Should I install a solar system on my roof.
February 9, 2016 2:33 PM Subscribe
A community program in my town (Eugene Oregon) is sponsoring a group purchase and installation of solar systems for homes. How can I think about this more effectively?
I need to get a dollars and cents kind of mindset about whether to do this or not. I have till 2/23 to pay $1k down on installation of a 3kW 10 panel solar system costing around $11k. I would receive some substantial tax credits on the federal and state side, plus a local utility incentive.
I'm having problems wrapping my head around this. On the plus side, solar's coolness factor is up there, I'm kind of technical, have a mini solar panel system I run on the side and don't have any problems with the technical or installation aspects of this. In other words, first on your block to have a solar system...I'm down with that.
On the financial side, it's a loan with the payback time from the solar system being on the range of 10 years. I've been pretty loan averse for my entire life, aside from a mortgage, so trying to assign a monetary value to this outlay is not part of my financial syntax. So far my queries at my financial institution have been pretty much 'WTF?!? solar.'
My roof is on the last third of it's life so un-installing panels in order to do the re-roof job at some point is a factor.
Finally, solar panels would be just one leg of many things I could do to improve my home's conservation factors, some of which are probably more cost effective, like replacing single pane windows and installing a high efficiency wood insert for heat.
At this point, I'm hoping AskMeFi can help me build some awareness. I have too many blank spots in my game plan to be able to take any kind of action, though it seems like a good idea to do.
I need to get a dollars and cents kind of mindset about whether to do this or not. I have till 2/23 to pay $1k down on installation of a 3kW 10 panel solar system costing around $11k. I would receive some substantial tax credits on the federal and state side, plus a local utility incentive.
I'm having problems wrapping my head around this. On the plus side, solar's coolness factor is up there, I'm kind of technical, have a mini solar panel system I run on the side and don't have any problems with the technical or installation aspects of this. In other words, first on your block to have a solar system...I'm down with that.
On the financial side, it's a loan with the payback time from the solar system being on the range of 10 years. I've been pretty loan averse for my entire life, aside from a mortgage, so trying to assign a monetary value to this outlay is not part of my financial syntax. So far my queries at my financial institution have been pretty much 'WTF?!? solar.'
My roof is on the last third of it's life so un-installing panels in order to do the re-roof job at some point is a factor.
Finally, solar panels would be just one leg of many things I could do to improve my home's conservation factors, some of which are probably more cost effective, like replacing single pane windows and installing a high efficiency wood insert for heat.
At this point, I'm hoping AskMeFi can help me build some awareness. I have too many blank spots in my game plan to be able to take any kind of action, though it seems like a good idea to do.
Best answer: I financed my solar panels through a local credit union using an EPA-backed "energy efficiency improvement" loan, which is typically used for installing insulation, replacing old heaters, and that sort of thing, but solar panels qualify because they reduce the amount of power I draw from the grid. The interest rate is absurdly low, only one percent higher than my actual mortgage. In fact, I think of the solar loan as basically just an extension of my mortgage, since the cost of a solar power system is pretty much just added straight on to the value of the house. I can't sell the solar panels independently, but I'll get my money back if I sell the house, so I have not incurred any new obligation by carrying the solar loan - it's a higher monthly payment for a few years, in exchange for a more valuable house, plus a lot of money saved on my power bills.
Beyond that, the solar panels will continue to produce power (=money) for 30 years, long after the loan is paid off. I'm currently two and a half years in, I'm halfway through the loan, and I am on track to break even just over four years from now. This is not at all the kind of economics in play with credit card debt or a loan to buy a car!
I have no regrets and would happily advise anyone to do the same.
posted by Mars Saxman at 2:58 PM on February 9, 2016
Beyond that, the solar panels will continue to produce power (=money) for 30 years, long after the loan is paid off. I'm currently two and a half years in, I'm halfway through the loan, and I am on track to break even just over four years from now. This is not at all the kind of economics in play with credit card debt or a loan to buy a car!
