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One of the most common questions we get from prospective customers is “can I just purchase solar panels and install them myself?” The answer to this question depends on a number of factors, chief among them being the amount of time, effort, and energy that a person is willing to devote to the project. A lot of people who are considering doing the installation themselves think the process is as simple as installing some rails on their roof, mounting the panels, and running a few wires into their breaker panel. However designing and installing any photovoltaic (PV) system is vastly more complicated than that. So let’s examine everything that actually goes into properly designing and installing a solar array!
The first step is to select the type of modules, invert(s), and racking to be used for the system. Additionally there are dozens of other components that will need to be purchased and properly configured with one another, from panel clamps, to grounding lugs, to a laundry list of electrical components. All of these products range greatly in terms of price, quality, size, warranty coverage, and compatibility with one another. However once these items have been selected, the installation is still a long way from beginning. Before any of the materials are ordered, three things are needed: an engineer’s stamped letter, a building permit from your local authority having jurisdiction (AHJ), and approval from your utility company (assuming the system will be grid tied). In order to obtain any of these three things a set of detailed design specs must be submitted. These designs must show: the proposed location, tilt and orientation of the array, string size, wire size, inverter size, breaker size, proper grounding, wire configuration, voltage drop calculations, and production calculations, just to name a few. When it comes to configuring a PV system an immense amount of knowledge is required not only to remain code compliant, but also to ensure the highest level of production from the system. If any one component is not properly sized or configured you could not only be losing power production, but could also be creating a potential fire hazard.
Once all the design work has been completed, the building permit issued, and approval from the utility company received, it is now time to begin the installation. If the system is being installed on a roof the person performing the installation will need to be confident that they are able to make anywhere from 50 to over 300 roof attachment points (depending on the size of the system) without creating any leaks. Hopefully the chosen racking system utilizes flashings and rubber gaskets to ensure water tightness. If quality solar panels have been selected, they should be warrantied for 25 years. Therefore it is very important that whatever style of roof attachment is being used will be capable of remaining water tight for a minimum of 25 years. If the system is installed on the ground, heavy machinery will be required to secure the racking firmly and properly in place. Remember all work being done must be completed in accordance with designs approved by a licensed engineer, and will be inspected by the building department.
Once the racking is taken care of, the solar panels must be mounted. This is a fairly simple process, although wire management is vitally important. If wires running form the solar panels to the inverter(s) are not properly protected and secured the system may not pass inspection, and could potentially create a fire or electric shock hazard. If the system is installed on the roof there are very specific provisions in the National Electric Code (NEC) pertaining to wires carrying direct current (DC). Again if any of these provisions are not met, the system will not pass inspection and may need to be entirely redesigned.
The next step is to install the inverter(s). Assuming a string inverter has been selected, all the DC wires from the solar panels need to be properly terminated in the inverter. Whoever is performing this work will be dealing with live wires producing up to 600V in direct current. If these wires are not properly tested and terminated, they could potentially ruin an inverter worth several thousand dollars. If microinverters have been selected, the procedures for setting panels and performing wire management are completely different than they are for installing a system utilizing a string inverter. Once again proper: grounding, circuit size, wire size, conduit size, wire splicing and etc. are all paramount. The importance of attention to these details cannot be overemphasized. Not only is the overall production of the system at stake, but safety and code compliance are major concerns as well.
Next the inverter will need to be wired on the AC side. According to the NEC this phase of the installation can only be performed by a licensed master electrician. For anyone considering installing solar themselves, it is imperative that they factor in the cost of hiring an electrician to perform this work. It is also imperative that prior to reaching this phase of the installation, careful consideration has been given to where and how the PV system will be connected to the grid. Again there are dozens of potentially limiting factors that should have been addressed in the design phase of the installation. Complex upgrades to the service panel are not uncommon in terms of making the panel ready to accept solar backfeed. If this is the case, this work will also need to be performed by a licensed master electrician.
Now that the racking and modules have all been set, the wires run, the inverter installed, and the system connected to the grid, the system must be inspected. Depending on the stipulations set forth by the local AHJ, multiple inspections may be required both during and after the installation is complete. Additionally many inverters (string inverters and microinverters) come equipped with monitoring software. If this is the case, the monitoring system will need to be installed and configured with the home’s Wi-Fi network. Once this is complete and the utility company has installed a meter capable of reading the system’s power production (usually called a “Net Meter”) the installation is complete!
