Are Solar Panels Right for me?
Posted by Norman F
Last Update: May 3, 2016
Spring is a time to start thinking about solar power. The sun is finally shining, and the rainy season has passed. Solar Panels produce green clean energy from an abundant energy source that shines on us everyday. Solar Electric Systems also called photovoltaics or PV convert the sun’s radiant energy into electricity. Unlimited renewable energy that is guilt free and at no cost once our panels are paid for. Enjoy energy independence.
Solar City has free quotes for solar electric systems. Give it a try, you have nothing to lose.
Google Project Sunroof helps you determine if Solar is cost effective by examining your location, usable sunlight per year, and roof.
Solar Power Helps the Earth
Play a direct part in combating greenhouse gas emissions, global warming, coastal off shore drilling, and help reduce our dependence on foreign dirty fossil fuel. Help your community by supporting local solar businesses. Your energy source is acquired at a specific cost, while rates on power can and usually do rise every year.
California has over 1 Gigawatt of energy generated from solar panels, a milestone hit in November 2011. Only Germany, Spain, Japan, Italy, and the Czech Republic has more solar installations. The number of solar panel installations grew significantly in California because of the Million Solar Roof Initiative. This initiative helped reduce the cost of solar panel installations. The California Solar Initiative was created by this program. It provides rebates to home and businesses who install solar panels. The amount of the rebate has faded over time and is now just a Federal tax rebate in many states.
Slow Solar Panel Price Decrease
Prices on raw individual solar panels have fallen approximately 42% from 2007 to 2011, according to SolarBuzz.com. The actual price of a complete solar system has only fallen 17% during the same time frame. Why the disparity?
- Time lag from buying panels one month to installing them several months later
- Solar panel modules account for less than half the cost of a complete solar system
- Labor and the cost of securing a permit typically haven’t fallen in price
- Materials such as copper and aluminum are not getting cheaper every year
- $2500 is spent on average to secure government permits for solar installations
- The entire solar installation ecosystem is very inefficient and varies from market to market
- Nationally the average cost of residential solar power installations has fallen to $3.63 in 2012 per watt when you factor in hardware, labor, and permits
- Commercial installations have fallen to $3.45 per watt
- German solar panel system installations have fallen to $2.24 per watt. So there is room for American prices to fall further
Solar Electricity Components
Solar Panels are installed on your roof and collect the sun’s energy and convert it to direct-current or DC power.
DC power is run from the solar panels into a power inverter mounted on the side of your house, that converts DC to AC, or power that you can use. The power inverter has an LCD display that shows how much power is being generated. The inverters are connected to a power shut off switch. Some newer solar panels use micro inverters to convert DC to AC at each panel. With these panels, there is no need to have a big power inverter.
The power from your solar electric system is fed through a special electric power meter that your utility provides. This meter can spin backwards when you are generating more electricity than you use. Extra electricity is sent out the utility grid for others to use.
In 2008 the average residential Solar Electric System cost an expensive $5.40 per watt of capacity, while commercial ones cost $4.20. These figures translates to 25 to 46 cents per kilowatt hour of residential power or 17 to 29 cents for concentrating commercial solar plant. Compare the above numbers to roughly 5 to 10 cents for coal, nuclear, and natural gas and you can see a disconnect. The average US electricity price in 2009 was 11.5 cents, compared to 8.4 in 1995.
PG&E Utility electric rates
In the San Francisco Bay Area most PG&E customers have tiered energy pricing for 2016 (E1 Residential Pricing plan) that starts at 12 cents, but jumps to 14, 29.4 cents, 40.4 cents and 40.4 cents as you use more power. The prices do not vary throughout the day. As PG&E puts it:
“The Standard Rate Plan is best for customers who can conserve energy throughout the month.”
An average home in PG&E’s territory ends up paying 29-40.4 cents/KWHr for more than half of their electricity usage. This type of pricing encourages energy conservation. Baseline quantities are set within a range specified by state law and approved by California Public Utilities Commission. This figure can vary by geographic location. Over the last 25 years, PG&E rates have increased by 4% a year. This makes solar much more justifiable.
PG&E solar customers like ourselves used to be able to choose the E7 tiered rate plan (it started 25 years ago), but were forced in May, 2016 to switch. We switch to the less favorable E6 plan by May 30, 2016, the last day it was allowed. Pricing for this electric rate plan:
PG&E Electric E6 Rate Plan
Winter Rates – November 1 to April 30
- 0.15 all day
- 0.17 Monday – Friday 5-8pm
Summer Rates – May 1 to October 31
- 0.34 Peak – Monday – Friday 1pm-7pm
- 0.22 Partial Peak – Monday – Friday 10am-1pm, 7-9pm
- 0.22 Partial Peak – Saturday- Sunday 5pm-8pm
- 0.14 Off Peak – All other times
E6 play will be phased out in 2022. Through 2020 the terms remain the same, then there is a 2 year transition to a 4pm – 9pm peak period.
