Proposal for solar panels on our garage

[Markola]

A company called Avolta has partnered with our utility to offer homeowners solar panels at no out of pocket costs. We figured, why not have them look at our garage, which has better sun exposure than our house? We got the proposal and, in fact, we’d qualify for $0 out of pocket and around $20/month savings on our electric bill over the first 25 years while the system is financed. Then about double that for the remaining 10 years of system life expectancy. We are intrigued and would like to contribute to energy sustainability but are personally leaning against this proposal, because:

1) The place I wanted to install the panels would have been on the western slope of our garage. However, the panels work better on the eastern slope, which is visible to us, and we’re not crazy about the aesthetics.

2). We’re burned out on construction projects right now after a grueling remodel, which itself will save some energy thanks to better insulation installed.

3). We figure panel prices might continue to fall and we might have a better deal later. We are in Minnesota, which is pretty progressive on energy policy but just doesn’t get the solar radiation of more southern states. Maybe panel efficiency will continue to improve, too.

4). We don’t intend to stay in the house for 35 years to enjoy all the financial benefits, though they are transferable to the next owner.

Are we missing something? Here is the core of the proposal:

 

[Another Reader]

This is a lease, and it encumbers the property. Should you sell, what are the terms of the lease? Can a buyer assume with qualifying? Does it have to be paid off at close of escrow?

Here, buyers will buy houses with existing owned solar systems, but frequently pay a fraction of the cost. Most buyers are adverse to assuming a lease. In a balanced market, your home may be difficult to sell with a solar lease.

For this reason, I would look at a purchase with financing if I really wanted solar.

Edit: If it's a purchase, look at the qualification requirements and how the loan is amortized from the perspective of a buyer.

 

[Markola]

Good question and thanks for the concern in other places, which I had not heard about. This is not a lease but a financed sale of equipment at 1.99% over 25 years. The sale is assumable by the next owner and there is no lien on our home. Here’s a relevant slide:

 

[walkinwood]

You should investigate the additional cost of replacing the roof of the garage due to the panels (not that they would affect the life of the shingles). Who would pay that extra cost. It could easily eat up all your energy savings and more.


Our house came with a 20 year pre-paid lease on the panels. We had to replace the roof due to hail damage and it cost about $2k more to remove & replace the 20 panels. I'm sure I'm paying a bit more in home insurance to have them cover that cost.

 

[Sunset]

We had solar folks come by, our roof is really great for solar and we don't even see it.

I turned them down:
We may move in next 10 yrs.
The roof is already ~8 yrs old, so will need replacement before the panels die, lots of extra cost.
What about hail , that is why we had the roof replaced last time.
It didn't save much $$
I didn't trust the company to keep the rates lower for 20 yrs, or admin costs.

Panels will be 1/2 the cost in 10 yrs and produce more electricity.

 

[Alan]

We are 10 degrees further north than Twin Cities and our Solar panels, installed 2 years ago, generate enough electricity to power the house and export excess to the grid. Over the winter months our experience so far has that we import more than we export but over a year we export more than we import.

I wish we had done it a year earlier when government incentives were still available but I reckon we will have payback within 7-10 years depending on the cost of electricity - the more it goes up the shorter the payback. Our cost to purchase was £8,500 for a 4kW installation consisting of 13 panels. ($11k)

 

[OldShooter]

My reaction to this type of thing is always skepticism.

Total Savings First Year $1,091 ? That's $91/month; how does that square with the promised $20/month which sounds more realistic except when the panels are covered with snow and ice.

30 years is a long, long time and no one has system lifetime reliability data to support such a claim. I would read the warranty very carefully and perhaps have a lawyer review it. But if it is complicated enough to require legal review that is close to prima facie evidence that you don't want the deal. Who backs the warranty; itty bitty solar power company, the regulated utility, or someone serious?

20 bucks thirty years from now is not worth much. The thing needs a careful net present value calculation.

How much is being financed? $22,053 at 2% interest-only is $37/month with no principal amortization. The data presentation is very confusing. $37 does not match with the implication that when the loan is paid off, a $20 payment is eliminated. " ... about double that for the remaining 10 years of system life expectancy."

What is the collateral? All of your assets or just the solar system? If just the system (unlikely) are you subject to a deficiency judgment if the collateral is worth less than the loan balance?