But wait! One thing often overlooked by do-it-yourselfers (and even some solar installers) is that utility companies often offer rebates and incentives to customers who install solar on their grid. Many utilities have different requirements for qualification, but in most cases a simple application is all that is required. If any rebates or incentives are overlooked, the system owner might be throwing away thousands of dollars in free money over the life of their system. Additionally there are important tax documents that need to be filed with the IRS for the system owner to receive their 30% federal tax credit.
So to answer the question of “can you install solar yourself?” the answer is yes – if you are willing to devote a large amount of time and effort to the project. The average person will need to do a tremendous amount of research before they are ready to begin the installation. Additionally they will need to be comfortable working on the roof (in the case of roof mount) or with heavy machinery (in the case of ground mount). They will need a basic to mid-range knowledge of construction, wiring, and electricity (as they pertain to solar). They will need to be willing to invest money in special tools, equipment rental, and hiring an electrician. Furthermore they will need at least one person who is willing to help them, as most phases of the project will require a minimum of two competent workers. So ultimately what the decision boils down to is a question of how much your time is worth to you. And are you willing to spend that time researching, planning, and installing all the components that go into a PV system? The final consideration is how confident you are in your ability to perform the installation at the same level of safety and quality that a professional solar contractor should be able to achieve. Ultimately, whatever you decide, you are making a great decision both financially and for the environment! So feel good… because you are doing the right thing!
Please check out our website at www.altewindandsolar.com and our Facebook page at www.facebook.com/Alt-E-Wind-Solar-Ltd-196202797091314/ or give us a call at 970-482-SOLAR(7652)
“Going Solar” is such an exciting decision! You already know you’re making a great financial investment decision as well as being a friend to the environment. So now you find yourself at the point where you contact different solar installers to get bids. A good installer should be able to give you a solid ball park price estimate over the phone if you provide them with your annual kilowatt usage and your address so they can look at a satellite image of you property on Google Earth. But to get an exact price quote, they will definitely have to make a site visit. So suppose you’ve received several quotes yet one is substantially lower than the others….how can this be?
This is where you have to be careful. It is tempting to go with the lowest bid, assuming that it will save you money. The old adage “If it sounds too good to be true, it probably is” definitely rings true here. It’s also true in this industry that you get what you pay for! Unfortunately there are companies out there who will provide you with erroneous or misleading information just to get your business; or will use shoddy product and cut corners on the installation… those companies likely won’t be around in the future should something go wrong with your system and you need help.
One of the most common ploys to be aware of is “Our solar panels are more efficient than others so they will produce more power.” This is very misleading. The efficiency of a solar panel has little to do with its power output. For example, a 300 watt solar panel is a 300 watt solar panel… it is only going to output 300 watts of power. Therefore 2 solar panels of the same size (wattage) exposed to sunlight for the same amount of time are generally going to produce the same amount of power (kilowatt hours). The efficiency has much more to do with the physical size of the solar panel itself… NOT how much power it will produce. If one 300 watt solar panel is more efficient than another 300 watt solar panel, that simply means it is smaller in physical size than the less efficient one. There are however some very small differences in solar panels that may contribute to one solar panel generating more or less power than another solar panel of the same wattage (i.e. – temperature coefficient) but these are small differences and will not greatly impact the power production, contrary to what many solar installers imply. The most important thing to remember here is that wattage is the most important consideration… a 10kW array is a 10kW array and one will not produce more than the other, regardless of solar panel efficiency. It is also important to ensure, that the installer is using Premium Grade solar panels from a Tier 1 manufacturer that offers a 25 year linear power production warranty. Also, ensure the solar panels have “re-insurance” to back up the warranty in case the manufacturer is not around if a warranty claim arises.
