I’m in the process of having solar panels installed on my roof. One of my friends is considering doing the same and asked me to share what I’ve learned so far. I figured I’d post it here since it may be useful or of interest to others as well. If you have any questions about anything I cover or don’t cover in this document, please feel free to email me or post a comment and I’ll try to respond.
Cost and incentives
Here are the incentives I’m taking advantage of in my solar panel installation project:
- 30% federal tax credit on the total cost of the system
- 15% state tax credit on the total cost of the system, capped at $1,000
- state Commonwealth Solar rebate based on the capacity of the system
- $750/kW base incentive
- $850/kW “adder” because my home’s assessed value is considered “moderate”
- Renew Boston rebate equal to 1/3 of the state rebate
- Solar Renewable Energy Credits, a.k.a., SRECs (pronounced “ess-recs”), through which the utility companies will pay me to produce solar energy for at least the next ten years
- Massachusetts law prohibits towns and cities from adding the value of installed solar panels to the assessed value of a home for 20 years after the panels are installed.
- Because my roof was too old and needed to be re-shingled before I could install the solar panels, I am able to include the cost of the re-shingling job in the total cost of the solar project, so I get the 30% federal tax credit on that as well.
In addition to the moderate home value “adder” for the state rebate, there’s also a moderate income “adder” of the same amount; you can only get one or the other of those, not both. There’s also a $100/kW “adder” if your system is built out of solar panels or inverters manufactured in Massachusetts, but my system doesn’t qualify for that adder (because of the size of my roof, I needed to use high-efficiency panels that aren’t manufactured in Massachusetts, and because of the shading conditions, I needed to use micro-inverters, ditto.)
Note that Commonwealth Solar rebate applications have been closed for “block 7,” the block of rebates my system is being installed under, but block 8 is scheduled to start taking applications in October 2011.
Note that the state and city rebates are taxable income. As the one hand giveth (tax credits), the other taketh away (tax on rebates). Go figure.
In terms of raw cost, a 5kW system (the size at which tax credits and rebates start to cap) can cost upwards of $30,000 before all of the incentives listed above.
What you need to qualify
Basically, you need to have a south-facing roof that is mostly unshaded. A little shade is OK, but if a shading analysis (the installer will do one) shows that your system will operate at less than 80% of maximum capacity overall, you won’t qualify for the Commonwealth Solar rebate. That’ll probably be moot, though, since in that situation it probably won’t be cost-effective for you to install a system anyway.
You need to have free space on the wall near the electrical panel in your basement to install the inverter (unless your system uses micro-inverters) and monitoring equipment.
What a solar panel system consists of
Obviously. When sun shines on the panels, they make DC electricity.
One or more inverters convert the DC into AC that’s compatible with the electric grid.
If your roof gets very little shade, your system will probably have all the panels connected in series to a single inverter. If, however, your roof gets shade that varies across your roof, it’ll probably make more sense for your system to use micro-inverters, i.e., a little DC-to-AC inverter connected to each panel on the roof.
This is because if all the panels are serially connected to one big inverter, then the efficiency of the entire system will be limited to that of the least efficient (i.e., most shaded) panel, whereas with micro-inverters, different panels can operate at different efficiencies without dragging each other down.
At a minimum, you’ll have a box in your basement, separate from your utility company meter, which keeps a running tally of how much electricity your system has generated. This is necessary so you can claim your SRECs.
However, you may also have access to more complex and powerful monitoring capabilities. For example the Enphase micro-inverters that will be installed in my system include extensive monitoring at no additional cost, and the installer I’m using also provides its own monitoring.
New electric meter
The electric company will install a new electric meter capable of handling net metering, described below.
Connection to your electric panel
Your inverter and/or micro-inverters will be connected to your home power grid. Any solar-generated power you don’t use will be fed back through the utility meter onto its grid, and you’ll get credited for it as described below.
There will be a box on the outside of your house containing a big rocker switch that the electric company can use to quickly disconnect your solar generation system from their grid. This is a safety precaution in case your inverter fails to shut down properly when the power goes out (see below).
What happens when the power goes out?
In a normal solar panel installation, you cannot use power from your solar panels when the utility company power is out. For safety reasons — to prevent your panels from feeding electricity back onto the grid and electrocuting workers trying to repair it — your system will detect when utility company power goes down and automatically shut itself down until the power comes back on.
Solar panel systems can be designed to charge batteries instead of feeding directly into your home electric grid. Such a system can be designed to automatically switch over to battery power when utility power goes down.