PG&E ETOU Energy Plans
PG&E continues to raise prices in 2016 and introduce newer plans like the ETOU-A or ETOU-B plan, which extends peak rates to 3-8pm or 4-9pm respectively. If we were on either of these plans, we would pay $127 more during True Up.
If you have an electric car, you can optionally select the PGE EV-A or EV-B rate plans. Their peak rates are Monday-Friday 2-9pm or 3-7pm.
PG&E has a minimum $5.40 a Minimum Delivery Charge – month fee for distribution among other fees, so no zero dollar bills are possible in our area. PG&E raised this fee to $10 starting September 1, 2015. The power utilities are starting to feel the pinch from more and more solar electric customers.
PG&E’s rate analyzer tool does not work if you are on Net Metering! You cannot compare your bill using different rate plans, if you use Solar Power. This really sucks.
Enough of the feel good rhetoric, how much $$ can one save? Everyone wants a zero power bill. A sample system run through a large local Solar firm’s website, Solar City’s Solar Calculator:
Assumptions: $300/month electric bill in San Francisco. 8% – A little shading, 22 degree roof pitch, South facing roof.
Save $2904 a year or $242 a month. New electric bill $60 month. 8.6 years to pay off system, then power after that is free! Most solar panels are warranted for 20 years, and some systems have been online or more than 30 years. The value of a solar electric system appreciates over time as power prices escalate.
|Initial System Cost:||+||$||38,976|
|Federal Tax Credit:||–||$||10,787|
|Final System Cost:*||=||$||25,169|
Be sure to check with your state to verify any rebates. Also check with your accountant to ensure that you qualify.
Per Solar City: This is a post-tax Internal Rate of Return (IRR), which calculates all the money you will save over the next 30 years because you will be generating free electricity from the sun instead of paying the utility company. IRR also takes into account your initial investment, government rebates and credits, and the time value of money.
Actual Solar Panel System Quote
Spring and sunshine are back. March is when we start seeing real energy being produced by our solar panels. With the large rebates available, there is a lot of interest in solar panels.
We have an example of an real life solar panel quotation that was purchased. This large 5.4kW system is based in the San Francisco Bay Area and uses very high efficiency Sunpower solar panels and inverter and costs $22,725 after rebates and incentives. You can download the pictures below and view them in their full size.
The owner currently pays $1269 a year for power, and will save 70% in annual energy costs or save $885 a year.
The solar electric system will pay for itself in about 13 years. They also calculated the home would increase in value by over $19,000 because of the solar panels.
The solar company also has an analysis if the system is paid for with a 15 year loan, which is the only way many people can afford the system. $188 is paid a month for the solar panel system or around $145 after tax deductions. You would have positive annual cash flow after 10 years. At year 16, your cumulative cash flow would be positive.
This solar panel system is a very large and state of the art efficient one. Most people would purchase smaller or less costly systems.
Here is a solar electric system quote for the same location but from Solar Dealer REC Solar.
By switching to solar you’ll save the equivalent of…
- CO2 emitted by driving a car 174,070 miles
- CO2 absorbed by 76 trees
- 49,789 gallons of water used in electricity generation
Owning solar panels is similar to renting vs buying a home, but instead of a home, the asset is electric power. If you could not afford $25k but still want to take advantage of solar, select their Lease plan and $0 initial payment where you lease the panels.
Save $960 per year on power. Solar Lease monthly payment $162 plus new electric bill of $58 = $221 per month compared to $301 a month on your old bill. Save $29,601 over 15 years as utility rates increase.
We have owned a solar system for many years and have been advocates to our friends and family just as long. Solar power is not for everyone. In this article we cover important factors you need to consider when deciding whether a new solar energy system worth the plunge.
- Rent or Own Home – If you rent or plan to sell your home within the next couple years, Solar panels are not for you. A solar system’s payback time is typically on the order of ten years. They will increase the value of your property when you want to sell. A recent study found on average that a solar system added about $5.50 per watt to a home’s resale value.
- Physical Location – If your home does not receive enough solar radiation because of tree shading, weather, or its geographic location, you are not a good candidate for solar panels. Different areas received differing amounts of solar radiation. Solar insolation in the San Francisco Bay Area averages 5.4 peak sun hours a day. National Renewable Energy Lab has a solar map of the US.