Another issue to be extremely aware of, if you are getting a roof mount system, is the type of racking that will be used to attach the solar panels to your roof. Many installers cut corners here in order provide you with a cheaper bid and win your business, but it is to your detriment. Roof mounted solar systems generally require attachments that penetrate the roofing material and attach to the roof joists or trusses in your attic. A reputable installer will use “flashing” which is a thin metal plate covering the roof attachment point, tucked under the shingle and further secured with bead of roofing tar AND silicon rubber gaskets to ensure no leaks ever occur at the penetration point for the full life of the system. A less reputable installer will just use something called an “L Foot” without flashing which is an L shaped bracket set and drilled into the trusses from the top of the shingle, leaving an opportunity for the roof to leak at every penetration point. Most will at least use a dab of silicon on top of the lag bolt that penetrates the roof, BUT… your solar panels have a 25 year warranty and I certainly wouldn’t want to rely on a dab of silicon on top of a bolt to protect my roof from leaking for 25 years or longer… would you? An installers cost for an attachment bracket WITH FLASHING and hardware is around $12 each versus an L Foot bracket at $2 each. Therefore, if you take a 10kW roof mount system, for example, it would require approximately 100 roof attachment points and 200 lag bolt penetrations into the roof (each roof attachment requires 2 lag bolts, if the installer is not cutting corners or using a low quality product). That means the cost to the installer is $1200 for the flashed attachment or $200 for the L Feet. It also is much less labor intensive to install an L Foot than it is to properly install a flashed attachment bracket. That one little trick right there allows the less reputable installer to knock approximately $1500 off your bid (parts & labor) with you being none the wiser……until your roof leaks.
Another trick commonly used by shoddy installers is to under size the inverter. It is really important to use an inverter that is large enough for your system to run at maximum efficiency. The inverter should not be sized less than 90% of the total size of the array (in kilowatts). The inverter can be slightly smaller than your array size because there are some system losses that occur (i.e. – panel soiling, wire/connection losses, etc.) but an inverter that is too small will “clip power” on a sunny day when the sun is over head. For example, if 10kW’s of solar panels are outputting 9kW’s of power but the system only has an 8kW inverter, then your system will only output 8kW’s because 8kW’s is the maximum output of the inverter. In this situation, your solar panels are producing 1kW (1000 watts) more power than the inverter can handle so the inverter “clips” the excess power (to avoid damage to the inverter), thereby wasting 1000 watts of electricity at that time. Obviously, the smaller the inverter is the less expensive it is so the installer can quote you a lower price and still tell you that you have a 10kW solar array, because you do in fact have 10kW’s of solar panels… even though it will not produce as much power as it should if the inverter were properly sized.
One final thing to be aware of… ask your installer to justify their power production calculations and make sure that all the quotes you receive use the exact same “system loss” calculations. Many installers will misrepresent the system losses, which produces the illusion that their solar array will produce more power than the other more reputable installers. I’ve even seen several installers say “because our system produces more power than our competitors (for whatever bogus reason), we can build a smaller system for you, which in turn saves you money on the installation cost.” Again, total hogwash! Bottom line is… a 10kW array is generally going produce the same amount of power as another 10kW array, if it’s properly designed and installed! So make sure they not only provide you with the power production calculations but ALSO with their “system loss” calculations so you can verify that all installers are using the same accurate calculations and that someone is not misleading you here.
It is so important to have an excellent installer when it comes to your new solar system. The best way to find them is to ask questions. An installer worth his/her salt should take plenty of time to answer any question you have down to the very last detail…..as you can see, details are important. Also, ask for references! These customers can give you feedback on the installation process, the efficiency of their system and if any problems arose, how they were dealt with. They are the best way to make sure the installation company has stood the test of time. Many companies can slap together a cheap installation but the few really good ones will provide an excellent product, outstanding service and be there for you down the road when and if you need them. Going with a reputable installer may cost a little more up front but is surely worth your peace of mind.
Please check out our website at www.altewindandsolar.com and our Facebook page at http://www.facebook.com/pages/Alt-E-Wind-Solar-Ltd/196202797091314 or give us a call at 970.482.SOLAR (7652).
Well, it looks like the New Year is well under way because, believe it or not, February is almost over! Here at Alt E Wind & Solar the phones have been ringing off the hook since many incentives offered by utility companies have renewed. One of the things we love best about our jobs here is the opportunity to educate our prospective clients about everything involved in “going solar” so they are well equipped to make the decision that best suits their needs and, therefore, successfully fulfill their goals. In the process of fielding all these calls with so many great questions, we have come to see a general pattern in the things that people tend to ask, or want to discuss as they are getting started with the process. Below is a list of things to ask yourself, or consider if you are seriously thinking about taking the plunge. Once you have a handle on these preliminary questions and topics, then it will be easy to get the ball rolling!