I have no regrets and would happily advise anyone to do the same.
posted by Mars Saxman at 2:58 PM on February 9, 2016
What is your sun exposure like? I live in sunny Southern California with a lot of roof and was told by a solar company that my house wasn't one where solar made economic sense (the widest part of my roof didn't face the optimal direction, the angles weren't ideal, there were too many vents sticking up to put enough panels to make a difference, trees that didn't belong to me blocked sun at the strongest part of the day, and my current consumption of electricity was already very low). I figured if a company out to make money thought my home was a bad solar bargain, I ought to listen.
So maybe get an evaluation from an unrelated solar company as to whether your house is a good candidate to start with?
posted by cecic at 3:56 PM on February 9, 2016 [1 favorite]
So maybe get an evaluation from an unrelated solar company as to whether your house is a good candidate to start with?
posted by cecic at 3:56 PM on February 9, 2016 [1 favorite]
Best answer: If you want a dollar and cents mindset, you need to fill in the financial details. It's not entirely clear that this is a good deal; it may be great or it may be lousy depending on your situation and only you can know for sure. For what it's worth, I think you've identified most of the relevant factors. Look at it first over the course of the first ten years. On the pro-solar panels side, you have the tax incentives ($3300 for federal, plus whatever your state and utility incentives are) plus the monthly electricity savings*120. On the cost side, you have the interest on the loan (if it's 0% then great, I couldn't tell from your question. If we say it's at 5%, that's about $2,700 over the life of the loan. If it's 3%, more like $1,600), the added cost to re-roof your house (a quick search online produced the estimate of $1,500, though this surely varies tremendously based on your home and area), the opportunity cost of the money you spend on the down payment and capital payments (if we assume you could get 5% average in the stock market, for example, the opportunity cost adds up to roughly $4,600 over the course of the first ten years), and any expected maintenance on the solar panels that wouldn't be covered by warranty.
Just for illustration, assume federal tax incentives are $3,300, state/local are $500, you save $50/month on your electric bill, loan interest is 3%, re-installing the panels is $1,500, you could get a 5% return in the stock market, and you don't have any maintenance costs on the panels themselves. 6,000+3,300+500-1,600-1,500-4,600 = $2,100 savings over the course of ten years. If instead the interest rate on the loan is 5% and you only save $35/month on your electricity, then instead you're $800 in the hole.
Next, estimate how long the solar panels are expected to last before needing to be replaced. Say they have a total lifespan of 25 years, so you have 15 more years to go (from what I can tell most will last longer than 25 years, but you can also expect to see its power output degrade by about 20% over that period so you might be ready for a replacement). After the first ten years, the yearly benefit to having the panels is the annual cost savings on your electric bill minus the opportunity cost of the $11,000 you've sunk into it ($550/year if we assume 5% investment return) and any pro-rated expected maintenance costs. Multiply this by the number of additional years you expect them to last. If maintenance costs are zero and you save $50/month on your bill, then you net $50/year, for a total additional benefit of $750 (over 15 years). If we use the second set of assumptions above then you ultimately lost $50 over 25 years by installing the panel; if we use the first set of assumptions you've saved $2,050.
I'm sure the above analysis is incomplete. There might be property tax exemptions, we might see the cost of electricity go up which would mean your monthly electric savings increase over time, etc. I don't think it's a slam dunk one way or the other; best you can do is fill in your own best guesses and go from there.
posted by exutima at 4:02 PM on February 9, 2016 [1 favorite]
Just for illustration, assume federal tax incentives are $3,300, state/local are $500, you save $50/month on your electric bill, loan interest is 3%, re-installing the panels is $1,500, you could get a 5% return in the stock market, and you don't have any maintenance costs on the panels themselves. 6,000+3,300+500-1,600-1,500-4,600 = $2,100 savings over the course of ten years. If instead the interest rate on the loan is 5% and you only save $35/month on your electricity, then instead you're $800 in the hole.