- Roof – Most solar panels rest on roofs. Your roof must be large enough and angled such that a Southern – Southwest sky exposure allows ample sunlight. The solar panels should be angled similar to your location’s latitude. The roof must also be in good shape and not leak. Fix the roof before considering solar panels. The structure of the roof must be able to hold the weight of solar panels and fastening system. Some communities like Palo Alto have requirement specifying spacing around solar panels for fire suppression purposes.
- Roof Shading – How much of the roof is shaded by trees, equipment, or other obstacles? Clearly, you want to maximize solar panel direct sunlight access. We had to trim trees to maximize sun exposure for the afternoon. Partially shaded areas work better with certain brands of solar panels.
- Financial – Solar Panels are not cheap. If cannot afford a solar system costing tens of thousands of dollars or do not have good enough credit to qualify for a solar lease, consider solar energy when your finances have improved.
- Permits – Many municipalities require building permits before a solar system can be installed. Make sure you can satisfy any requirements, which may include neighbor or association approval. Paperwork and permit costs can add almost $2500 to a residential system. Permits are usually needed to qualify for rebates.
- Rebates – In order for solar power to be cost efficient, your system needs to qualify for Federal, State, and or local solar rebates. Incentives can cover up to 40% of a solar electric system depending on the state. Verify this before proceeding. Rebates are reserved on a first come first served basis. DSIRE has a national incentive database. California Solar Initiative tracks California rebates. You solar installer will help with the rebate paperwork. The best solar incentives are in Arizona, California, Colorado, Massachusetts, New Jersey, and Pennsylvania. Texas and Florida are coming online.
- Energy usage – Your energy consumption needs to be high enough to justify solar panels. If your bill is too low, you would never achieve solar panel payback. Use about $75 a month as a ballpark guide. Your local utility can give you annual usage information.
- Utility Company – Do they buy back excess power? Where does the excess power go? Do they support Net metering? How much they charge per kW? Are there special monthly charges for solar panel owners or net metering?
- Power Outages – Most Solar Electric Systems are Grid-Tied or connected to the power grid. The solar system inverters automatically turn off if a power outage occurs. Inverters generally restart 5 minutes after power is restored. Solar panels will not keep your power flowing unless you setup and expensive battery backup system.
Many local solar installers can walk you through these questions and help you answer them. They will be skewed on the side of selling you a system of course. If you satisfy all the above criteria and are not scared off by the pricing, read our article on Solar Panel Installation – Planning.
Power Bill True Up
In our area, PG&E sends us a small $5 monthly bill every month for electricity. At the end of the year, they calculate how much power we have actually used from PG&E when our needs are not being met by our solar panels. PG&E then subtracts the amount of power we sent them. The final bill is known as the True Up bill.
If your True Up bill is greater than $1000, it may be time to invest in another string of solar panels.
$0 Down Lease Solar Panel Promotion
Solar Power for less. Several solar power companies have $0 down solar panel installation promotions. Basically, you are given the solar panels and pay for the lease of them every month. The solar panels generate more energy than your monthly lease payment, letting you save on your energy cost.
Free home estimate. Special savings end soon.
- Guaranteed performance
- Free monitoring and maintenance
- Free panel cleaning
- Full solar system insurance
If you run the numbers, you do not save as much as buying the solar panels, but if you cannot afford the upfront costs, leasing is a good way to go.
Typical 6.5kW solar system for someone with a $200 monthly electric bill price out in 2015:
Lease Loan Buy
Upfront Cost after incentives $0 $0 $17,000
Annual Savings $1300 $1200
Total 20 year savings $26,000 $24,000 $41,000
Solar Panels will Raise the Value of Your Home
Research in 2014 has found that homes with a typical 3.1-kilowatt photovoltaic systems or solar panels sell for almost $25,000 more than a home without the system. (or roughly $6000 to $8000 per kilowatt) Systems depreciate by approximately 9% each year even though they should last 25 years. Cost of systems have fallen by 50% from 2009 through 2014.
Solar panels are most prevalent in Arizona, California, and Hawaii, due to aggressive rebates.
Alternative-Energy Future is way off
Wall Street Journal had a good article quickly examining various promising technology and realistically looking at when they could make an impact.
Nuclear, Carbon capture, Solar, Wind, Algae biofuels, Fusion and electric cars where examined. It is pretty clear that nothing major is going to hit in the near term. We really need to conserve energy, put solar panels on our roofs, drive more efficient cars, and push hard on clean technology.
Are Solar Panels Right for me? Maybe. Examine all the elements we described and you will now be making a more informed decision.
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