- Are you looking to fully eliminate your electricity bill or just offset it?
- What is the last 12 months of kWh (kilowatt-hour) usage for your home? You have to get this information from the last 12 months of your electric bill or simply call your utility service provider.
- What is your budget? Financing can be an option.
- Does your roof have good southern exposure?
- Do you have any open land for a ground mount system if your roof is not optimal?
- Do you have a lot of mature trees that may obstruct the sun? Shade is the enemy of optimally functioning solar panels.
- What incentives or rebates does your utility company offer? If you forgot to ask them this question when you had them on the phone, don’t worry, Alt E has a great handle on most utility programs and can answer that question when you call.
- Did you know the Federal government will provide a 30% tax credit for the cost of you solar system? This is a dollar for dollar reduction to your Federal tax liability, which means that the IRS essentially pays for 30% of your solar system!
- Did you know 95% of today’s solar systems are tied to the electric grid? Alt E, however, can design either an off grid OR hybrid system with battery backup. Both of these are a more expensive option but new technology coming in the near future promises to bring these prices down.
- Important to know that your installation company should take care of all necessary design requirements, engineering and permitting requirements as well as all required electric utility paperwork.
- Did you know the state of Colorado prohibits homeowner’s associations from restricting the installation of solar panels? CLICK HERE if you would like to review the state statute.
- Did you know solar panels can withstand high winds and hail very well and also come with a 25 year warranty?
- Were you aware that solar panels require little to no maintenance?
- And….last but not least, a new solar system will generate a risk free, average annual return on investment of 10-20% over the lifetime of the system!
Again, these are just preliminary questions and topics but doing some research and finding more in-depth information will help a great deal in making your decision and then moving forward. We would, however, love to hear from you should you have any more questions or would like general pricing information over the phone. Should you have further interest, the next step would be for us to set up a sight analysis and then put together a proposal with all the specific information you would need in order to get the job done. We are always here to help so please, don’t hesitate to give us a call today and see what we can do for you!
Please check out our website at www.altewindandsolar.com and our Facebook page at http://www.facebook.com/pages/Alt-E-Wind-Solar-Ltd/196202797091314 or give us a call at 970.482.SOLAR (7652).
NOW THAT I HAVE DECIDED TO GO SOLAR, IS IT BETTER TO BUY OR LEASE?
Have you recently made the decision to harness the clean energy of the sun and “go solar?” If so, congratulations, it’s a wonderful decision that is great for the environment, the economy and your pocket-book. One of the very next questions you will face is whether to buy a system or lease one.
Many residential solar installation companies like to push leasing. Some will offer “no money down’ or they will charge $1,000 to $3,000 (depending on the size of the system) up front to install the solar panels, and then lock the homeowner into a 20 year contract, where they will have to pay rent every single month for 20 years. For example, if a homeowner has a monthly electric bill of $250, he or she might pay the solar company $125 a month to rent the solar panels and the homeowner’s electric bill would drop to around $100. All in all, he or she would be saving around $25 a month by renting solar panels. This is an example using a system that only partially offsets the homeowner’s electric bill. A large enough system could eliminate the entire electric bill but the monthly rent would be larger and the savings to the homeowner still minimal. Also, it’s important to be aware that solar leases include an approximate 3% annual increase causing the homeowner’s rent payment to increase every single year over the 20 year contract period. These leasing companies also emphasize that they will install the system, monitor and take care of all maintenance. All you have to do is sit back, feel good about the environmental benefits, save money and leave the rest to them. Sounds pretty good, huh? Well there is a whole lot more to the story.