That garage will probably need a new roof within 30 years, necessitating removal and replacement of the solar array. Who pays for that and how much?

Is there a prepayment penalty on the loan?

I think your inclination is leading you to the right decision. If the deal came with a personal salesperson's visit to your home I would reject it on that basis alone.

With my attitude I may miss a good deal once in a great while but it does pretty well keeping me out of stinky ones.

 

[target2019]

Here in NJ the calculation for monthly electricity is $119 per month for past 7.5 years. Two HVAC systems, 3000 sq ft living space, new roof. Over the years we've paid for improvements like efficient windows, additional insulation and HVAC replacement.

$20 per month savings doesn't convince me. I might be inclined to buying a system with powerwall just over eastern-facing garage roof. But it would also mean cutting down a dozen trees, and so on. If I could turn that roof to face south that would also sweeten the deal. I would not go for a lease that nets me just $20 per month.

I think a purification/ventilation system of some kind might save $20 per month by making HVAC systems run more efficiently. Just thinking out loud...

 

[Jerry1]

So you save about $240 per year and as indicated, just under $6000 over 25 years. I don’t know but to me, it just doesn’t seem worth it. As you pointed out, construction/renovations are a PITA. Then a payback period or commitment of 25 years is just too long. It’s like the insulation contractor that wanted to air seal my attic for $10K. I didn’t doubt the work justified the price, but my payback period wasn’t even within my lifetime.

I imagine as current energy sources get more expensive and the cost of alternatives goes down, the payback will get more in line. But for now, I’m not in.

Having said that, there are some examples where it makes sense. I have a shed and with the low voltage draw of LED lights and a small solar system. I can light my shed cheaper that running an electrical line out to the shed. Not only cheaper, but easier since I’d have to dig under concrete and it would be an interesting little project.

 

[EastWest Gal]

I would run from any company trying to drum up sales this way. Them partnering with your electricity provider suggests that there are two companies benefitting financially from this arrangement, Which cuts considerably into your savings.

We decided we wanted to look into solar a few years ago, so we contacted a couple of companies. Only one actually responded, and they had good ratings. We looked into the company, and decided to go with them. Had the roof inspected, and it was due for replacement. We used our existing HELOC to pay for part of it. I was working as well, so we used cash from our account as well. We got a 30% tax credit for the cost of the panels and the installation. We save about $240/month on electricity during the summer months, less in the winter of course. The company continues to participate in monitoring the workings of the system along with us. We've had small hail only a few times in the last 20 years.

A note, the OP's profile indicates he lives in Alaska. Hail is quite rare in that state.

 

[Sunset]

...
A note, the OP's profile indicates he lives in Alaska. Hail is quite rare in that state.

That would KILL the idea for me, Alaska is NOT prime solar country.

 

[ERD50]

...
A note, the OP's profile indicates he lives in Alaska. Hail is quite rare in that state.

Yes,

About Markola

Gender
Male
City/Town
Twin Cities
State
Alaska

but his OP says

We are in Minnesota,

OP is not being straight with us!

But anyhow, I'm also in the camp of being skeptical of something like this with so many assumptions and long payoff.

-ERD50

 

[skipro33]

It sounds to me like you are renting your roof for $20 a month for the next 30 years.

But any way you look at it, it's not a good deal. If you can not rationalize an outright purchase of solar to cover your energy uses, then someone is making money off you, not the other way around.

As others have said, read carefully what you sign, not what their sales team tells you. Get everything in writing. Know who's responsible for damages, equipment failures, home sale, etc.

I bought a 5.5Kw solar design installed for about $14,000 about 7 years ago. I'm probably around break-even now. Here's a link to my solar data. It includes both generation and power/energy used. You can click on buttons to check back over the past years; daily, weekly, monthly, yearly. Lots of info to digest.

https://pvoutput.org/intraday.jsp?id=43187&sid=39456

 

[Lsbcal]

What happens if the solar company goes out of business?

If you someday want to add battery storage what are the gotchas? I read that battery storage is too expensive right now but maybe in the future it becomes feasible?

These things always seem so complex to me. It has to be a clear win.

