In 10 years, will I think "I should have bought that solar panel system?"

[Maidensong]

OP-I was glad to read that you decided against buying the solar. Especially glad you won't be dipping into your 401K to do it. You can always make more money, but you can't make up the time you lose in the market. (Personal note: My sister & B-I-L raided their retirement accounts multiple times to add home theaters to various houses they've lived in over the years. Now they are in their late 50's with a goose-egg in the 401K, but a collection of thousands of movies,more than they could ever, or would ever, watch.)

Also, you mentioned you might sell your home or you might stay in it. I'd never add $40K worth of improvements to a home I intended to rent or sell, unless it was a kitchen or bath that had a hope of adding value. And since your home is a two story, unless it has a main level master suite, you may not be able to stay in it. Boomers are starting to realize a ranch style is more forgiving of changes in mobility.

Good luck and stay cool there in Texas!

 

[PatrickW]

I considered also

Spoke with a someone in the industry when I was building my house, and I was considering this sort of thing (Solar and Geothermal).

He said, "When it comes to alternative energy stuff, you'll never see a payback. You probably won't like it, but whoever lives in your house after you're gone will love it".

If you do this, it may be best to consider it a "hobby". Not something that is going to pay you back financially.


- Pat

 

[candrew]

He said, "When it comes to alternative energy stuff, you'll never see a payback.

"Never"? The gods love to toy with those who use absolutes.

 

[Offgrid Organic Farmer]

Two other things to consider in your financial analysis....
1. Solar panels decrease in effective generation of electricity by some percentage each year. I have no idea what this is, but I do know that it’s true. As they age, they produce less and less electricity.

One of my neighbors put in his solar panels in the 1980s. He is still getting over 80% of the rated capacity.

...
2. What happens when it is time to replace your roof? I really just pose this question, I don’t know the answer. Do you have to remove all these panels in order to put a new roof on your house?

I have solar power. I have toured every solar installation in our town. Nobody in my town has their panels on the roof of their house.

One homeowner has them mounted on an exterior wall. I know people who put them on their barns. Most are free-standing ground mounted.

 

[Offgrid Organic Farmer]

So your net cost was $28K? And your annual electricity cost was reduced to the $240 fee plus an occasional bump? And what do you think the annual depreciation of the system is? ... I am just curious.

The IRS mandates that solar power system depreciate over 7 years.

If you use a 'straight-line' method that means you write-off 1/7th of the total cost each year, for seven years.

If your total outlay was $28k, then your annual write-off is $4,000 each year.

 

[candrew]

Two other things to consider in your financial analysis....What happens when it is time to replace your roof? I really just pose this question, I don’t know the answer. Do you have to remove all these panels in order to put a new roof on your house?

Yes, panels and their stand-offs must be removed to put on a new roof. It is a good idea prior to installing rooftop PV solar to assess the condition of your roof. Our roof was 17 years-old when we made the decision to install PV solar. So, we decided to have our roof R & R prior. Our roofing company told us that in cases where panels need removal and reinstallation, the cost runs approximately $1500 for that service.

 

[johnhkc]

I am considering taking a loan from my 401K to pay for a solar based electrical system.

Before you say HELL NO, hear me out...

HELL NO!

First, you're going to need a boatload of solar panels. I have 13 panels 255W each with microinverters behind each one. Microinverters mean that each panel supplies power on its own. If you use a cheaper string inverter, the output of all panels will fall to the lowest of any other panel in the string. Basically, I'm getting maximum power.

Solar only gets maximum power for about 60 to 90 minutes each day when the sun is at just the right angle (no pun intended) to the panel. The rest of the day, you get less. The end result is 13 panels produce about $40 to $45 per month in power assuming a rate of 12.4 cents per kilowatt-hour.

You're going to need a crapload, buttload, boatload, sh!tload of panels to replace $204 per month. About 60 panels. Got space for that?

My tankless water heater was $2500 installed. The panels plus microinverters were $10K installed about 4 years ago. My 16 SEER HVAC was $5K installed about 2 years ago. The ridge vent was $250 extra when the roof was redone for the solar.

And that's another thing: how old is your roof? Panels will last 20 to 25 years. Will your roof? If you don't replace the roof at the same time, you're going to be tearing everything off and then re-installing it all later. How much will that cost?

The ridge vent naturally cools the house. The air under the roof rises through the vent and cooler air is sucked in under the eaves. Your installer has to run some calculations to make sure you have enough vents under the eaves to keep the flow going. With outside temps over 100F here in Kansas City, inside it barely gets above 86F. The HVAC works a lot less. Huge improvement for $250.

If you suck that $40K out of tax-deferred savings, what would have that money grown to in retirement? $100K? $200K? All for a solar system that only replaces $30 and a "rebate" of $12K?

HELL NO!!!

