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Solar panels good investment even for low usage household

Discussion in 'Tesla Energy' started by brucet999, Jun 6, 2015.

  1. brucet999

    brucet999 Active Member

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    My wife and I are frugal users of electricity, running $60 per month average SoCal Edison bills. Solar panel sellers say $150 or more billing per month is necessary to pay off the investment in a reasonable time. Even so, I calculate that solar would be a good investment on a strictly financial basis even at a 12-year break-even.

    I looked at my Solar City quote for a modest sized array that would cover our meager household usage plus expected annual Model S demand, and realized that even a 3kW system that would project out to cover only our present usage would be a good investment. Scaling the larger system down to cover just our house, I arrived at a price of $10740 (after Federal tax credit) which, against a $720 annual savings at today's rates (and they will certainly be going up) amounts to a 6.7% tax-free ROI with negligible risk.

    If I were to source components online and install the system myself (which any DIY with good roofing and electrical skills can do), I could pare the cost down to about $5,400 (after Federal tax credit) and a tax-free yield of about 13.3%.

    Our rental properties yield much better than that of course, but in a land littered with earthquake faults in a state with high unemployment/underemployment, they are not risk free. We have a very good investment manager handling our equities, but a low-risk portfolio can't match 6.7% tax-free, much less 13%, and the Market does have some risk.

    One might argue that lack of liquidity is a downside, but as long as we live here we have to use electricity and if we move we can get back the value of the system in a higher sale price and quicker sale vs similar properties without solar.
     
  2. Brit4864

    Brit4864 Member

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    I'd say yes they are a good investment especially if you bought the property recently and plan to live there for a few years. That's exactly what I did. Bought the house (2400 sq ft) in 2013 and added a 10Kw solar rooftop array exactly one year ago.

    In addition to any tax incentives that may be offered, the hidden benefit is the value it will add to the property. In my case, it added about $20k which is close to the price for the system minus the 30% Federal Tax Credit. FL doesn't give any tax incentives other than zero sales tax for purchase and installation and an exemption for property tax valuation.

    I was paying an average of $170pm to FPL. Now it's around $20-30pm. I'd say just do it!
     
  3. EVSteve

    EVSteve 110% Solar Powered

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    Highly recommend getting a quote from another company just to compare costs. Solar City and other PPA installers will typically inflate the installation price to push customers into a PPA or lease instead of buying the system outright. Also consider different inverter options and panel types to maximize production per panel. This is vital not only from a ROI perspective but also installation and reliability costs. I have never dealt directly with Solar city but I would expect they have a typical installation of a set inverter and panel type.

    Forgot to add. Check the fine print on the tax credits and any local rebates. They sometimes require a license number of the person doing the installation and will not validate the credit or rebate without the system being installed by a licensed installer. We ran into that and would have forfeited $7,500 had we done the installation ourselves.
     
  4. HankLloydRight

    HankLloydRight Fluxing

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    I just went with a 20 year PPA with Solarcity. I'm paying 6.6cents/kWh. And I have a small ~3kw system (15 panels). I think the break-even point is about 6 years, after that, it's gravy. My power usage before the panels was about 550kWh/month, but I went through and turned off a lot of things that didn't need power, and now I'm averaging 330kWh/month (not including car charging). The solar panels will cover that usage plus enough to charge my car over the course of a year. For the last two months, I've had a net metering kWh credit, which I suspect will continue throughout the summer. And with the PPA lease, I didn't have to lift a finger to get the system installed or maintained. And after a few years, I could buy-out Solarcity if I wanted to.
     
  5. EVSteve

    EVSteve 110% Solar Powered

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    If you signed a PPA (Power purchase agreement) how do you have a "break even point"? There's no break even point as you don't actually own the system. Theres also a rider which raises that 6.6 cents/kWh every year. Also keep in mind you forfeited every single incentive including the 30% federal tax credit and any local rebates which amounts to thousands of dollars Solar City pockets as the true owner of the system. In addition should you ever need to sell your home the new owner will have to assume responsibility of the lease. This makes the property more difficult to sell whereas having a customer owned system adds value to the property.
     
  6. HankLloydRight

    HankLloydRight Fluxing

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    It works for me. No, the 6.6c is fixed. It's 100% pre-paid, so there are no increases. I don't care about the incentives because I didn't pay one dollar to have the system installed. I paid a one-time fee of $4k. That's it. $4k for 20 years of 100% of the solar energy the panels produce. I can also pro-rate that when I go to sell the house and the buyers just take over the lease. OR, I could just buyout Solarcity and own the system before selling it. What responsibility is there with a new owner taking over the lease? There's nothing to do, and they get the solar energy for the duration of the lease. Break-even is over not having solar and paying grid rates. It's really pretty simple, it seems like you don't understand how it works.