 

[NW-Bound]

If you someday want to add battery storage what are the gotchas? I read that battery storage is too expensive right now but maybe in the future it becomes feasible?

Adding battery storage is simple, if it is the AC-coupled approach used in the Tesla Powerwall. Basically, the battery module and the grid-tied solar inverters are connected together via the AC wiring.

They are both on the grid, and on the same side of the power meter, meaning the house side as opposed to the grid side. The solar panel power is converted from DC to AC, and pumped into the grid. At the same time, the battery charger is a AC to DC converter, and takes power from the grid to charge the battery. The battery charging rate can be controlled to match the solar panel output, so that there's no net in/outflow to the grid if that's what you want to happen.

On the other hand, my DIY solar battery is DC-coupled. The battery is charged by the panels via charge controllers. Then the battery juice is converted from DC to AC via inverters that may be grid-tied, or off-grid as in my case.

In the DC-coupled systems, the battery is an integral part of the solar power system along with the panels. In the AC-coupled systems such as Tesla Powerwalls, the battery is a storage unit independent from the solar panels, and can be installed even if you have no panels (however, Tesla will not sell the Powerwall alone).


PS. I can now get a hybrid inverter/charger that allows my battery to work similarly to a Powerwall. However, a grid-tied system requires permission of the utility company. Hence, I keep my solar+battery off-grid, and use it to run only part of my home appliances.

 

[jazz4cash]

I’d look very closely at the assumptions used for the savings analysis. The proposal we got assumed local utility rates would rise by ~4% annually which overestimated the savings since rates have actually gone down. The lease agreement included a provision to remove and replace panels if necessary for roof replacement or repair for a reasonable preset cost ($500). I think the panels should extend the life of the shingles.

 

[finnski1]

I’d look very closely at the assumptions used for the savings analysis. The proposal we got assumed local utility rates would rise by ~4% annually which overestimated the savings since rates have actually gone down. The lease agreement included a provision to remove and replace panels if necessary for roof replacement or repair for a reasonable preset cost ($500). I think the panels should extend the life of the shingles.

I have about 9 acres but mostly forested. Ideally if I were going to do solar I would love to have them ground mounted. Easier access for any service issues etc.

 

[NW-Bound]

I have about 9 acres but mostly forested. Ideally if I were going to do solar I would love to have them ground mounted. Easier access for any service issues etc.

First, chop down some trees and burn them for heat. Then, you have a clearing for your ground mounted solar array. Problem solved.

I love ground mounted arrays. Wish I have a bigger lot than what I have right now. It's easier to build, easier to wire up, and to protect from strong wind, does not mess up the roof. What's not to like?


PS. You may even be able to use the downed trees for lumber to build the mounting frame for your array. Beautiful.

 

[NW-Bound]

Back on the panels mounted on the roof, I saw some terrible installations around my neighborhood. One is so egregious that I wonder if the home owner even gets 1/2 of the output that he should be able to get; not only the panels are mounted on the wrong side of the roof, many are shaded by his large tree. Arghh!

It is obvious the installer just wanted to bolt down 30-some panels and bill for that many, without concern whether they produce any power or not. It's really a crime.

 

[ERD50]

Back on the panels mounted on the roof, I saw some terrible installations around my neighborhood. One is so egregious that I wonder if the home owner even gets 1/2 of the output that he should be able to get; not only the panels are mounted on the wrong side of the roof, many are shaded by his large tree. Arghh!

It is obvious the installer just wanted to bolt down 30-some panels and bill for that many, without concern whether they produce any power or not. It's really a crime.

Yes, I've seen some of this as well. And an old thermal solar installation that was almost completely blocked by trees 10 years later.

Some opinion piece some where(it was a while ago) mentioned that if we are going to give subsidies for solar, it ought to at least be based on actual production, not installed capacity. That would eliminate some of this incentive to install as many watts as possible for the subsidy.

-ERD50

 

[Alan]

Some opinion piece some where(it was a while ago) mentioned that if we are going to give subsidies for solar, it ought to at least be based on actual production, not installed capacity. That would eliminate some of this incentive to install as many watts as possible for the subsidy.

