About a year ago, we got solar panels installed on the roof of our condo. In that time, our panels have generated around 6.58 MWh of power (/work?). Enough to power our home, eliminating our electric bills and then some.
Our home is up in the cold, dark, often rainy Northeast. The roof with our panels are non-optimally placed, they face somewhat south (to our benefit), but also mostly eastward. Even so, we’ll likely recoup our investment in the panels in about nine years of its purchase. And then for another eleven years we’ll benefit from the free energy to come.
I don’t often write posts like this with lots of external tutorials, advice and how-to’s. But I’m a big fan of our solar panels and know that the idea of investing so much in a new technology for your home can be a big daunting process. So I’ve outlined below what our financials have looked like with solar: the cost, the benefits, and some tips on how you could get started as well.
Our solar array consists of 23 270 kW Canadian Solar panels (which, despite the name, are manufactured in China). These panels are attached to micro-inverters, which allow more individualized panel monitoring and energy input, and are lined with snow guards that prevent roof-valanches from burying our neighbor without warning in the winter. Our installation comes with a 10 year warranty and the panels themselves are guaranteed for 20 years.
The sticker cost of our solar array was $20,004.20. However, we got $6001.26 back in the form of federal tax credits and additional $1000 back due to incentives from our state. So on net we only paid $13,002.94 for the panels and installation.
Because of the cost of the panels, we’ve increased our homeowner’s insurance to the tune of $60/year. In addition, we paid $275 to our real estate attorney to amend our condo agreement. That way, it was clear and on the record that 1) our neighbor approved the build and 2) our unit alone owns the panels.
- Upfront cost: $13,277.94
- Ongoing cost: $60/year
SRECs and Net Metering
As we generate electricity, we are issued SRECs which can be sold to public utilities to meet their state-mandated portfolio quotas for renewable-sourced energy. Note that these SRECs are independent from the buying and selling of the energy itself. We get 1 SREC for each 1.2 MWh of energy we produce. That averages out to about 20.925 cents/kWh of energy our array generates. The value of our SRECs will decline over time by 5% per year and we will cease to generate SRECs by the 10th anniversary of our system’s installation.
In addition, we live in a net metering state. That means that our meter backslides and we get paid for excess solar energy generated by our array and fed back into the grid during the day. We are paid around 18.462 cents/kWh of energy we pump back into the grid. Last year we used only 3615 kWh for our own electricity use, a little more than half of what we generated.
These net metering credits do not get sent to us in the form of cash, but instead just credits on our electricity bill. This isn’t super useful to us since, well, our electricity bill is always $0 (we’re using solar, remember). But, there is a way around this. By filling out a little bit of paperwork, we can instead have our energy credits applied to someone else’s bill instead of our own. In this way, we sell our energy credits at a 20% discount to a couple of our friends. It’s a win-win: they get a discount on their electricity bills and we get to off-load otherwise-useless credits.
- First year SREC income: $1376.87 (estimated, not yet paid out)
- First year savings on energy bill: $607.40
- First year energy credit reselling income: $437.92
- Total first year gross: $2422.18
- Total first year net (post-tax, after insurance): $1,683.97
Projected Revenue and IRR
Given our current projections for revenue, our panels should break even in about nine years:
Over the period of twenty years, we’re looking at a 13% IRR for the solar installation based on gross revenue and 7% IRR based on net post-taxes. That is to say, not bad for a home improvement project. The return would have been much better had we financed the whole thing like Gen Y Finance Guy did with his solar installation.
What To Do If You Want To Install Solar
- Make your home energy efficient. Before investing the big bucks in solar panel, first start by optimizing how you use energy in your home already. We’ve found that easy, cheap solutions like LED light bulbs and insulation pay for themselves within a year. Look to the “energy efficiency pyramid” for guidance on where to start.
- Determine whether your roof is a good candidate for solar. Online services such as Google’s Project Sunroof will help estimate how many hours of light your roof gets and which portions of your roof are most optimal for solar panels. Project Sunroof also gives a breakdown of the expected cost and payback period for panels on your roof, which I’ve found to be close to my real numbers at least a year in. They even factored in federal tax credits, state tax credits, and SRECs into the calculation.
- Get comparison quotes for solar installers in your area. I personally like Energy Sage (not a sponsored link) as a means for generating quotes and comparing prices on costs for local solar installers.
- Determine financing options in your area. For example, our state subsidizes banks that lend money for residential solar arrays. That means, had we financed our panels, we could’ve paid nothing up front and gotten rates as low as 1% interest (no, that’s not a typo). So even if you don’t have the money up front for a five-figure solar installation, you might be able to get a ten-year loan, perhaps never spending more than your current energy bill to do so.
- Consider community solar projects or alternative utility providers if solar doesn’t work for your home. If you’re a renter or if your roof isn’t well-positioned for solar, but you are interested in bringing renewable energy to your home, try participating in a community solar project in your area. Or consider connecting your utility account to an alternative energy provider such as Arcadia Power. By telling your public utility that you want renewables for your home, you can help signal the growing public support for solar and wind investment in your area.
Have you considered installing solar panels? What sort of “green” additions have you made to your home?