Next, estimate how long the solar panels are expected to last before needing to be replaced. Say they have a total lifespan of 25 years, so you have 15 more years to go (from what I can tell most will last longer than 25 years, but you can also expect to see its power output degrade by about 20% over that period so you might be ready for a replacement). After the first ten years, the yearly benefit to having the panels is the annual cost savings on your electric bill minus the opportunity cost of the $11,000 you've sunk into it ($550/year if we assume 5% investment return) and any pro-rated expected maintenance costs. Multiply this by the number of additional years you expect them to last. If maintenance costs are zero and you save $50/month on your bill, then you net $50/year, for a total additional benefit of $750 (over 15 years). If we use the second set of assumptions above then you ultimately lost $50 over 25 years by installing the panel; if we use the first set of assumptions you've saved $2,050.
I'm sure the above analysis is incomplete. There might be property tax exemptions, we might see the cost of electricity go up which would mean your monthly electric savings increase over time, etc. I don't think it's a slam dunk one way or the other; best you can do is fill in your own best guesses and go from there.
posted by exutima at 4:02 PM on February 9, 2016 [1 favorite]
I think your roof lifespan may be the deal breaker here.
posted by latkes at 4:31 PM on February 9, 2016 [1 favorite]
posted by latkes at 4:31 PM on February 9, 2016 [1 favorite]
Sometimes, those state or federal tax credits suddenly stop being available. I suggest you crunch the numbers both with and without them. If those disappear next year, does this still look appealing?
Call a roofer. Ask for a quick and dirty estimate of how much this adds to the roofing bill. Does it still make financial sense?
Do you have an estimate on how much this is likely to lower your power bill and/or bring in income for selling the excess?
How often do you go without power? Does that incur costs such as food spoilage that are likely to stop happening if you have your own power supply?
You might also do a little reading related to the big picture. Distributed, environmentally friendly power infrastructure has larger implications for the potential economic and environmental health of your region. Those implications can impact your welfare in ways that can be quantified as a dollar value and in terms of quality of life where dollar value may matter a whole lot less to you.
posted by Michele in California at 4:45 PM on February 9, 2016
Call a roofer. Ask for a quick and dirty estimate of how much this adds to the roofing bill. Does it still make financial sense?
Do you have an estimate on how much this is likely to lower your power bill and/or bring in income for selling the excess?
How often do you go without power? Does that incur costs such as food spoilage that are likely to stop happening if you have your own power supply?
You might also do a little reading related to the big picture. Distributed, environmentally friendly power infrastructure has larger implications for the potential economic and environmental health of your region. Those implications can impact your welfare in ways that can be quantified as a dollar value and in terms of quality of life where dollar value may matter a whole lot less to you.
posted by Michele in California at 4:45 PM on February 9, 2016
Nevada recently passed rules that raise the monthly connect fee and reduce the credit for generated power. If there is any possibility of this happening in your state it should be part of your calculations.
A quick googling shows that Arizona, Maine, and California may also be raising fees. Many others are considering raising fees and reducing net metering.
posted by H21 at 5:14 PM on February 9, 2016 [1 favorite]
A quick googling shows that Arizona, Maine, and California may also be raising fees. Many others are considering raising fees and reducing net metering.
posted by H21 at 5:14 PM on February 9, 2016 [1 favorite]
You need an accurate estimate of how much power you'd actually generate (and how much power you use) over the course of a year, and whether there are net metering credits available on your electric bill if you feed power back into the system. Depending on how much sun you get, how much power you actually use, and how the net metering works in your area, you could come out ahead, break even, or have some expensive self-satisfaction. And if the rules on net metering change, you could find that your great investment isn't worth as much (which is what is happening in Nevada and what the electric utility lobby in California is trying to make happen there).
(Also in some areas the net metering is a lousy deal; you pay retail for power, but you get credited wholesale.)
If you start with an estimate of how much money it would save you over a year (if it saves you anything at all), you can then figure out how the installation costs work out for you (financed through group purchase; financed through HELOC or traditional loan; paid off up front). It could be that you'd save money with a HELOC, but lose money with their financing, or you could come out ahead either way. Also read the fine print of how their financing works, if it includes any hidden costs, and if it includes warranty and maintenance coverage. It would suck to have a loan on a system that didn't work and didn't have any support.
