
Also let me know if you are now interested in solar panels yourself. Buying solar panels makes sense for the home owner such as myself, owners of rental properties (either residential or office) and business owners who own their own real estate. As previously mentioned, I bought SunPower solar panels and they offer a pretty generous referral program. If you are interested, reach out to me in the Contacts page (link) and I’ll let you know how it works.
The Green Swan