-ERD50

This was the UK approach until they stopped the subsidy end of 2018. My neighbour installed his panels 8 years ago and it comes with with a 25 year contract to pay market price for every kWH generated, so he saves money by reducing his electric bills plus every 6 months he receives a form to complete and send in with the latest reading from his separate meter showing how much has been generated. (He gets about 12p/kWh currently)

 

[ERD50]

This was the UK approach until they stopped the subsidy end of 2018. My neighbour installed his panels 8 years ago and it comes with with a 25 year contract to pay market price for every kWH generated, so he saves money by reducing his electric bills plus every 6 months he receives a form to complete and send in with the latest reading from his separate meter showing how much has been generated. (He gets about 12p/kWh currently)

Thanks, that's a much more sensible approach (though I don't actually think a subsidy in either form is a good idea). In the US, a person gets the subsidy based on the installed cost. A person in in a very good solar producing area, with their panels oriented at the optimum angles and an efficient, low cost installation charge might get a lower subsidy than one in a poor solar producing area, with their panels poorly oriented and maybe lots of shade that over-paid for the installation costs. If the goal is to promote reducing fossil fuel use, then the subsidy should be aligned with that. The subsidy actually rewards bad practices, an extrememly poor use of my tax $. Clearly, this is a very poor measure against the stated goal.

Even if one feels subsidies are a good idea to promote solar, they should rail against this "% of installed cost" approach, as it isn't really doing a good job of promoting the stated goal. A % of actual production does that better. The taxpayer would at least get more "bang for the buck", and the $ would go further towards the(questionable) goal.

-ERD50

 

[Markola]

OP here. Thanks for all of the informed comments, which make me glad we waited. OldShooter, Jerry1 and others mentioned the potential extra cost of replacing a roof due to hail, which would take away any savings, so that’s pretty compelling right there. All that said, the necessary trend of the world is toward electrifying everything and then decarbonizing that electricity. I expect massive innovation to continue and for the economics to improve.

To clarify two items from the discussion:

1). That $1,093 savings in the first year is just part of the subsidy. They pick up our first year’s worth of payments as a way to help bridge us to obtaining the tax credit in March or so when we file our 2021 returns, all with no out of pocket expenses.

2). I live in Minnesota and just changed my profile. Pardon the confusion. I must have been trying to be clever back when I first wandered into the forum. [emoji16]

 

[target2019]

If you have electric heat in MN, then it makes sense! I know MN gets a lot colder than NJ, and there is more spent on heat. In NJ we spend an average of $134 per month on natural gas. Some of that is a water heater. Our electric and natural gas bills are essentially the same amount. The major positive impact on natural gas cost was new HVAC systems.

If you're going electric vehicle, that tilts the decision a bit further in favor of solar.

For new construction I'd definitely take a swing at a solar installation.

 

[ERD50]

... All that said, the necessary trend of the world is toward electrifying everything and then decarbonizing that electricity. I expect massive innovation to continue and for the economics to improve. ...

I'll add to that (as I have many times in the past), if you want to promote solar energy to offset other forms of energy, you should be against residential installations.

The math and logic is simple. You want the most bang for the buck. Residential installs fail at all levels, compared to larger industrial/commercial installations). For residential, there is no economy of scale. Every site has to be analyzed, permitted, transfer switches installed, a crew has to get set up, and on to another place for each small installation. The roofs are steep and dangerous for the crew. The roofs are almost never at the optimal angles and/or free of shade (and future shade from growing trees). It's a stupid thing for the government to promote.

Put panels on a large flat roof (school, big box store, etc) and you have one crew working the same job for much longer, one site review, much safer working on flat roofs, easy to place at the proper angle and avoid shade. Residential in comparison is just wasting the valuable resource of the panels, which are very energy intensive to produce.

If you have electric heat in MN, then it makes sense! I know MN gets a lot colder than NJ, and there is more spent on heat. In NJ we spend an average of $134 per month on natural gas. Some of that is a water heater. Our electric and natural gas bills are essentially the same amount. The major positive impact on natural gas cost was new HVAC systems.

If you're going electric vehicle, that tilts the decision a bit further in favor of solar.

...

I don't follow. What does consumption have to do with it (unless different cost tiers come into play)? You scale the system in line with your consumption (depending on your net-metering situation). It either pays for itself in X years or it doesn't.

It's like return on a fund - the % return is the same if you invest $1,000 or $10,000.

-ERD50