Should we buy solar panels - advice needed

[MrsSmall]

I am a long-time lurker who rarely posts, but I've gotten a lot of great information from this board. I'm trying to make a decision about solar panels and I would love some feedback.

We are somewhat environmentally conscious and have always been interested in solar power, but put off by the price tag. My city is currently sponsoring a Solarize project. This project has gotten group pricing, and a lending company and a solar installation company to come together to make it easier to put on solar panels. There are also federal tax credits of 30% and state tax credits of 35% so if you purchase solar panels you can get 65% of the cost back as a tax credit.

My problem is that we don't have much cash in the bank, and our daughter is going to college next year. We plan to pay for her college education. Our only debt is our mortgage and I was trying not to have any other financial obligations over the next few years. We would need a loan of $21,500. We could pay off a good portion of it when we get the tax credit next year and the year after, but we would be paying on the full amount of this loan for at least six months. I wouldn't do it, except it feels like we are passing up a 65% off sale. I also worry that things might change in the future. The system is a net metering system and there was a recent solar thread on this board that talked about how the utility companies want to change the rates for solar customers. I would hate to take the risk and invest the money and have it not save me anything.

Would you do it?

[Deleted]

How much is your electric bill in total over 12 months?

[phil5185]

We would need a loan of $21,500.   I wouldn't do it, except it feels like we are passing up a 65% off sale.

lol - yeah, they are counting on you liking that 65%.

The salespersons in our area are in trouble for over-selling, the local Paper put out warnings last week.

I've looked at the numbers - such claims as 'you get your money back in 8 yrs, etc'.  Our 2011 electric bill was $1404, we have a total electric 4bd3ba house, so that $1404 represents heating, cooling, stove, water heater, the whole thing. If I spent $20,000 that would mean that I would no longer get the 8% from those stocks/bonds, ie I would lose that $1600/yr income (plus my $20k would be gone.) Obviously I won't buy something that would replace my $1404/yr bill with a  $1600/yr bill. 

The people that were interviewed by the Paper thought that they might be saving $20 or $30 a month, quite a bit less than promised. But they seemed to think that a $30/m savings ($3600 in 10 yrs) was positive. But they left out the $1600/yr that they would no longer be earning?

IMO they are being way oversold.  Solar panels have been around for a long time, I did thermal analyses on lunar modules in the 1960's - they are a great power source when there in no power lines around - elk crossing signs 10 miles away from towns, an electric fence to control cattle on remote ranches, and of course, on the moon (btw, we were able to rotate them to get nearly 100% sun impingement - on your house you only get 12 hours).

[Tiny]

You need to attempt to figure out the Return on Investment UNLESS you are an 'early adopter' kinda person and the value is in being able to say you are 'off the grid' or 'I've got the latest greatest'.

So, yes you need to do some math: what kind of electric usage do you have? What's the current cost of a Kilowatt? What's the energy consumption/production like in your area(old antiquated gas powered? will a new nuclear plant need to be built soon? Is there more construction in your area where in 4 or 5 years energy prices will go up because of increased demand?)   The total amount due from your bill might not be very representative of your actual usage. More than 50% of one of my 'typical electric bills' is for delivery, fees, taxes, and other assorted charges. I don't pay much for electricity-it's all the other stuff. What I'm trying to say is that even with solar power - you'll still probably have electric company type expenses - solar panels don't generate electricity at night.

Also, how long do you plan to stay in your home... I suspect the ROI on Solar Panels is atleast 10 to 15 years. If you sell your house in 5 years - I doubt the new buyers will be willing to pay a premium for the solar panels (just like they wouldn't for a 5 year old super high efficiency furnace).

You need to do the math AND determine why you want solar. I know if I had 30K burning a hole in my pocket (after having won a 100milion in the MegaMillions lottery) I'd be making my house more efficient and adding some sort of solar component. Doing this wouldn't be lining my pockets with money - but it would be SUPER COOL! and gives me value as part of my hobbies and geeky interests - I solar cook and enjoy the science-y goodness that is alternative energy. That said, I have better things to do with my money than attempt to save less than $500 a year in 'energy' costs. I'm better off working on using less electricity (thru more efficient appliances and better insulation) than on installing any sort of solar system. I've done the math.

ADDED:  not to be totally "don't do it!"  -  I'm sure in some parts of the US installing solar is a workable option.  You need to crunch the numbers though - unless it's more for bragging rights and then it doesn't really matter what your ROI is. 