The group buy thing didn't work for us right now, but because of it now I have solar on my list of desired home improvements, and it'll probably happen, paid for by us, if/when we get a roof deck. We had to get through refinancing our house first, and that's now done. A HELOC is our next step.
posted by fedward at 5:54 PM on February 9, 2016 [1 favorite]
(Also in some areas the net metering is a lousy deal; you pay retail for power, but you get credited wholesale.)
If you start with an estimate of how much money it would save you over a year (if it saves you anything at all), you can then figure out how the installation costs work out for you (financed through group purchase; financed through HELOC or traditional loan; paid off up front). It could be that you'd save money with a HELOC, but lose money with their financing, or you could come out ahead either way. Also read the fine print of how their financing works, if it includes any hidden costs, and if it includes warranty and maintenance coverage. It would suck to have a loan on a system that didn't work and didn't have any support.
The group buy thing didn't work for us right now, but because of it now I have solar on my list of desired home improvements, and it'll probably happen, paid for by us, if/when we get a roof deck. We had to get through refinancing our house first, and that's now done. A HELOC is our next step.
posted by fedward at 5:54 PM on February 9, 2016 [1 favorite]
First, do you spend at least $75/mo on electricity? If not, it's not really worth it (see caveats about net-metering above).
Second, do you have enough credit to also fix the other things? If so, don't compare to fixing the windows, compare only to itself/rate-of-return. You can do both. If not, your ceiling/attic should be insulated before you do anything else.
Three, you are using wood heat? Get a heat pump with your solar panels and you'll drop an immense amount of pollution (CO2/J is highest for wood, more than any other common fuels (coal, natural gas, propane), not to mention the horrible particulate emissions). You can't seal your house up right now because the wood stove needs to bring in cold air for every bit of warm air it sends up, but if you switch to a heat pump you can seal everything up tight with a few $4 tubes of caulk.
If your house is oriented east-west (so there is flat roof surface facing south) with enough roof surface for all the panels and no trees to block the sun March through November (the sun is higher in the sky then, which is why the months matter; Dec-Feb get negligible insolation), then you have the best possible installation candidate.
Also consider replacing just the roof area where panels are being installed with a metal roof at the same time? The early cost might be worth not removing the panels later.
posted by flimflam at 6:44 PM on February 9, 2016 [1 favorite]
Second, do you have enough credit to also fix the other things? If so, don't compare to fixing the windows, compare only to itself/rate-of-return. You can do both. If not, your ceiling/attic should be insulated before you do anything else.
Three, you are using wood heat? Get a heat pump with your solar panels and you'll drop an immense amount of pollution (CO2/J is highest for wood, more than any other common fuels (coal, natural gas, propane), not to mention the horrible particulate emissions). You can't seal your house up right now because the wood stove needs to bring in cold air for every bit of warm air it sends up, but if you switch to a heat pump you can seal everything up tight with a few $4 tubes of caulk.
If your house is oriented east-west (so there is flat roof surface facing south) with enough roof surface for all the panels and no trees to block the sun March through November (the sun is higher in the sky then, which is why the months matter; Dec-Feb get negligible insolation), then you have the best possible installation candidate.
Also consider replacing just the roof area where panels are being installed with a metal roof at the same time? The early cost might be worth not removing the panels later.
posted by flimflam at 6:44 PM on February 9, 2016 [1 favorite]
Best answer: First thing to do is calculate your total cost after incentives and then compare it to the value you generate by reducing your electric bill. PV Watts is a good estimator for generation, but make sure you have the orientation of your panels right. If your roof is shaded some of the time, you'll need to account for that too. Do the math and see if this makes sense.
For what it's worth, I don't think $3.66/watt is a particularly great deal. It is probably about normal.
I agree with flimflam that you should consider redoing your roof with a material that will last as long as the panels at the same time.
It sounds like there are lots of other energy saving investments you can make. If you can afford to make them plus solar, do both. If you can only afford those other changes (air sealing and insulation are probably the most effective for your cost), then do those first.
posted by ssg at 7:56 PM on February 9, 2016
For what it's worth, I don't think $3.66/watt is a particularly great deal. It is probably about normal.