    Oh, and one more thing.. if the panels produce LESS than Solarcity estimates they'll produce, I get check for the difference. If they produce MORE, I get to keep that energy for free.

    - - - Updated - - -

    How is it more difficult to sell?

    "Hello buyers.. for the next X years, would you prefer to pay 6.6c/Kwh for power from the solar panels, or 16.9c/kWh from the grid?" Yeah, real hard sell.

    - - - Updated - - -


    Oh, and one more thing... over 20 years, the solar panel generation will have saved me $12k over paying for grid power, or an ROI(irr-post-tax) of about 15%.

    And over those 20 years, if anything breaks or needs service, it's on SolarCity's dime, not mine. At the end of 20 years, they'll come and totally un-install it, or I can buy out the system.

    I really don't see any downsides here.
     
  7. cantdecide

    cantdecide Member

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    The federal 30% doesn't apply to rental properties, so tends to be a longer break even.
    Once your electricity is cheap you can also consider optimizations like heat pump for hot water etcetera...
    BTW, for your break even calculations did you take into account any time of day advantages you are likely to get in summer? I.e. get solar at peak rates and buy it back off peak at night.
     
  8. brucet999

    brucet999 Active Member

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    As stated, we are on tiered rates, so no TOU. Off-peak TOU rates here are much higher than tiered rates at low total consumption levels.

    Since I don't pay utilities on rental properties, it never occurred to me to install solar there.

    - - - Updated - - -

    $145/mo saved x 12 / 20,000 = 8.7% tax-free return on investment; even better as FPL raises rates.
     
  9. EVSteve

    EVSteve 110% Solar Powered

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    Making a lot of assumptions regarding the rate structure of your electricity provider is foolish. A lot can and will change over the course of the next 20 years. Those changes could result in a buyer being locked into unfavorable circumstances. There's also the possibility that a better cheaper solution comes along as technology advances. Those solutions may make the grid even cheaper than the 6.6 rate meaning you'll be paying MORE for power over the life of the system. Meanwhile they're stuck with an antiquated system that they'll have to negotiate with SC to have upgraded. What would SC's incentive to cooperate be when they're already locked into a 20 year contract? It should also be mentioned that after that 20 year lease its either buy the system or they come and remove it from your house. Being that you're no longer a customer do you really believe they'll be extra careful to repair each and every hole left by the racking? I also hope you replaced the roof prior to this installation as any future roof work will require the complete removal and reinstallation of the system at your expense.

    Systems rarely if EVER have a component failure as there are no moving parts and if those parts ever do fail it's typically in the first few years of operation. Manufacturer warranties from reputable companies would cover any costs associated with such failures. Our Panels carry a 25 year warranty for 80% output and the inverters follow suit.

    Defend the purchase all you like. The bottom line is that anyone installing solar should always take the credits and buy the system outright with cash. PPA and lease companies are making money hand over fist with this business model. If it were so great for the consumer and such a bargain this would not be the case. They would need scale to turn even a small profit.
     
  10. brucet999

    brucet999 Active Member

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    #10 brucet999, Jun 6, 2015
    Last edited: Jun 6, 2015
    Here in sunny, SoCal, (please send us some rain) solar radiation in Dec Jan is 42% of June July and we are same latitude as southern Spain and Beirut, so I think you can count on closer to 30% if you can keep the snow off the panels. Cold and sunny actually produces more PV power than hot and sunny, but you guys have a way fewer sunny winter days than we do.

    But with a fixed 6.6 cent rate and guaranteed yield, it won't matter much to you anyway as you will be getting what you contracted for.
     
  11. brucet999

    brucet999 Active Member

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    I too would rather own than lease, but, please, grid power rates going down in the next 20 years? :)

    This is America, after all. Even if some super cheap power generation breakthrough were announced Monday morning, planning, permitting, environmental impact studies, NIMBY lawsuits and finally construction time of just a pilot plant would take a decade or more, followed by a trial period before the whole process would start over again for construction of a full-scale plant.

    I don't think Hank has to worry about paying over Grid rates during his lease.
     
  12. HankLloydRight

    HankLloydRight Fluxing

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    I'm not defending it, I'm just explaining it so you understand how it works.