[Tiny]

FWIW: in my Midwestern world - solar hot water heating seems to be the thing to do... for laundra-mats and large apartment buildings with radiator heat.   It's basically a two step process - water is warmed thru the solar heat collecting panels on the roof of the building and then that warmed water goes to the boiler to finish being heated. It works great for something like a laundra-mat - the 'city water' coming in could be 40 degrees it goes to the solar heaters on the roof and which can easily raise the temp to 90-100 degrees (and closer to 200 plus on a bright sunny summer day) before the water goes to the boiler - the boiler doesn't need to work as hard to get the water to 'hot water washing temps'.  <-- my examples are approximations.  I do know for a fact the solar water heaters can hit 200 and above when conditions are right - even in the dead of winter. (well, maybe not from mid December to mid January - I don't bother solar cooking for those 6 weeks but that doesn't mean the sun isn't giving a little something to be collected - just not enough to cook with ).  

The same thing for the large apartment buildings - water going thru the solar heat collectors allows the boiler to not have to heat as much.     

Since both systems are in use every day (there's a supply of hot water for daily use to the tenants year round)  it does indeed save money/use less energy in the long run.

 

[Deleted]

I am in Europe (France, suburb of Paris). We looked into it, but not in a very scientific fashion.

Several contractors told us that when the solar panels have lived out their lifespan, we would have to pay a HUGE amount to dispose of them. 

Sorry, I have no numbers for you, but that might be something you'd want to look into: how long do they last, and what are the disposal / replacement costs? 

[The Walk of the Penguin Mich]

There is a lot of math that you need to do to determine if this is a good investment.

The question I would ask is what sort of upkeep do you need to do with these solar panels?  Do you need to climb up on the roof monthly and clean them?  Will they lose efficiency over time?  Do they have a lifespan?

[Deleted]

don't forget to include the revenue you get from selling back to the grid (or whatever the term is)....whatever extra you generate you sell back

[MrsSmall]

MMC - I added up our electric bills for the past year and they came to $1203.44. I think we spend .11-.12 per kWh, and our average kWh per day is 28, does that sound right? We heat with gas, but I think we use some electricity when we run the gas furnace.

Phil - I know the 65% off sale sounds bad, but it is a tax credit, not a discount from the company. The idea is that you get back credits of $13,975 over the next two years so you are actually only paying $7525 for the 5 kWh array. Hopefully you are getting some electricity from the solar panels so your electric bill goes down. Instead of paying the electric company you are paying the solar panel loan.

I appreciate your input that you think solar panels are not the most effective form of electricity. 

Tiny Speck - I don't know that I'm doing it for bragging rights exactly. It's more that I want to keep our use of natural resources low. We have a small house and I would like to do as much as possible to preserve the environment for future generations. That being said I think there is a little bit of "it would be cool!" involved in our doing it. Your comment about more efficient appliances really hit home. Our house was built in 1963 and our air conditioning unit and wall oven date from that time. Our refrigerator is probably from the 1990s and we know our dish washer and hot water heater (both of which we purchased in the past 10 years) are having issues which might be driving up our electric usage.

Whether or not we will stay in this home is another concern. We might stay here for another 20 years, but we have considered moving to a different type of living situation after our daughter is out of college. In that case it would be the people who buy the house from us who actually get the benefit of the panels!

Thank you for the suggestion of solar hot water.

debthaven2 and Mich - I actually don't know their lifespan. I was thinking 25 years but when I looked through the information they gave me I couldn't find anything specific. I also don't know what the disposal costs would be. Those are things I probably need to find out.

Would wouldn't need to climb up on the roof monthly, but we would need to periodically check on them.


Well, after reading all this you all have probably talked me out of it. Thank you for your input!

[phil5185]

Would wouldn't need to climb up on the roof monthly, but we would need to periodically check on them.

Quarterly is about right. Rain causes a film (kinda like the water spots on a car after rain) and, if allowed to build up, the panels will lose about 10% of their effectivity.

As for the 65% is a tax subsidy - you pushed my button, lol.  I am very much  in favor of conserving our natural resources - for over 60 years I have helped with contour farming, grass waterways, no-till corn, rotation of corn with legume crops to replenish nitrogen, and much more.
It saddens me that we (the US) are putting all of our energy subsidy dollars into solar & wind (mostly because the voters demand it). But the science simply isn't there, those 2 sources are projected to give us less than 15% of our power 20 years from now.
Conversely there are other ways to provide all of our energy, replace the fuel burning cars and coal/gas power plants - I would like to see those govt dollars go for that research.

[milee]

Solar panels do need cleaning and they do degrade. The amount of cleaning and degradation depend on the type of panels and ambient conditions.  I periodically research this for our business building and even with the tax credits, I'm still not convinced it makes financial sense.