However, such systems are significantly more expensive and higher maintenance, and are almost certainly not worth the expense unless you live in a rural area where the power goes down often and/or for extended periods of time.
With all these incentives, a solar panel installation can easily pay for itself in only a few years. In my case, payback is going to take a bit longer, for two reasons:
- As noted above, I had to use high-efficiency panels and micro-inverters, both of which are more expensive; homes with more roof space and less shade than us would be able to get by with less expensive components.
- Also as noted above, my panels are going to be a bit shaded, so the system isn’t always going to be operating at maximum capacity.
I expect my system to entirely pay for itself, including paying back the interest on the money I am borrowing from my home equity line to pay for installing it, in well under ten years.
It is also worth noting that the preliminary data that’s available suggests that you get back >90% of the money spent on solar panels when you sell your home. Therefore, even if you move before your system pays for itself, the odds are that you’ll end up ahead.
Included in my payback calculations is the electricity that the panels are producing. I expect my system to produce about half of the electricity that is used by my home in a year.
Home solar panel installations in Massachusetts are interconnected with the power grid, and electric utilities in Massachusetts are required by law to support “net metering.” What that means, in a nutshell, is that when I’m producing more electricity than my home is using, it gets fed back into the electric grid and my electric meter runs backward.
If I produce more electricity than I use in any given month, then my electric bill will show a credit instead of a balance due. That credit will offset future electric bills, but note that it’s not the same as cash — I can’t ask NStar to send me a check for it. It’s therefore not cost-effective to install solar panels with more capacity than your home needs over time.
I’m buying my system outright. When it’s finished and turned on, I will own it and all the electricity and SRECs it generates.
Some of the solar installers offer various other financing and leasing options. I’m not going to get into them here. All I will say that if you have the money to pay outright for your system or you can borrow it for a low interest rate, you will definitely make out better in the end by buying your system rather than leasing it. Any installer who tells you otherwise is selling you a pack of lies and you should run, not walk, away from that installer and find a different one.
Warranty, maintenance, system lifetime
Commonwealth Solar requires any systems installed under its aegis to be warrantied for parts and labor for five years.
Solar panels are pretty plug-in-play, so the odds of one failing after the five-year burn-in period are quite low. Having said that, there’s always the possibility of failure, or indeed of a tree falling on your panels. This is the one thing that could reasonably be construed as an advantage of leasing — if someone else owns the system, and it breaks, then it’s their responsibility rather than yours to fix it. Having said that, the odds of this happening are sufficiently low that it doesn’t come close to justifying the significant decrease in ROI when you lease rather than buy.
The efficiency of solar panels degrades by 1-2% per year. Even after 50 years, the panels will still be producing a significant amount of electricity. After 20-30 years the panels on the market may be so much better that you’ll want to install new ones even though the old ones are still working. However, even if you’re too lazy to bother doing that, you’ll still continue to generate electricity and save money, and by that point the system will have paid for itself long ago, so it’s all gravy.
Inverters and micro-inverters tend to die before solar panels. Reputable installers will factor into their ROI calculations the cost of replacing your inverter(s) once during the lifetime of your system. Note, however, that inverters are getting better all the time. For example, the Enphase micro-inverters in my system have a 25-year warranty.
Solar installers I looked at
SunBug is the first installer I spoke with. They were my favorite from the start, and they were the ones I ended up choosing to install my system.
I spoke first with Ben Mayer. He spent a very long time on the phone with me, patiently answering my questions and educating me about everything. After that, Dan Covey came out to my home to do the site assessment. He, too, has been consistently knowledgeable, competent, and helpful.
SunBug is a small, local company. All of their installation work is performed by employees, not subcontractors, with the exception of the final electrical interconnection work, which is handled by a subcontracted electrician with whom they have a working relationship.
Small companies are often run in a chaotic and ad hoc fashion, but that does not seem to be the case with SunBug. They give the distinct impression of running a very tight ship.
SunBug originally proposed a system that was only half the capacity of the system proposed by Transformations Inc. I wanted the higher capacity system, but I was also feeling slightly more comfortable with SunBug than Transformations, so I asked SunBug if they could submit a second proposal for a higher capacity system. They did, and that’s the system we ended up going with.
By the way, SunBug offers a referral bonus, so if you contact them, please let them know I sent you!
I liked Transformations, and they were my second choice if SunBug hadn’t worked out.