    Maybe you can explain this to me, but aren't you making the exact same bet ("assumption")?? I assume you paid $X to install your system, and got $Y back in subsidies and credits. So your net cost is $X-$Y. Call that $Z. I also assume you know (or can easily derive) with some pretty good accuracy how many total kWh your system will produce over 20 years (SolarCity does this for every contract). So just like I can, you can calculate your net cost per kWh. I know that my system will produce about 62,700kWh. At $0.066 that's a total cost of $4,138. So if you calculate your net cost per kWh, aren't you making the same bet against the grid costs that I am? Do you care to post your net per kWh cost over 20 years? If it's 4c/kWh, can't I say the same thing to you: "Making a lot of assumptions regarding the rate structure of your electricity provider is foolish. A lot can and will change over the course of the next 20 years."?? What we are really talking about is how we financed the investment.. but the bottom line is the actual investment in infrastructure is identical (albeit not the same size).

    Hmm.. again, aren't you also subject to this same restriction? You're also "stuck with an antiquated system" unless you want to invest 10s of thousands of more dollars (plus labor) to upgrade your own system? How is that any different? Will you be able to get the same subsidies and tax credits for upgrading your solar panels in 10 years (as opposed to a new installation)? A lot can and will change over the course of the next 10 years, those subsidies and credits may not be available. I know today how much my system costs, and how much energy it will produce. I really don't care if it's "antiquated" because upgrading down the road is only going to drive up the cost, unless the efficiency of the panels is increased several fold, and that's pretty unlikely.

    And here you're making a really wild assumption about how Solarcity will treat a 20-year long customer. Perhaps I'll be upgrading to a new system? And even if I don't, it's a pretty wild assumption to posit that SC is going to trash my house because they're removing an old system, especially after I've been a customer for 20 years and made them a pile of cash 20 years earlier due to the subsidies and tax credits they were able to enjoy. I guess the sky could also fall.

    So you're saying that these manufacturers will cover all the materials and labor costs associated with replacing defective units? That's cool, because SC offers me the exact same deal -- they take care of everything in case of any failures. Again, I fail to see how that's any of a difference between buying or leasing a solar install.

    You can't make blanket statements like this. Everyone has a different set of objectives and financial goals. You can say "in the long run, it's always cheaper to buy versus lease", but you can't say "everyone should do X". I looked into buying a system outright, and it was a daunting exercise, with a huge upfront investment ($20k), and uncertainty in exactly what subsidies and credits I would get back and when -(months or years later). I would have had to research all the options and choices for equipment, hopefully find a reputable contractor, and manage the entire process, and deal with the state and town for permits, the power company for all the approvals,inspections, and system changes. Then applying for all the subsidies and credits. I'd also be on the hook when something breaks to arrange the work to remove/replace panels (even if reimbursed by the manufacturer) and deal with the hassle and costs of all of that. It's a lot of work, time, and effort to manage all of that, and I don't know about you, but my time is money. ... OR, I could just lease the system, and do nothing other than open the door for SC when they got here and let them do it all from initial inspections through to energizing the system (actually, I did have to "flip the switch"). Did that cost me some money compared to buying a system? Sure it did, I'm not fooling myself into thinking I "got a better deal". But what I did get was a completely turnkey system that I didn't have to do anything for other than sign a few documents and make a one-time payment.

    I can't follow your logic here. They're popular because they are good deals for both parties. They're entitled to make a profit (and they obviously are), and the customer gets a great deal on power for 20 years compared to the grid. It's a win-win. Is it as good as doing it yourself? No, I never said that, nor would I. But that doesn't make it a "bad deal"... for me, and thousands of other people, it's actually a better deal than buying because it's so freaking simple. And now I have solar power for 20 years well, well below grid rates.

    And unless aliens come down and provide us with some magical new instant power generation technology, I seriously doubt that grid rates will ever drop below $0.066/kWh. And actually, my "non-generation" (delivery service) rate is currently $0.0674/kWh (+a $20 Service charge) BEFORE I pay for the grid power (currently about $0.09/kWh). So even if the generation power cost went to $0.00/kWh, I'd STILL be paying more than I'm paying for the solar power.

    And in my particular case, I also qualified for the $1000 Tesla+Solarcity rebate, I pre-paid the SC fee in one payment instead of two ($50 discount) and I referred one friend who also installed a SC system ($250 referral credit). So taking all those into consideration, my total solar PPA cost was actually was $2,838, meaning my ACTUAL 20 year cost per kWh is $0.04526. So yeah, I do think I got a pretty good deal in the end. I just like to use the $0.066 rate because that's what the regular SC deal is so it is consistent with other peoples' SC PPA analyses.
     

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