Archives 2020

Going Solar, Part Three: Waiting for permission

The adventures of installing rooftop solar panels on an existing home

Now we wait. Whiling away the hours by reading the warranties.

HOA

My homeowners’ association (HOA) must approve any changes I make, particularly regarding the exterior appearance of my home. In Nevada and other states, the HOA’s ability to keep me from installing solar panels on the rooftop is limited by legislation meant to encourage renewable energy. As I understand it, they cannot refuse to allow panels. They may, however,  require changes that might reduce the output of my system as much as 10%. That would put a real dent in my payback. They may also take their sweet time, up to 45 days, to approve my application. I’m on day 28 now. 

At request of my solar provider, the HOA sent me a standard application form. Among other things, the form asks for the signature of all my surrounding neighbors indicating if they “approve” or “disapprove.” In the case of solar panels, it’s my understanding that the neighbors’ approval is not required. In my case, getting neighbors’ signatures is complicated. During a pandemic it doesn’t seem a good idea to go door to door getting signatures. Also, the homes around me are rentals and it might prove daunting to try to get approval from out-of-state owners. I filled in “Unable to obtain due to COVID-19.”

The solar provider filled in “December 3” for the installation completion. That’s more than twelve weeks away but we all hope it will be sooner. They don’t get paid until I sign off on the installation.

Building permits

City, County and other authorities must approve the plans. This can also take 8 weeks to complete.

Warranties

I’ve been reviewing the warranty information provided by the solar contractor. With the exception of the roof, they’re standard manufacturers’  warranties.

As always with warranties and their loopholes, you’ll be dependent on the good will of the company to stand by their product, assuming the company still exists in 10, 20 or 25 years.

Photovoltaic Modules: 25 year workmanship warranty / 25 year 90.76% power warranty / 25 year labor warranty. Manufacturer warrants the power output will be no less than 97% of the designated Maximum Power (Pmax) stated in the product data sheet for the first year from date of purchase of the Product by the Customer and the Power output degradation will be no more than 0.26% per year for the following 24 years, so that, at the end of 25th year, the power output will be at least 90.76% of Pmax.

Translation:

Panels tend to produce less power as time goes by. Many panels degrade to 80% capacity or less after 25 years. Mine are “warrantied” to produce at least 90.76% during their lifespan of 25 years. Except, not really.

For one thing, they claim a margin of error of +-3%, so they’re really only guaranteeing 87.76% over the course of 25 years, not 90.76%, and that 3% “deduction” starts at year one.

The way they get to that 90.76% figure is somewhat convoluted, and of course unfair. Let’s say something worth $100 depreciates 10% per year. The first year it will lose $10 and be worth $90. The second year it will lose 10% of the $90 or $9, and be worth $81. After 25 years you’d still have $7.98 left. The way the panel manufacturer calculates it, you’d lose 10% of the original value each year, and would be down to zero after just 10 years. That’s how a rate of 0.26% per year goes from 100 to just 90.76 in 25 years, whereas if properly calculated it would be 91.12. Of course that difference is insignificant compared to their +-3% ringer.

In any case, an underproducing/defective panel may not be replaced with a new one, or even a refurb. Rather, the manufacturer can choose to refund the “value” lost. As I understand it, if a panel is only producing half the power it should, they’ll refund half the cost of the panel. This will probably be small comfort as you dig deep into your pocket to replace it.

If my “superior” panels turn out to have a lifespan no better than the “inferior” models, and is at only 80% after 25 years, if I’m lucky they’ll refund 7.76%, a paltry sum. Their brag about superior lifespan may be true, but it’s not backed up by much of a warranty, at least on paper. They’re no dummies!