It’s very important to understand the dynamics of actually purchasing a system (remember the solar company is the purchaser when you lease) before making your final decision. A solar system will not only pay for itself in as little as 5 to 10 years, but will continue to make you money over its 35 to 40 year expected life span. Remember, after the system has paid for itself the owner has no electric bill or one that is much lower so the savings grow and grow each year as energy costs rise. This is one of the primary reasons why residential solar leasing companies want you to let them use your roof or your property. Huge utility company rebates are available in many states, some as high as $2,000.00 per kilowatt. With a solar lease you won’t receive a rebate because you are not buying the system. The leasing company will get the rebate because they will own the system that you’ll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof or your property. The Federal government is offering a 30% tax credit that’s currently available for the installation of a solar electric system on your home. With a solar lease you won’t receive the 30% federal tax credit either because you are not buying the system. The leasing company will get the tax credit because they will own the system that you’ll be making payments on for the next 20 years. Yep, you guessed it; this is another reason why residential solar lease companies want you to let them use your roof or your property. A properly installed solar system requires almost no maintenance, by the way, other than a good rinsing upon occasion to remove dust and debris. Solar modules are covered under a 25 year factory warranty and inverters are covered by a 10 to 25 year factory warranty. Also, purchasing a solar system substantially increases the value of your property whereas a lease is a liability in the eyes of someone looking to purchase your home.
All in all it is easy to see that the owner, whether it is you or a leasing/installation company, is the one who gets the risk free annual return on investment of 10-20%! Why not let it be you? If the concept of little or no money down is attractive to you, do the math and it will become clear that financing the purchase of your solar system with little or no money down makes a whole lot more financial sense than leasing. It sure would be great to change over to clean, renewable energy and put a nice amount of money in your pocket at the same time!
Please check out our website at www.altewindandsolar.com and our Facebook page at http://www.facebook.com/pages/Alt-E-Wind-Solar-Ltd/196202797091314 or give us a call at 970.482.SOLAR (7652).
HOW LARGE OF A SOLAR SYSTEM CAN BE INSTALLED IF I HAVE A SET BUDGET?
Okay, so we’ve discussed how much solar costs if your goal is to eliminate your electric bill (CLICK HERE to read part 1 of that blog post and CLICK HERE to read part 2) and how much solar costs if your goal is to maximize your roof space (CLICK HERE to read that blog post) but what if you have limited funds to invest in solar and don’t want to go into debt to purchase a system (or worse, lease a system, which is always a bad idea). Does that mean you shouldn’t install solar and take advantage of the excellent R.O.I. and all the great environmental benefits? Absolutely not!
We are happy to design a system within your budget! Taking this approach we can tell you what size of a system we can install within your budget and what percentage of your electric bill will be off-set by the power produced from the solar array.
Of course, the first thing we’ll need to know is your budget. Then we’ll need to know your last 12 months of kWh (kilowatt hour) usage (see our prior blog posts in this series for instructions on how to determine this).
The next order of business is to determine your roofs tilt and orientation (we do this during our site analysis). The roof tilt and orientation will determine how much power (electricity) the system will generate given its size. It’s important that your roof have at least some southern exposure.
Once we have this information we can determine how large of a solar system we are able to install given your budget, how much power your system will produce (given its size and your roof tilt and orientation); and what percentage of your electric bill will be off-set by the solar array. With this information in hand you can easily do an “apples to apples” comparison with other solar proposals to see which installer is offering you the greatest value.
Also, keep in mind that if you have a limited budget today, we can always design your solar system to be “scalable” so you can add on to it in the future as additional funds come available.
If you haven’t had a chance yet to read our prior blog posts in this series titled “HOW MUCH DOES SOLAR COST?”, I would highly recommend doing so. There you will find lots of very specific and extremely useful information on price, R.O.I., tax credits, rebates, power production, payback time frames, etc., all of which will be very beneficial as you further explore the possibilities of installing solar on your home or business! You can click the links below to be taken directly to the prior blog posts in this series.
HOW MUCH WILL IT COST TO INSTALL SOLAR ELECTRIC (PV) IF MY GOAL IS TO MAXIMIZE MY AVAILABLE ROOF SPACE?
If your goal is to eliminate your electric bill but don’t have enough roof space or land to build a ground mounted system, then the next best thing to do is maximize your available roof space with southern exposure. Taking this approach we can tell you what percentage of your electric bill will be off-set by the power produced from the solar array.
The first thing you’ll want to do is determine your last 12 months of kWh (kilowatt hour) usage (see Part 1 and Part 2 of our last Blog Post for instructions on how to determine this).