Count on decreased output of 1% - 3% per year as the panels degrade. Some have more, some have less, but none are guaranteed so that particular risk falls on the purchaser.  Also, remember that the installation is a big chunk of the expense, so you had better have a roof with at least 20-25 years of useful remaining life or you're going to blow up your savings in a few years when you replace the roof and have to pay to have the panels removed and re-installed. That was another reason we waited; the roof on our commercial building isn't old and isn't new. My best guess is that it will need replacing in 5-10 years (could be more, could be less, but almost certainly before the solar panels are dead.) The cost of removing and replacing the panels onto a new roof is expensive and part of what blew up the cost/benefit analysis.

That and DH - who is BTW an electrical engineer and scary smart - doesn't think solar panels will last long enough and produce enough power to be reasonable.  When DH talks about electrical matters, I listen even though the CPA and greenie in me is tempted by the $$$ and enviro cred.

[qofcc]

I did some extensive research on this a few years ago and while every situation is different in the scenario I was looking at with a house with a gas furnace the numbers didn't work out with much savings over the cost of borrowing (or lost investment income). Whole house systems converting DC to AC are not particularly efficient and there are many things that can break & need replacing. You need to be using a ton of electricity to see a real payback and the systems are really more suitable for commercial applications but most tax credits are for residential & most businesses don't want to bother with anything requiring more maintenance.

There are a few companies that LEASE residential solar systems. I think the initial commitment was 5 yrs or something & you pay them monthly at a rate less than your current electric bill & they take care of any repairs.

Sent from my SCH-I605 using proboards

[Tiny]

Jan 26, 2014 19:39:37 GMT -5 MrsSmall said:

 
We have a small house and I would like to do as much as possible to preserve the environment for future generations. That being said I think there is a little bit of "it would be cool!" involved in our doing it. Your comment about more efficient appliances really hit home. Our house was built in 1963 and our air conditioning unit and wall oven date from that time. Our refrigerator is probably from the 1990s and we know our dish washer and hot water heater (both of which we purchased in the past 10 years) are having issues which might be driving up our electric usage.

Your energy usage seems to be a bit more than mine which probably isn't out of line (I'm in a late 40's, brick house, I'm single and not home a lot during the day and I don't have a lot of electronic gadgets and whatnot. I have one TV (the HORROR!)

Your older appliances are probably 'energy hogs' simply because the newer ones are so much more efficient.  I was looking at fridges and ones that are comparable to my 16 year old fridge use 1/2 the electricity based on the energy star stickers.  

I also was shopping for washers/dryers (to replace my washer and then a set for a rental property) and there was quite a bit of difference in the electric usage even between the new ones.   My old washer estimated usage was 900 kilowatts a year based on it's energy star sticker - my new washer uses something like 150 kilowatts a year based on it's energy star sticker.  

Even my so-so efficient AC unit (which replaced an 11 year old so-so efficient AC unit) uses much less energy than the older ones and it's not a super high efficiency unit.    Same with my newer furnace -- I actually saw a difference in my usage during the summer with the AC because of the more efficient furnace - the fan/blower sips rather than guzzles electricity!      

Have you done an Energy Audit?  Maybe your electric company offers this service OR less effectively offers an online survey you can fill out to help you figure out how to make your house more efficient in more effective ways?

 

[bookkeeper]

I would spend $5000-$10,000 on new energy efficient appliances and call it good. If you do move, that investment will appeal to other buyers. You may not be able to say the same thing about solar panels.

By the way, do you live in a community with an HOA or covenants? Sometimes your neighborhood dictates what you can and can't put on your roof.

Phil is right about solar and wind energy. It is feel good technology. When you close down the fossil fuel electric generation you will pay double for electricity and be sitting in the dark when the wind doesn't blow or the sun doesn't shine.

Big changes are coming in the electric industry.  My DH is soooo looking forward to retirement.

[Deleted]

Jan 27, 2014 9:03:46 GMT -5 bookkeeper said:

I would spend $5000-$10,000 on new energy efficient appliances and call it good. If you do move, that investment will appeal to other buyers. You may not be able to say the same thing about solar panels.

By the way, do you live in a community with an HOA or covenants? Sometimes your neighborhood dictates what you can and can't put on your roof.

Phil is right about solar and wind energy. It is feel good technology. When you close down the fossil fuel electric generation you will pay double for electricity and be sitting in the dark when the wind doesn't blow or the sun doesn't shine.

Big changes are coming in the electric industry.  My DH is soooo looking forward to retirement.

as far as HOAs dictating whether or not you can put solar panels on your roof - I believe multiple cases have been tried and lost regarding trying to restrict this.  I know many many years ago out HOA sent out a letter saying they couldn't restrict you from putting a satellite dish on your house and you didn't need approval.  Pretty sure they also changed the CCRs to say the same thing about solar panels.

