Part 1 of 2 of my decision process and subsequent installation of a solar energy system (see part 2, Solar Power Installation California Bay Area).
VERY long story short: We’re getting a 3.9 kw (DC) solar photovoltaic system installed on our house that should have a “payback” of 8 – 10 years.
Now, all the sordid details:
Why we need / want solar: I posted earlier about how we’ve been looking for ways to save electricity. Unfortunately we’ve hit the point of diminishing returns for conservation without significantly changing our lifestyle. We realized that changing consumption would only get us so far… we needed to begin production!
My Solar Love Affair Begins: I’ve always been fascinated by solar power. As a kid I loved electronics and did weekly bike rides to Radio Shack to spend all my money on motors, LEDs, etc. I remember getting my first solar powered calculator and falling in love from that day forward. I was so enthralled with power from the sun that for my high school “Senior Project” I chose to write about solar energy (thermal and photovoltaics).
Fast forward to 2010: A few entrepreneur friends and I went to a “green” networking event and the place was full of solar companies. I thought I’d pass by and hear their sales pitch. One of the more aggressive companies was able to get me to fill out a “free consultation” card… a few days later I had a voicemail for an appointment. I was honestly dreading the meeting. I always thought solar energy for the house would be cool, but wasn’t really considering adding residential solar power to our home because:
- Our roof has about 5 years of life left. No sense in getting solar installed only to to have it removed and reinstalled in 5 years when the roof needs to be replaced.
- I heard that the “solar break even” or “solar payback” periods were 12 – 15 years.
- We’re not sure we are going to stay in our current house long term.
- I kept thinking “Solar tech will just get more efficient and cheaper, so I’ll wait.”
Well, I figured I’d have the solar sales guy come by to do his song and dance. During the appointment the most interesting things I leaned:
- The goal of a solar install (at least in the California Bay Area) isn’t to remove your need to be “tied to the grid” but to remove you from the top tiers of electricity prices. For example, if you use 200% of your “baseline” you get charged $0.50 a killowatt hour!! NOTE: If you are tied to the grid (and you probably will be unless you want to spend $20k more on a battery system) it is required that the grid be powered for your inverter to function. That means if the grid goes down at noon then your inverter turns off and your panels, even with full sun, will not produce a single watt of power. A bummer for sure because if the power company is down for 3 days, you will be too, even with a 4k watt power plant on your roof.
- Based on the above, if you use a lot of electricity (like we do) then your break even happens much quicker. We average about $160 a month just in electricity (about 30 kwh/day). I’ve been told you should be at about $80+ a month if you are thinking about solar for mostly monetary reasons.
- We could just replace the roof section where the solar array would go and leave the rest of the roof for replacement down the road.
- Rebates and Credits: There is a 30% Federal Tax Credit of on a solar system install and California State “Go Solar” rebate of $1.10 per watt installed.
- The CA rebate was VERY CLOSE to dropping down to the lower “step” of $0.65 within a couple weeks, so if we wanted to do solar, now was the time to do it. Going from $1.10 to $0.65 would be an opportunity cost of potentially $1,755 (3900 x $0.45).
After really thinking about the items above, we realized that we’d probably stick around in the house we’re in and that it financially made sense for us to get solar and to take advantage of the great rebates and credits.
Our final decision process was as follows:
1. Does solar make sense financially? Fortunately this was pretty much already resolved. I got in touch with a few people that have had solar for up to 3 years and all were very happy with the ROI and the efficiency of their systems / cost savings.
2. Which panel manufacturer? The manufacturer of our previous roofing material went bankrupt so we’re kinda sensitive to making sure the panels be covered by a solid manufacturing company.
3. Which installer?: I wasn’t about to sign a contract with the first company that came by (and he really was pushing us to do so). I ended up getting a bunch of referrals and read a bunch of reviews to narrow the ton of California based solar companies down to a handful.
Solar Company Competition: Below are the companies that did on-site evaluations (in alpha order).
Each company had pretty good presentations. In fact, I ran into a problem I didn’t expect: Each company had glowing reviews and a really good value proposition. After an extensive amount of research I had narrowed the list down to three companies: REC Solar, SunLightAndPower, & Super Solar.
SunLightAndPower: A large, well known, reputable company in the SF Bay Area. They have many installs under their belts and the sales rep was extremely helpful and knowledgeable. Their price was the highest of the group, but I felt like there was great value in working with a large company.
