Bruce Howard – Energy by Choice
It happens all the time. It seems to occur with more and more frequency. You’re at your kid’s soccer game or even walking by the copier at work and you hear someone say it again – “I had the guy out last night, we’re going solar!” The conversation seems to take on a life of its own. A crowd forms. A flurry of questions ensues followed by enticing statements and unbelievable numbers. Someone always offers the tale of their cousin that went solar and he swears that leases are better than a PPA. Or the guy at the end of the cul de sac who paid cash to have his custom engineered– he doesn’t have any bill anymore! Sighs and the typical salutation of “let me know how it goes” signal the end of this solar roundtable. Everyone moves on in various states of curiosity.
Homeowners speak about “solar” in a generic manner not seen since the advent of cellular phones and the refinancing boom. It can’t be helped. Although solar technology has been around for decades a number of larger, national solar companies have sprouted up recently that advertise heavily on TV, radio and may have knocked on your door during dinner. The pitch of “zero out of pocket” and “$25 PSEG bills” are attractive, but their cookie cutter approach to solar power has left many homeowners disenchanted since they were never made aware of all the aspects of a solar project. Many homeowners never stopped to think, ‘what do they really want to get out of going solar anyway?’
Solar is not just solar! When solar works it is a marriage of the right technology with the right financing installed by an experienced contractor you trust. Here is a brief overview of the aspects of “going solar” that vary greatly from panel to panel and company to company that will influence the technical and financial outcome of your project.
The Finances of Solar:
Will leasing the equipment be best for you or will financing the purchase of your system give you a better ROI? While owning the system gives vastly greater returns this decision is based almost exclusively on your tax appetite. Working homeowners with taxable income will be able to utilize the30% Federal Income Tax Credit (ITC) and discount the purchase price of their system significantly. This is not available to homeowners who lease their equipment. Since the Federal ITC goes to the system owner, the finance company gets that 30% credit in a lease. Leases are useful to people who are not looking to get maximum tax advantage from their transition to solar. Typically, retired homeowners do not typically have tax liabilities. For them, leasing is a great way to cap electricity expenses. The New York State ITC (caps at $5,000) is available to all homeowners that go solar in New York State, regardless of whether system is leased or owned. Latest studies indicate more people are choosing to own their solar system.
Think long term. While a low monthly solar payment looks enticing, those savings can quickly evaporate with annual escalators. Larger, national solar companies use escalators in a generic approach to finance. With your monthly payment raising 1.5% or even 2.9% annually you will not see much value in switching from PSEG (LIPA) since historically most local utilities average less than 4.5% increases per annum. Insist on a fixed rate loan or a lease with 0% escalator. The term of your payments is critical. With leasing – you will always be paying. While the lease payments are typically for 20 years and predictable, it never goes away. At the end of the lease term you either remove it or lease a new system. Leases do not allow for the purchase of the system except upon sale of the property. In a financed purchase the payments stop when the system is paid off. From that day on the homeowner enjoys payment free use of the system. There are premium systems that are reliably producing power for more than 30 years.
The majority of residential solar systems that are purchased by the homeowner are financed. Not only do you utilize both Federal and NYS ITCs, you can select the type of financing that fits your financial plan. There are several commercial and NYS subsidized loans available depending on credit worthiness and desired term of loan. Terms vary from 5 years to 20 with rates starting as low as 3.49% for typical borrowers and lower rates for those with FICO scores above 750. Many customers actually pay their systems off early increasing their ROI. Recent Department of Energy research confirms that homeowners who own their solar system enjoy increased value upon resale. Increased value in the area of $4.00 per kilowatt is typical. Leased solar does not always perform as well at resale of the property. Appraisal Institute and National Association of Realtors findings are similar. Consult with your tax professional to see which gives you the greatest benefits.
Then there is the technology itself, the panels, inverters and racking, the physical components that transform homeowners from consumers to producers. Your solar panel uses photovoltaic cells to capture light and convert it into electric power. There are hundreds of Photovoltaic (PV) manufacturers. Some are giant electronic manufacturers that make everything from smartphones and refrigerators to solar panels. Many of these have recently entered the market because of the increasing demand for solar power. Then there is the established research- and science-based companies bringing innovation and durability to the market. Mass produced panels manufactured with price point as the key feature offer only limited warranties and are often categorized as Conventional (or Standard) Efficiency panels. Panels from the older, technology based companies often offer greater reliability and production due to scientific research, testing and customer feedback collected over decades. These panels are considered Premium (or High Efficiency) Panels and their pricing reflect the consumer’s preference for performance and time-tested reliability. Premium panels are easily recognizable; they are the panels that have all-inclusive warranties (labor & shipping included) and would offer a performance warranty over 85% stated production at 25 years.
It is worth it to consider premium panels even if you are attempting to save as much as possible upfront. They produce more power now and over time. Aesthetics are considered better on some of the high end panels’ better grade of materials and even all black modules are used with low profile racking systems. Looking good is important! As the residential solar market continues to mature quality makes a greater impact both for power production and at resale of the property. Quality and reliability come under scrutiny when prospective buyers are involved since they will most likely be the ones to use the warranty.
As far as your individual application use a local contractor. Local firms are usually most responsive and experienced with building and safety codes and if something does go awry, they are local! Feedback suggests that most homeowners feel more comfortable dealing with an experienced, local installer instead of national firms chiefly because this is a long term investment. Whomever you choose, ask for references, read reviews and go see their work. Some sustainability advocates assert that using local firms consumes fewer resources and keeps money in the local economy while it reduces local unemployment.
In conclusion, while solar is widely seen as an expensive and new technology it is neither. Government and industry have leveraged solar power for decades and now incentives and widespread adoption of solar is seen as benefit to the environment as well as homeowners. For the greatest energy independence remember to:
• Check with your tax pro and see if leasing or owning is a better strategy.
• No escalators! Use fixed rate financing for your solar project.
• Quality doesn’t cost extra – It actually pays dividends in production and resale value.
• Ask for references