Inverter: 25 year workmanship warranty

Power Optimizer: 25 year workmanship warranty

GSM Kit: 5 year prepaid plan (extendable at expiration). This is the communications module for the system monitoring app. GSM provides a cell-phone signal to facilitate remote monitoring. My understanding is the module includes WiFi so I can monitor without paying for the GSM signal. Typical costs for this kind of GSM service are $10 a month, which would weigh heavily in any calculation of return. I hope I won’t need it.

Mounting Racks: 25 years

Contractor Labor and Roof: 25 years. For the duration of the roof warranty, contractor is guaranteeing it’s roof penetrations to be watertight under any weather conditions. In case of a roof leakage after the expiration of the home’s original roof warranty homeowner must prove that the  leakage is actually caused by contractor’s roof penetrations.

Resources:

PVWATTS calculator

Rough Draft of my spreadsheet. Click “Assumptions” tab after opening.

Going Solar, Part Two: Time of Use Rates

Solar Panels are good for the environment of course.

The adventures of installing rooftop solar panels on an existing home

There is much to learn! Like “Time of Use Rates.”

Since I posted “Part One” I have had my roof inspected by the solar provider. One cracked tile was found, which they will replace, and they report “the felt is good.” They took photos of all aspects of the roof. I suppose I should get a copy of those.

They say they will be providing a 25-year warranty on my roof. That protects against leaks from the points at which they attach their panels to my roof.

Meanwhile I’ve been refining the numbers on my spreadsheet. Savings each month will vary according to how much solar is used and how much is taken from the grid. It is not simply the total generated minus the total used, because I only get a credit of 75% retail from the utility. So the more I use solar instead of the grid, the less I pay. I can calculate a maximum savings (all solar used, none sent to the grid) and a minimum (no solar used, all sent to the grid). For projections, I’ll use a figure midway between those two points.

Solar is not a substitute for conservation

Solar panels on your roof does not mean you should use electricity with abandon. In fact, you should be conserving energy whether or not your go solar. You may find you save so much money by conserving that adding solar panels is unnecessary or not cost-effective. You need to compare the cost of solar versus your energy use AFTER employing conservation measures, not before.

Change all your non-LED light bulbs

LEDs use about 1/10 the amount of electricity as old-fashioned incandescent bulbs. They last much longer, and the payback on replacing old bulbs is only a year or two. Your local utility may even provide some new light bulbs for free.

Turn off outdoor lighting during the day

You can use LED light bulbs that turn themselves on when it’s dark. Be sure to get the dark yellow ones that don’t screw up the insects and birds. Ordinary LED bulbs may be screwed into sockets that are only on in the dark. Your local utility may provide some of these for free or at a substanial discount.

Use smart sockets

Many appliances use electricity even when they are off. Shut them down as much as you can. For instance, kitchen appliances may be plugged into smart sockets that automatically turn themselves off overnight.

Seal doors and windows

Plug up the cracks that allow cooled or heated air to escape.

Upgrade appliances

Refrigerators, dryers, hot water heaters and air conditioners that are over 10 years old are probably wasting energy. Your local utility may provide replacements for free or a substanial discount.

Install a “smart” thermostat

Something like the “Nest” can reduce your electic usage by identifying times when you can be cooler or warmer. You can set it up to “pre-cool” your house on hot summer days, so you use less energy during peak times. Your local utility may provide a smart thermostat for free or a substanial discount.

Time of Use Rates

My research led me to something called “Time of Use Rates“. This is a plan that might provide savings to almost anyone, but especially for those with solar panels and a bit of discipline. Or it might be a total loser for those who’d rather not think about how they use energy. I’m going to give it a try, and I’m told I can cancel after 12 months and get a refund for any overage. All I had to do was notify NV Energy that I’d like to try those rates.

Basically they charge more (4 times as much) for energy from the grid 1pm-7pm during summer weekdays. At all other times (evenings, weekends, wintertime) I pay about half the going rate. Sounds like if I’m willing to sweat a little during the summer afternoons, I can cool things off at night while saving money, perhaps 25-30% of my bill.