 

[johnhkc]

I forgot a few more things:
1. Insurance cost. Once you install solar, many insurers will use that as an excuse to jack your rates into the stratosphere. One quote I got recently was $65 per month higher supposedly just because of the panels. That wipes out the advantage of having them.
2. Property tax. Solar panels don't "count" here in Missouri. What about Texas? Will it change in the future?

 

[candrew]

I forgot a few more things:
1. Insurance cost. Once you install solar, many insurers will use that as an excuse to jack your rates into the stratosphere. One quote I got recently was $65 per month higher supposedly just because of the panels.

Interesting your experience with insurers in the KC market. Here in the Phoenix area, for our homeowner's policy, we've found that there are only a couple of insurers that won't cover PV solar panels (IIRC, MetLife was one). Most do, and the additional coverage for us has only increased our annual premium a few dollars.

Could it be due to the KC area being more prone to storm damage, i.e. hail?

 

[Oakster]

BTW, not a HELOC -- that's interest paid going back to the bank, and it looks like over 4% at least.

The 401K loan is "6%" but it goes back to yourself -- you pay yourself back more than you put in. An artificial "interest rate" is used to force the account to be repaid in a reasonable time, and set a bounds that if you default in payments: you get the 10% withdrawal penalty. So you're very motivated to pay this back on schedule (or sooner). Hence the general advise: only do this if you're sure that you're going to have reliable income for a few more years. (which in my case, I'm fairly sure for 5-10 more years at least).

That makes me realize an interesting point: if the market continues to rise as it has recently, I can pay it slowly (say a $700/mo minimum). But if the market tanks this second half of the year, then I can buy it more aggressively (say $3000/mo) since I'd be buying back in on a dip! Hmm.



I guess my issue isn't so much in coming up with ways to pay for it -- lots of options there. It's just in 10 years, will it have been worth it? The 25 year warranty gives confidence that the stuff is going to at least be operational that long. Energy costs are bound to keep rising, and I'm fairly addicted to using electricity!

Isn't that the same as no interest? You are paying yourself with money that you have already earned, and paid taxes on. To top it off, you lose the investment gains over that period of time because you have the money withdrawn. 401k loan seems like a terrible idea. My 401k is all in mutual funds and the performance is over 10% annually (average). Why would I give that up? What ever you pay in is money you already had, not an interest gain.

 

[Oakster]

I guess my issue isn't so much in coming up with ways to pay for it -- lots of options there. It's just in 10 years, will it have been worth it? The 25 year warranty gives confidence that the stuff is going to at least be operational that long. Energy costs are bound to keep rising, and I'm fairly addicted to using electricity!

The warranty is only good as long as the company is around to service it. If there are words that do not belong together in our language, it is "energy industry" and "stability". As soon as the company that has your warranty sells, or goes out of business, so does your warranty. Often, the warranty is only for parts and the labor etc is very expensive. Make sure you know what you are getting in to. I see that market as rapidly changing and improving. I would suspect that the tech you install in your home will be outdated in 6-8 years. I do not have a good knowledge of the field though.

 

[Oakster]

Other than that, it's no big deal. From the vantage of the 401K side, you've taken part of your account and allocated it to a loan. The principal is returned, with interest. So it still has an investment return, just like your other investment options. Maybe it's not the best return you could've gotten, but it's not bad and it is safe unless you yourself are a bad credit risk.

Please explain... I struggle with this because the 'return' is me taking money out of one account and putting it back into my 401k. On a balance sheet, it would be net zero. I can increase my 401k at any time by putting more money in it.

 

[johnhkc]

Interesting your experience with insurers in the KC market. Here in the Phoenix area, for our homeowner's policy, we've found that there are only a couple of insurers that won't cover PV solar panels (IIRC, MetLife was one). Most do, and the additional coverage for us has only increased our annual premium a few dollars.

Could it be due to the KC area being more prone to storm damage, i.e. hail?

SafeCo (based in California) wanted $138 per month and justified the huge increase based on solar. Hartford also quoted higher than expected but not nearly as high as Safeco.


They both claimed replacement costs were much higher than actual. $30K (Hartford) to $60K (Safeco) instead of the $10K it actually cost.


The panels can handle golf-ball sized hail supposedly.

 

[candrew]

SafeCo (based in California) wanted $138 per month and justified the huge increase based on solar. Hartford also quoted higher than expected but not nearly as high as Safeco.


They both claimed replacement costs were much higher than actual. $30K (Hartford) to $60K (Safeco) instead of the $10K it actually cost.


The panels can handle golf-ball sized hail supposedly.

I take it then that you were able to eventually find an insurer with a more reasonable rate?

 

[jimnjana]

Yes, panels and their stand-offs must be removed to put on a new roof. It is a good idea prior to installing rooftop PV solar to assess the condition of your roof. Our roof was 17 years-old when we made the decision to install PV solar. So, we decided to have our roof R & R prior. Our roofing company told us that in cases where panels need removal and reinstallation, the cost runs approximately $1500 for that service.