I agree with flimflam that you should consider redoing your roof with a material that will last as long as the panels at the same time.
It sounds like there are lots of other energy saving investments you can make. If you can afford to make them plus solar, do both. If you can only afford those other changes (air sealing and insulation are probably the most effective for your cost), then do those first.
posted by ssg at 7:56 PM on February 9, 2016
I'm doing this right now. In Scandinavia. My neighbor did it, and his bills are done to one tenth of what they were before.
I also have the problem of an old roof, and the installation will be made in a way so it can be taken off and placed on the ground when the roof needs changing.
posted by mumimor at 6:11 AM on February 10, 2016
I also have the problem of an old roof, and the installation will be made in a way so it can be taken off and placed on the ground when the roof needs changing.
posted by mumimor at 6:11 AM on February 10, 2016
Best answer: Consider downloading RETScreen software, this is free and allows you to take into account all the parameters for your different options. It can account for costs, subsidies, demand, output, etc. I help run undergraduate programmes in renewable energy and we find this to be something that students can adopt pretty easily to carry out basic assessments.
posted by biffa at 7:51 AM on February 10, 2016
posted by biffa at 7:51 AM on February 10, 2016
Response by poster: These are all really helpful insights. The installer is predicting 15% savings over our normal use via the solar system. We would be net metering, so feeding back into the grid, not running any kind of battery bank or trying to go off-grid. We have excellent south exposure with the exception of a tree we would need to cut down.
Redoing the roof in that area is a good idea. I've considered doing exactly that, however, I'm unclear if I can do just a partial roof section. Sounds like that is a viable idea so I'll checking that out as well. I had planned to do the whole roof in metal at some point, this is just another incentive to get it done sooner rather than later.
Next next step is to investigate those EPA backed loans. Our utility bill baselines around $135 per month on average, jumping up to $220-300 during the winter using the heat pump. So, yes we're considering an insert as a way to supplement this system.
These are all very useful insights. I'll need to get busy crunching some numbers now.
posted by diode at 8:26 AM on February 10, 2016
Redoing the roof in that area is a good idea. I've considered doing exactly that, however, I'm unclear if I can do just a partial roof section. Sounds like that is a viable idea so I'll checking that out as well. I had planned to do the whole roof in metal at some point, this is just another incentive to get it done sooner rather than later.
Next next step is to investigate those EPA backed loans. Our utility bill baselines around $135 per month on average, jumping up to $220-300 during the winter using the heat pump. So, yes we're considering an insert as a way to supplement this system.
These are all very useful insights. I'll need to get busy crunching some numbers now.
posted by diode at 8:26 AM on February 10, 2016
The installer is predicting 15% savings over our normal use via the solar system.
Do you mean that you will produce 15% more electricity than you use? Because that would mean you use only a very small amount of electricity. Or you would only produce 15% as much electricity as you use, in which case you use a huge amount of electricity and could probably save a lot by reducing your electricity use.
Do you mind sharing your annual electricity use here?
I wouldn't consider re-roofing just a section of a roof, but you could consider re-roofing just one side of your house (assuming you have a simple roof). Especially as you would just be re-roofing the south side and then north side would be expected to last longer anyways (so you could potentially go even longer before replacing the north side).
posted by ssg at 3:15 PM on February 10, 2016
Do you mean that you will produce 15% more electricity than you use? Because that would mean you use only a very small amount of electricity. Or you would only produce 15% as much electricity as you use, in which case you use a huge amount of electricity and could probably save a lot by reducing your electricity use.
Do you mind sharing your annual electricity use here?
I wouldn't consider re-roofing just a section of a roof, but you could consider re-roofing just one side of your house (assuming you have a simple roof). Especially as you would just be re-roofing the south side and then north side would be expected to last longer anyways (so you could potentially go even longer before replacing the north side).
posted by ssg at 3:15 PM on February 10, 2016
This thread is closed to new comments.
posted by acm at 2:54 PM on February 9, 2016