I don’t know if or how this affects the credit I get for kWh sent back to the grid. Most likely my credit fluctuates with time of use. Either way I’m bound to be using solar during those summer daylight hours and unlikely to ever pay the pumped-up peak price. As I learn more I’ll update this post.

I may shift dinnertime from 6pm to 7:30 to avoid using cooking appliances during peak. No dishwasher, washer, dryer etc. I pre-cool the house down to 75° from 11:45am to 1pm during summer weeks, then turn the thermostat up to 81° until 7pm. Today it was 106°. From 1pm to 4pm the inside temperature drifted up from 75 to 81 and the aircon kicked back on. It didn’t take much to keep it below 81 from 4 to 7. At this time it looks like TOU rates might cut $30-60 off my monthly bill, but will be even more beneficial once I switch on the solar.

My solar rep never mentioned “Time of Use”, probably because it might reduce my existing electric bills, thus reducing the cost-effectiveness of installing solar panels. When I asked him about it, he replied, “I think that is a great idea for everyone who has a solar system on their roof.”   

In California, solar users who employ “net metering” to sell power to the grid must also adhere to “Time of Use” rates. There’s an article at Energy Sage but I can’t vouch for its accuracy, nor the comments.

Compare solar to what your electric bill should be, not what it is.

If you reduce your electric usage through conservation, you will need a smaller, less expensive solar panel setup. This affects costs and payback.

Don’t skimp on capacity

Your objective is to produce as much electricity each year as you use. If your system produces too much, you’ve paid for capacity that has a relatively poor payback. Too little and you wind up shoveling too much cash back to the utility. Given the basic costs of designing and installing the system, don’t skimp on capacity.

Read Part Three

Resources:

PVWATTS calculator

Rough Draft of my spreadsheet. Click “Assumptions” tab after opening.

Going Solar, Part One: Up on the Roof

Solar panels can be fun!

The adventure of installing solar panels on an existing home

Follow this blog as I learn things no contractor will ever tell you.

It is more complicated than I thought it would be, but probably it’ll be worth it.

I pulled the trigger yesterday (August 28, 2020) and arranged the first concrete step toward installing rooftop solar panels: the site inspection. The solar company will be out to inspect my roof. They’ll make sure it’s structurally able to support the panels, and that the angles, inclinations, tilts and azimuths will provide sufficient direct sun exposure.

On-grid or off-grid?

Mine will be an on-grid system, where I can pull energy from the utility when I need it (at night, for instance) and send excess energy back to the grid when my panels produce more than I’m using. In my case NV Energy will pay me 75% of the rate for any excess I send them. For instance my solar panels will likely produce more energy than I need in Las Vegas winters, but less than needed in the hot summers. Being on the grid allows me to balance those out to some extent. I will still have to pay a monthly base (about $12.50) to the utility , plus the cost of whatever energy I use from the grid (at night or peaks), plus taxes.

Every Kilowatt hour (kWh) of energy counts: those you generate with solar, those you feed to the grid and what you use from the grid. An old-fashioned 100-watt light bulb consumes 1/10 of a Kilowatt in an hour, for which Nevada Energy would charge me about 1.2 cents.

If you go off-grid you will need batteries to provide power when the solar can’t keep up, like at night, cloudy days, or peak heat. The amount you save might well pay for the batteries but I haven’t built that into my spreadsheet yet.

Rent or Own?

As I understand it, you should not choose to rent your system, though the monthly cost may be much lower than owning. Your lease may run for many years, with a lien on your house. If you decide to sell, it may be difficult to find a buyer willing to pick up the lease. You may have to pay it off yourself. You may even have to pay to have the system removed.

Conservation is the cheapest way to save

You should do everything you can to manage your electrical usage before you start looking at Solar. See Part Two for details. Then you can compare solar to your reduced usage to calculate needed capacity and payback.