I made the mistake of not replacing the roof when I got my original solar system. We thought we had another 20 years of life on the roof at least that's what our inspector said when we bought the house. Haha. The price for taking the panels on/off varied from $1,800 to more than 6 grand.

 

[daylatedollarshort]

Wow. The average of 1,600 kWh/month is high.

My home in the "Valley of the Sun" uses 2,600 kWh in the hottest month of August, but only around 900 kWh in the mild winter months. The total annual consumption is around 15,000 kWh, for an average of 1,250 kWh/month.

It is also of the size of 2,700 sq.ft., but two-story and has a good-sized pool. It's all electric.

Our house is about the same size and we currently use around 470 kwhs a month - no pool, fairly mild climate, older furnace / AC unit, gas water and heat and not well insulated.

We started out at 1,200 kwhs a month before we went around with the Kill a Watt, getting LED bulbs, drying racks, etc. With tiered rates our bill dropped by more than half since we cut the most expensive tier hours. We still have a fair number of energy saving projects to do so I would like to get that lower, but we've made most of the high payback changes already now so we're not in a big rush to do more.

 

[ncbill]

Yeah, something still sounds wrong for a 3,000 sqft. house to be using ~2,000kWh/month even in a hot climate.

Money would better be spent on an energy audit first, then things like insulation, air sealing, ensuring proper attic ventilation, maybe a radiant barrier, etc.

 

[ExFlyBoy5]

Spoke with a someone in the industry when I was building my house, and I was considering this sort of thing (Solar and Geothermal).

He said, "When it comes to alternative energy stuff, you'll never see a payback. You probably won't like it, but whoever lives in your house after you're gone will love it".

If you do this, it may be best to consider it a "hobby". Not something that is going to pay you back financially.


- Pat

Well, we purchased a house with geothermal HVAC (ground source heat pump to be exact) and I am *not* impressed. It works very well in keeping the house nice and cool when it's toasty out, but it's NOT CHEAP, electric wise. The "savings" that are touted on so many websites I think are nothing more than a marketing ploy. Had we built new and spent an extra $15K for geothermal, I would be mad as hell at the operating cost.

 

[NW-Bound]

Much of the electricity used in the hottest summer month of August is used for the AC, when the high of the day is more than 120F (49C), and the low is more than 90F (32C).

SRP says that my home's usage is below the norm, for its size and with a pool.


PS. SRP (Salt River Project) keeps the record for all accounts going back 3 years. A home owner can pull up a chart to correlate his power usage vs. the average temperature. They show that the temperature when averaged over a 24-hour period gets as high as 104F (40C) in Phoenix.

 

[NW-Bound]

I forgot to add the following.

Heat transferred by thermal conductance through walls is proportional to the temperature difference. This means if you keep the interior at 80F, when the outside temperature rises from 100F to 120F, the heat gained is doubled. It's because the temperature difference is now 40F instead of 20F.

And then, your AC has to work twice as hard to pump the same amount of heat against the 40F difference instead of the 20F.

That's 2x times 2x for a factor of 4.

 

[johnhkc]

I take it then that you were able to eventually find an insurer with a more reasonable rate?

Yes. It's $82/month from Safeco! Ha! I thought the $138 was Safeco but I guess not. Sorry, Safeco. My memory is failing.

 

[ncbill]

Well, we purchased a house with geothermal HVAC (ground source heat pump to be exact) and I am *not* impressed. It works very well in keeping the house nice and cool when it's toasty out, but it's NOT CHEAP, electric wise. The "savings" that are touted on so many websites I think are nothing more than a marketing ploy. Had we built new and spent an extra $15K for geothermal, I would be mad as hell at the operating cost.

IIRC ground-source "geothermal" heat pumps are recommended for cold climates, e.g., upper midwest or the northeast here in the U.S.

For hot climates like mine there's not enough benefit over standard air-source heat pumps to justify the extra cost & hassle...I suspect the federal subsidy probably drives many installs.

 

[ExFlyBoy5]

...I suspect the federal subsidy probably drives many installs.

I could pretty much guarantee it. The house was built in 2006/2007 when there were significant subsidies.

If/when it dies, it will be replaced with a conventional system.

 

[johnhkc]

I could pretty much guarantee it. The house was built in 2006/2007 when there were significant subsidies.

If/when it dies, it will be replaced with a conventional system.

In KC, if you install a GSHP, the utility company offers a reduced rate. Is that true where you're at?

 

[Offgrid Organic Farmer]

IIRC ground-source "geothermal" heat pumps are recommended for cold climates, e.g., upper midwest or the northeast here in the U.S.

In my region [Maine] heat-pump [mini-split units] are all the rage.
They appear to work well in the 'shoulders' of the winter, ie fall, and spring. But you still need a primary heat source through the middle of winter.

When the temps are -20F and the best your heat pump can do is put out 50F air, that simply does not cut it.