The next order of business is to measure the roofs dimensions, tilt and orientation
(we do this during our site analysis). The roof dimensions will determine the size of the solar system, while the tilt and orientation will determine how much power (electricity) the system will generate given its size.
It’s important that your roof have at least some southern exposure. If yours does not, this does not mean you shouldn’t install solar… it simply means that your system will not produce as much power and therefore your return on investment will not be as great. The ideal orientation for a roof is 168 degrees from north. However, anything from 135 – 205 degrees from north will yield 95% optimal results; and from 115 – 225 degrees will yield a minimum of 90% of the optimal results. Whereas, if you have a roof that faces directly east then your system will only produce at 78% of the optimal level. Likewise, if your roof faces due west then it will only be 69% of the optimal level. So as you can see, just because you don’t have a south facing roof, doesn’t mean your solar system won’t produce… it just means it won’t produce at the optimal level. However a north facing roof line is not well suited for solar here in the northern hemisphere.
The optimal tilt for solar panels in Northern Colorado is a 40 degree pitch. Most roof tops aren’t this steep but even a 20 degree pitch will provide very good results. Unless your roof is fairly flat, we typically recommend a flush mounted system since the incremental increase in electricity production usually doesn’t justify the additional cost associated with increasing the tilt of the panels. However, if your roof is fairly flat then it definitely makes sense to use a tilt-up racking design.
Once the roof dimensions, tilt and orientation are established we can then determine how many solar panels your roof will hold and how much power the system will produce. As a very broad based rule of thumb, each kW (kilowatts) of solar panels installed in Colorado will generate around 1,300 – 1,600 kWh’s annually, depending on the tilt and orientation of the solar panels.
There are many variables in determining the cost of installing solar on your home or business. But one of the most important things to understand is that solar pricing is not linear. Generally speaking, the larger the system is the lower the cost (per watt) will be. A 10kW (10,000 watts) solar system will cost a lot less per watt than a 4kW (4,000 watts) system. Of course, the total cost of a 10kW system will be higher than a 4kW system but the larger the system is the lower the cost per watt and the greater the return on investment.
In addition to size, there are many other variables that impact the cost of installing solar, which we evaluate during our site analysis (ie – breaker panel and electric service, roof structure and material, rafter/truss system, meter location, point of grid interconnection, conduit runs, etc.). However, getting to the heart of the question, the total turn-key cost of having solar installed on your home or business will typically be between $3.50/watt, for larger solar PV systems, and upwards of $6.50/watt for smaller systems. However, anyone who installs solar on their home or business is eligible for a 30% federal tax credit (this is not a tax deduction; it is a tax credit… a dollar for dollar reduction in the taxes you pay to Uncle Sam), thereby reducing your installed cost by 30%. Also, many utilities offer rebates and/or REC (Renewable Energy Credit) payments based on the size of the solar system and the amount of power it produces. These utility rebates can also drastically reduce the cost of installing solar. Please call us at 970.482.SOLAR (7652) if you want to find out what rebates your specific utility offers.
Putting it all together… we’ll use an example addressing everything we’ve discussed in this article, using the following assumptions: your kWh usage over the last 12 months was 15,325kWh’s and you don’t anticipate any change in your future usage; your roof, which faces due south (180 degrees from north), has 625 S.F. of shade free space available and has a 24 degree pitch; and of course you want to maximize the available roof space and determine how much of your electric bill will be off-set by the electric produced from the solar system.
Using 250 watt solar panels (approx. 18 S.F. each) we can determine that your available roof space will comfortably hold 32 solar panels (32 x 18 = 576 S.F. total), which equates to an 8kW system (250W x 32 panels = 8,000 watts or 8kW). Next, using our power production tools (based on 30 years of solar irradiance data collected in Colorado) we can determine that an 8kW system will produce approximately 11,859kWh’s per year (based on the roof tilt and orientation assumptions from above). Therefore, this system will reduce your on-grid electric usage by a little more than 77% (11,859kwh’s produced divided by 15,325kWh’s consumed = 77.4% reduction in your electric bill)
An 8kW roof mounted solar PV system installed by Alt E would cost around $35-36,000 ($4.50/watt), at today’s prices.