The numbers

The financial benefits of rooftop solar panels are not overwhelming

When I first started looking at the numbers, solar seemed to be almost a no-brainer. The US government is providing a 26% tax rebate. On a $20,000 system (like mine) that’s $5,200 dollars up front. Most people take a loan to pay for the system, and the rebate will cover the first few years’ payments. I will be cash-flow positive for about six years, even while paying the monthly loan, the utility base fee, some kWh from the utility, and the increase in my homeowner insurance premium.

After six years, though, I will have “used up” the rebate and my cash flow takes a steep downturn. Expenses exceed the benefits for the last 5 years of the 12-year loan. I’ll go under by about $2500 at the end of the loan, but after that monthly savings kick in. By year 14 I’m cash-flow positive again with at least 10 more years of life in those panels. I’ll probably be dead by then but for a younger person who is settling down those would be the energy gravy years. If I do happen to live past age 80, I’ll especially enjoy the “free” energy.

Watch out for the “little things”

When you’re looking at 25 years, every little expense tends to add up. The economics of solar seem to have been figured out to the penny, by the utilities, government, manufacturers and the contractors. Seemingly insignificant things like the monthly utility base fee, the 5% utility tax, or getting only 75% of retail for the kWh you send back to the grid, tend to tip the balance out of your favor. No matter how many pencils you wear out figuring, you’ll still have only a rough estimate of what will happen in the real sunlight. It’s not a slam-dunk, financially.

Building equity?

In the meantime, the saving grace is that I may be building up equity that will be returned when I sell the home. That may be better than funneling all that cash to the utility. At the end of the loan, when I’m $2,500 in the hole in cash-flow, I hope those panels will still be worth at least $10,000. It is a risky investment, but perhaps a sensible one.

Choose your loan wisely

Like car salesmen, solar providers sell their systems by quoting a low monthly amount that involves a long-term loan. That can be a reasonable approach if you’re planning to keep the car (or solar panels) for the life of the loan and beyond. It makes a lot less sense if you think you’ll trade your car in after three years, or sell your home in five or seven years.

I was offered loans as long as 20 years, which would reduce the monthly payment and make the cash-flow look a bit better. Keep in mind that you will probably have to pay that loan off early when you sell your home. A longer-term loan is going to have a bigger balance to pay for two reasons:

  • Principal is paid off over a longer term
  • You may have paid a significant “fee” to obtain the loan. Although that fee is spread out over the term of the loan, you’ll basically have that extra chunk to pay if you pay off early.

I chose a shorter 12-year term, with a smaller fee, to reduce the risk that I would face an unmanageable amount to pay if I have to pay the loan off early. Otherwise it could eat up a lot of the “profit” I’d make when selling.

Your agent may not like it

Real estate agents frown on solar because they believe it narrows your market when you sell. They’ve also run into significant issues when a solar installation is rented instead of owned, of if the solar company put a lien on your house instead of just the panels. You may have to wait patiently for a buyer who appreciates the value of solar and is willing to pay a reasonable amount extra for it.

Some studies indicate solar panels add an average of 2%-4% to the value of a home. On a $300,000 house that might be $12,000 for a system that cost you over $20,000. Here’s a more optimistic view from Green Mountain Energy.

I used a depreciation model in my spreadsheet. I start the value of the system at 65% of cost and depreciate by 0.6% per year.

A hedge?

The value of the system may be more as a hedge against future climate change (in the warming direction) and increased energy costs from the utility. I’m not figuring in climate change, but estimates are that utility costs will increase 3% per year.

Your carbon footprint

It sure seems like solar panels on your roof will go a long way toward reduction of your personal contribution to global climate change. Even if you wind up losing a bit of money over the long run on solar, this benefit seems significant.

I’ll post here again as I go through the process, and I’ll provide helpful details about the calculations involved.

Read Part Two

Resources:

PVWATTS calculator

Rough Draft of my spreadsheet. Click “Assumptions” tab after opening.