Super Solar: Owned by a former employee of SunLightAndPower who had been one of their top installers for about 10 years. They are just a few person company which meant low overhead and a low price. Unfortunately, I just couldn’t get past the fear of working with a small company.
REC Solar: Actually this company wasn’t even on my original list. I was literally about to choose (that night) between SunLight&Power and SuperSolar when I was referred to REC Solar from a really smart guy I met online. I found that REC Solar was the company that was partnered with Costco, so I thought I’d give them a quick chance to throw their hat into the ring. They are a good sized company with a great reputation. The sales rep was amazing to work with, and the proposal was very impressive and competitive with the others I received. Oh, and they were the only company on my short list that was willing to guarantee the CA Rebate at $1.10 even if the application for my array didn’t make the cut before the drop down to $0.65!
In case you can’t tell, I ended up choosing REC Solar
Why REC Solar? Here are some of the highlights of why I want with REC Solar (Renewable Energy Concepts):
- Large company with a ton of installs under their belt
- Partners with Costco
- Very knowledgeable and friendly sales rep and engineering staff
- Guaranteed CA Rebate before the price drop
- Turn key installation. They do everything including permitting with the city, etc.
- Availability of the TIGO Energy optimizer (up to 20% more energy from the array and a cool online monitoring system)
- Price per watt installed was very competitive with the competition
The system details:
- 3,960 Watts DC (3,295 Watts AC) Solar Electric System that would require about 323 sq/ft.
- Estimated 6,378 kilowatt hours produced per year (we use about 9,500 per year)
- 18 – REC220AE-US solar panels / modules (This REC is “Renewable Energy Corporation”) + 25 year warranty
- SMA 3000US Inverter
- Tigo system components
- All labor + 10 year warranty
System Grand Total: $23,800
CA Rebate: $3,440 (estimate based on shading, etc.)
Costco Member Savings $233.60
Costco American Express Savings $116.80
Federal Tax Credit $6,108.00
Net System Cost $13,901.60
Note: This “net cost” doesn’t include the new roof section ($2,400) or the tree trimming ($600).
Our “payback” or “break even” is estimated to be 8 years, and is calculated based on our current usage and a 6% annual utility rate increase. I personally believe 6% is too aggressive, but this is the % that all the solar companies use. Obviously the payback time gets longer or shorter if our kilowatt usage changes (3 girl household) and/or if our electricity rates change.
Another way I calculated the financial aspect of the panels is by setting it up like an annuity.
System cost: $13,900
Periods: 300 (25 year life expectancy)
Future value: $0.00 (assuming worst case that the panels aren’t worth anything after 25 years)
PMT: -100 (we expect to save at least $100 per month in electrical bills)
Based on the above, the annualized rate of return on this system is 7.2% using the “RATE” calculation in Excel. Keep in mind that this is POST TAX MONEY, so when comparing it to another “investment” you’d need to add your tax rate. So, if I’m in a 30% tax bracket my comparable rate would be more like 9.36%! Compared to other investments (especially at 9%) I think solar panels also have much lower financial risk.
When I asked my REC Solar sales rep about which of my friends would and wouldn’t be good candidates for solar he replied:
“Realistically, the cutoff for a decent ROI with PV is going to be around $80 per month. There are infinite reasons to go solar that are not directly related to immediate payback and ROI (increased value of home, hedge against the rising cost of power, property tax exempt investment, very safe and stable part of an investment portfolio (think CD’s but with a higher ROI), and an inflation beating investment) but the reality is the ROI would probably be around 4%-7% (not that bad!).
Also, one day the Plug-in hybrid vehicle, or all electric vehicle will be a reality, which will change the PV industry forever as people will see the value in creating their own “gasoline” for their cars with solar.
There’s also the little part about not buying power from fossil fuel burning sources. Unfortunately at this point, there is not much of a monetary value associated with this (though there should be since the environmental effects do COST money).”
I couldn’t agree more! In addition to the financial reasons to “go solar” I personally put a lot of weight into:
- The fun and cool factor of having your house powered by the sun
- The warm fuzzies knowing you’re doing your part to reduce your carbon footprint
- The joy of fully meeting up with your childhood love for solar!
The panels should be installed this month. I’ll post part 2 with all the installation details when the solar juice is flowing.
Have you thought about getting solar installed? Why or why not? Post your thoughts below. Oh, and if you’re thinking about getting solar, give REC a call and tell them Rob Ludlow sent you!
(For part 2, see: Solar Power Installation California Bay Area – Part 2 )