Taking the next step, using $35,000 as the installed price, you will receive a federal tax credit of $10,500, thereby bringing the cost down to $24,500. Now let’s assume your electric utility pays you a REC payment of $.13/kWh and your electric rate is $.105/kWh (this is Xcel Energy’s current REC payment price for “small solar PV systems” and its current residential electric rate). Your solar system will save you $1245/per year at today’s electric rates (11,859kWh’s produced x $.105/kWh = $1245.19 annually), PLUS Xcel will pay you under contract $1542 annually (11,859kWh’s produced x $.13/kWh REC payment = $1541.67) for each of the next 10 years (paid monthly)!! Therefore the total annual financial benefit to you is $2787 ($1245 in annual savings + $1542 in REC payments = $2787).
To do a very simple payback analysis, simply divide the net cost (after your federal tax credit) of $24,500 by the annual financial benefit (savings and REC payment) of $2787 to determine that the payback timeframe is 8.79 years. However, we all know that electric rates are only going up (average annual electric rate increase over the past 30 years has been 6.7% annually – doubling about every 11 years), so if you factor in this rate increase going forward, then your actual payback time frame is more likely around 7.5 years. This equates to an approximate 14% annual return on your investment!
However, if you want to calculate your true return on investment (R.O.I.) then it’s important to take into consideration the tax ramifications. Since savings on your electric bill are not taxable, in order to compare the true R.O.I. with other investments, which are taxable, you must ask yourself, “What would I need to earn on a $24,500 investment in order to net $2787 annually from that investment, after I pay taxes?” To answer that question, let’s assume you are in a 25% tax bracket. If that were the case then you’d need to earn $3716 from that $24,500 investment in order to net (after taxes) the same $2787 from your solar system ($3716 less 25% tax of $929). Looking at it this way (which is the proper way of calculating actual R.O.I. on your solar investment), then a simple calculation shows a payback timeframe of 6.59 years ($24,500 divided by $3716 = 6.59 years). Once again, factoring in electric rate increases, your actual payback timeframe is about 6 years or an annual return on investment of almost 17%… where else are you going to get a risk free (a contract with a utility company is about as safe of an investment as there is) return on your investment that’s anywhere close to that?!!! WHY ISN’T EVERYONE DOING THIS???
HOW MUCH WILL IT COST TO INSTALL SOLAR ELECTRIC (PV) IF MY GOAL IS TO ELIMINATE MY ELECTRIC BILL (“NET ZERO”)?
Putting it all together… we’ll use an example addressing everything we discussed in our last blog post (See Part 1), using the following assumptions: your kWh usage over the last 12 months was 15,325kWh’s and you don’t anticipate any change in your future usage; you live on a small acreage and have room for a ground mounted system; your roof is shade free, faces southwest (225 degrees from north) and has a 20 degree pitch; you have plenty of roof space but want to know the cost difference between a ground mounted solar system and roof mounted system; and of course you want to get as close to “net zero” as possible.
Using our power production tools (based on 30 years of solar irradiance data collected in Colorado) we can determine that an 11.5kW system on your roof will produce approximately 15,425kWh’s per year (based on the above assumptions); whereas a 10kW ground mount array built at a 40 degree tilt and 168 degrees from north (100% optimal) will produce 15,286kWh’s. As you can see, this ground mount array will produce approximately the same amount of power (within 139kWh’s) as the roof mounted array but is much smaller in size (10kW vs 11.5kW).
An 11.5kW roof mounted solar PV system installed by Alt E would cost around $43,000 ($3.75/watt), at today’s prices, whereas a 10kW ground mounted system would cost around $40,000 ($4.00/watt). As you can see the cost per watt for a ground mount system is a little more than the roof mount system but the total cost is much less since the ground mount system is 100% optimal and produces about the same amount of power as the less optimal roof mounted system. Therefore the return on investment is much higher for the ground mount system since the price is lower!
Taking the next step, let’s assume you decide the ground mount system is the way to go. Using $40,000 as the price, you will receive a federal tax credit of $12,000, thereby bringing the cost down to $28,000. Now let’s assume your electric utility pays you a REC payment of $.13/kWh and your electric rate is $.105/kWh (this is Xcel Energy’s current REC payment price for “small solar PV systems” and its current residential electric rate). Your solar system will save you $1605/per year at today’s electric rates (15,286kWh’s produced x $.105/kWh = $1605.03 annually), PLUS Xcel will pay you under contract $1987 annually (15,286kWh’s produced x $.13/kWh REC payment = $1987.18) for each of the next 10 years (paid monthly)!! Therefore the total annual financial benefit to you is $3592 ($1605 in annual savings + $1987 in REC payments = $3592).
