Going Solar, Part One: Up on the Roof

Going Solar, Part One: Up on the Roof

Solar panels can be fun!

The adventure of installing solar panels on an existing home

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. That will occur next Tuesday. 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.

Mine will be an on-grid system, where excess energy is sent to the utility and credited at a discount. In my case that will be 75% of the residential rate. 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. My home is already energy-efficient. All LED lights, smart (Nest) thermostat, good insulation, tight windows and good seals around exterior doors.

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 $5000 at the end of the loan, but after that monthly savings kick in. By year 15 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 down to the penny, by the utilities, government, manufacturers and the contractors. Seemingly insignificant things like the monthly base fee, the 5% 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’s better than funneling all that cash to the utility. At the end of the loan, when I’m $6,000 in the hole in cash-flow, I hope those panels will still be worth at least $6,000. It is a risky investment, but perhaps a sensible one.

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. Those factors are not baked into my calculations.

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.

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