[sesfw]

There are a few companies that LEASE residential solar systems. I think the initial commitment was 5 yrs or something & you pay them monthly at a rate less than your current electric bill & they take care of any repairs.

This is something we considered.  With a 5 yr commitment the leasing company does all repairs AND at the end of 5 yrs you can get the newer technology when/if the lease is renewed.

We do have a solar water heater and found a 30% reduction in our electric bill.  We got it 6 years ago and with all the incentives we had a payback in 18 months.  Living in Arizona with a lot of sun I don't know what the payback would be with total solar.  We are also switching over the LEDs in all the lighting.  Our appliances are within the last 7 years and working well so not eager to replace them just yet.

[Deleted]

Jan 27, 2014 9:13:00 GMT -5 @singlemominmd said:

Jan 27, 2014 9:03:46 GMT -5 bookkeeper said:

I would spend $5000-$10,000 on new energy efficient appliances and call it good. If you do move, that investment will appeal to other buyers. You may not be able to say the same thing about solar panels.

By the way, do you live in a community with an HOA or covenants? Sometimes your neighborhood dictates what you can and can't put on your roof.

Phil is right about solar and wind energy. It is feel good technology. When you close down the fossil fuel electric generation you will pay double for electricity and be sitting in the dark when the wind doesn't blow or the sun doesn't shine.

Big changes are coming in the electric industry.  My DH is soooo looking forward to retirement.

as far as HOAs dictating whether or not you can put solar panels on your roof - I believe multiple cases have been tried and lost regarding trying to restrict this.  I know many many years ago out HOA sent out a letter saying they couldn't restrict you from putting a satellite dish on your house and you didn't need approval.  Pretty sure they also changed the CCRs to say the same thing about solar panels.

In California, HOAs have little power to restrict solar installations. They can deny you putting them in your front yard IF your roof would produce similar power levels for example, but that's about it.

[tskeeter]

Jan 26, 2014 19:39:37 GMT -5 MrsSmall said:

 Phil - I know the 65% off sale sounds bad, but it is a tax credit, not a discount from the company. The idea is that you get back credits of $13,975 over the next two years so you are actually only paying $7525 for the 5 kWh array. Hopefully you are getting some electricity from the solar panels so your electric bill goes down. Instead of paying the electric company you are paying the solar panel loan.

So, Shades, let's look at the financial structure of a solar panel installation.  The solar panel salesman and the company they work for gets full price for the solar panels.  If you don't buy solar panels, they don't get paid.  So they have a vested interest in convincing you to buy solar panels.  Much like a car salesman has a vested interest in convincing you to buy a car. 

As far as the tax credits are concerned, they aren't free money.  If government agencies are giving you tax credits, the government, in total, must be getting tax revenue from someplace else to replace the revenue they gave up when they awarded you tax credits.  So, you and your neighbors must pay more in taxes on somethng else to replace the revenue that the government gave up on the tax credits you got.  Simply ain't no free lunch.  Someone, including you, is footing the bill for the tax credits you'd collect.

To top it all off, the analysis that I have done on solar panel installations indicates that it is unlikely that you will recover your investment even if you consider any tax credits "free money".  I have calculated payback period to be 30 years, give or take a couple of years.  According to the information I've seen, the life expectancy of solar panels is in the 20 - 25 year range.  (And the performance of the panels degrades over time, so your savings decreases as the years pass.)  And then, as Phil pointed out, you've got the income or gains you would not get because you because you invested your money in solar panels rather than in mutual funds.  Or, if you didn't invest your own money, the interest you would have to pay on the loans you took out to fund the solar panel installation.

All in all, the only solar panel installations that I've seen that are financially justified are installations in areas that do not have reasonable access to another power source.   

[MrsSmall]

Thanks again for all your posts. I think I'm going to get an energy audit and try to purchase more efficient appliances.

By the way - my husband read this and says I need to change my screen name. I'm going to become "Notblack&white" which was what I was trying to express with "shadesofgray". Nothing to do with the book/movie

[milee]

OK, if you live in a hot area and run that 40+ year old AC much, that's your biggest energy hog, so the place to start.  If you live somewhere cooler and only run it occasionally, then maybe not.

The second appliance to consider is the hot water heater. Newer ones can be a little more energy efficient, but at the end of the day, they're still having to heat a large container of water, so not too much efficiency can be gained with new unless you go solar or tankless.

The third appliance to consider is your 20 year old refrigerator. Start doing your research and once you figure out what you want, look for sales and lurk at the scratch and dent areas.

But none of this stuff is going to have a quick payoff.  I'd be shocked if any of those purchases would pay for itself in less than 4-5 years even with optimistic figures.  Not saying you shouldn't do it, just saying be realistic about the payoff and know that you can do your research now and then just do it as needed.