To do a very simple payback analysis, simply divide the net cost (after your federal tax credit) of $28,000 by the annual financial benefit (savings and REC payment) of $3592 to determine that the payback timeframe is 7.79 years. However, we all know that electric rates are only going up (average annual electric rate increase over the past 30 years has been 6.7% annually – doubling about every 11 years), so if you factor in this rate increase going forward, then your actual payback time frame is more likely around 6 years. This equates to an approximate 17% annual return on your investment!
However, if you want to calculate your true return on investment then it’s important to take into consideration the tax ramifications. Since savings on your electric bill are not taxable, in order to compare the true R.O.I. with other investments, which are taxable, you must ask yourself, “What would I need to earn on a $28,000 investment in order to net $3592 annually from that investment, after I pay taxes?” To answer that question, let’s assume you are in a 25% tax bracket. If that were the case then you’d need to earn $4789 from that $28,000 investment in order to net (after taxes) the same $3592 from your solar system ($4789 less 25% tax of $1197). Looking at it this way (which is the proper way of calculating actual R.O.I. on your solar investment), then a simple calculation shows a payback timeframe of 5.85 years ($28,000 divided by $4789 = 5.85 years). Once again, factoring in electric rate increases, your actual payback timeframe is under 5 years or an annual return on investment of OVER 21%… where else are you going to get a risk free (a contract with a utility company is about as safe of an investment as there is) return on your investment that’s anywhere close to that?!!! WHY ISN’T EVERYONE DOING THIS???
One last thing to note on solar costs… it rarely, if ever, makes good financial sense for the consumer to lease a solar system. While there are a lot of solar companies out there that really push this approach (because it’s solely in their best interest) it is almost never in the best interest of the consumer. They will lock you into a 20 year contract (most with annual rent payment escalators) and tell you that your “rent payments” will be less than your electric bill and they will take care of all maintenance. Well, first of all, if you calculate the total kWh’s that your system will produce over the 25 year warranty period (our proposal shows you this), then you will see that by purchasing the system your price/kWh produced is far, far below the cost/kWh that you’re paying the utility; and far, far below the cost/kWh to lease the system. Secondly, the panels and even some inverters come with a 25 year warranty, so even if there is a problem with your system (very unlikely) the warranty will cover the cost of the new part and the manufacturer will even pay for the labor to replace it. Honestly, it really irritates me when I hear these larger installers use these as main sales points in pushing a lease! It’s simply and completely misleading… to their benefit and the consumers detriment! However, their main sales pitch is that “you don’t have to come up with any money up-front” or “we have a ‘zero down’ lease plan”. Again I call BS… there are several lenders out there who will finance a solar PV system with no money down (we work with two such lenders). Some also sell a “Prepaid Lease Plan”, where they make it look like it cost less up front than it does to purchase a comparable system. Again, do the math (or call us so we can show you exactly how the numbers work) and it becomes crystal clear that a lease is definitely only in the best interest of the installation company! Also, it’s very important to understand that if you lease a solar PV system you will not receive the tax credits or the utility rebates and it will not increase the value of your property! In fact it may make your home harder to sell since the buyer will now be obligated to assume the lease for the reminder of the contract! If you are interested in monthly payments and/or no down payment, please don’t fall for the lease sales pitch, financing a solar system can achieve those same goals and you’ll be far better off financially. Call us… we’re happy to walk you through the numbers of both approaches so you can see for yourself!
Stay tuned for our next blog post which will address… HOW MUCH WILL IT COST TO INSTALL SOLAR ELECTRIC (PV) IF I WANT TO MAXIMIZE MY AVAILABLE ROOF SPACE BUT DON’T HAVE ENOUGH ROOM TO ELIMINATE MY ELECTRIC BILL? In the meantime, please check out our website at www.altewindandsolar.com and our Facebook page at http://www.facebook.com/pages/Alt-E-Wind-Solar-Ltd/196202797091314 or give us a call at 970.482.SOLAR (7652).