The guys I spoke with at Transformations seemed just slightly less “with it” than Ben and Dan at SunBug. It’s not like they made mistakes or anything like that; they seemed just a little bit less on the ball. When all was said and done, I felt just a little more comfortable with SunBug than with Transformations.
The other reason I chose SunBug over Transformations was because SunBug’s monitoring capabilities were more extensive, and that appealed to me.
For the record, I think Transformations would have done a perfectly good job if I had opted to use them instead of SunBug.
I recommend strongly against using SolarCity.
They’re a big, big, national company, and they act like it in all the stereotypical, bad ways.
They didn’t send a technical guy to do a site assessment. Instead, they sent a sales guy to give me a hard sell.
He handed me a proposal which he said up-front wasn’t final and wouldn’t be final until I signed on the dotted line. Only then would SolarCity’s engineers get involved in actually assessing the site and designing the system. If I didn’t like the result, I would be free to back out, but by then weeks would have been wasted and I probably would have missed the Commonwealth Solar block and ended up waiting months to try again with another installer in the next block.
He tried really, really hard to convince me that leasing was a better option than buying, even though it, well, isn’t. Under the terms of SolarCity’s leasing programs, homeowners can’t buy the system at the end of the lease — the only choices are signing a new lease, upgrading to a new system, or having SolarCity remove the system completely. Only a fool would enter into a deal like that.
As part of trying to convince me that leasing would be better than buying the system outright, he told me that the SREC program “could disappear tomorrow,” which would hurt me a lot financially if I bought the system outright, but wouldn’t hurt me at all if I leased. The problem is that it’s simply not true — the SREC program is pretty much guaranteed to be around for at least ten years after my system is installed. Either the salesman was totally clueless, or he was lying scum. Either way, no thanks, I’m not interested.
Steve Pitney at Alternate Energy seems like a nice guy, and he has a huge amount of experience in the solar energy business. However, he definitely seems to fit the “chaotic, ad hoc” small company stereotype, which made me pretty uncomfortable.
For one thing, he missed our scheduled site assessment appointment without calling to let me know.
When he did come and do the assessment, the system he proposed to install was one which I was fairly certain, from what I’d learned from the other installers, wouldn’t actually fit on our roof.
Furthermore, he didn’t see any need to use micro-inverters, even though both SunBug and Transformations were convinced that they were essential because of the shading conditions on my roof.
Steve said he could not quote a 5kW system for my roof without putting up weirdly angled panels on my dormer, even though SunBug and Transformations were both able to do so.
Steve’s quoted prices for the systems he was able to quote were in the same per-kW range as the quotes from the other installers, but his system didn’t include any web-based monitoring.
If Alternate Energy had been the only installer I spoke with, they probably would have done an OK job and I probably would have been happy with it. However, after speaking to multiple installers and educating myself, Alternate Energy definitely wasn’t the front-runner.
The steps in the process
Here, in a nutshell, is what it takes to get solar panels installed on your roof:
- Assemble a list of candidate installers (in my case, the list was predetermined by the vendors certified for the Renew Boston rebate program).
- Call them all. Chat with them on the phone. Make site assessment appointments with the ones you’re comfortable with.
- Wait for them to submit proposals to you after the site assessments.
- Compare and contrast the proposals. Ask hard questions. Pick an installer.
- Do tons of paperwork. Put down a deposit.
- Wait about six weeks for Commonwealth Solar to approve your rebate. The installer can’t start work until the rebate is approved.
- While you’re doing that, get your roof re-shingled if the installer told you it needs to be done before solar panels are installed. Make sure the roofer removes the old shingles rather than putting new ones over them; with the weight of solar panels on your roof, you don’t want the weight of extra shingles as well. How to find a decent roofer is beyond the scope of this document. 🙂
- Once the rebate is approved, give another chunk of money to the installer so they can order all the materials.
- You and the installer wait a few weeks for the building department to get around to approving the project and for the all the materials to arrive. The building department will probably take longer than the materials (at least, that seems to be the case in Boston).
- The installer does the installation work.
- Wait for the city to come inspect. The inspection is coordinated and supervised by the installer.
- Wait for the electric utility to come inspect. Again, the inspection is coordinated and supervised by the installer.
- The installer turns on the system, and you start saving money on your electric bill.
- Once a month, report how much electricity your system generated through the web site that manages SRECs.
- When you’ve generated enough electricity to produce an SREC, the web site will broker a sale of the SREC and deposit cash in your bank account.