• Friday solar blogging

    This is neither as entertaining as Kevin Drum’s Friday Cat Blogging nor as regular (nor always on Fridays), but here’s an update on my experience with solar. My home’s photo-voltaic system has been running for about three months now. Guess how much it has offset electric energy we’d otherwise have drawn from the grid?

    We both know you’re not going to guess and that I’m going to tell you. So let’s cut the charade and get right to it.

    Here’s the graph, comparing last year’s draw from the grid (in kilowatt-hours, of course) to this year’s, by month. I admit, the offset is bigger than I thought it’d be.

    solar production

    The gray bars are last year, the blue this year. Our grid draw is going down as the days grow longer. By the April meter read, it was already nearly six times lower than last year. It shouldn’t be long now until we are generating more solar power than we use, which we’ll bank for the shorter solar days through net metering.

    Pretty good, eh? Let me know if you want in on this action. A referral gets you a discount and me a credit.


    • The real question we all have is how long it will take to recoup your upfront investment. (Pretend we’re insurers looking to be convinced that investing in a preventive treatment will save us more over the coverage time horizon.) Knowing you, you’ve been recalculating that estimate every time your monthly grid draw is reported.

      • Upfront investment: $0
        I am buying the electricity my system generates at a negotiated discount. I neither own the system nor am liable for its maintenance. The owner is also bound by contract to make good on a production minimum. It’s a great deal.

    • We just cancelled our contract for solar installation since we put down money almost a year ago and nothing has happened. Who did you use?


    • Austin,

      Seems like the panels are working well.

      Did you do a comparison IRR between purchase and lease?

      The banks who fund this are likely securitizing the income streams, which in your case probably starts $50-75/month. With the yearly 2.9% appreciation, neglecting any SREC or incentives other than the tax credits, and even neglecting the residual value of the system to the lessor at the end of the 20 years, the IRR seems to be around 3-7%.

      Why give away the return? These are relatively maintenance free and probably last even longer than the 20 years.

      Would be tough for me to sign for 20 years with so many unknowns.

      If you have the money you should probably buy.

      Especially considering that money for the banks is essentially free now, compared with buying isn’t it just accepting unnecessary long term debt and a long lease contract with an un-time-tested company.

      • Who’s giving away return? Instead of putting the money all in my own PV system I diversified it across many other investments. Meanwhile, I have zero maintenance on my PV system or the mutual funds I own.

        I should add, I have the option to buy the system at any time.

        Meanwhile, I still get the return of cheaper electricity at no money down. It’s free money with no risk.

        • You answered the question. You gave the return to SunRun/the Bank because you feel that your diversified investments provide a better return. Currently a capital investment in a solar system acts like an annuity. A tax advantaged annuity at that. And one that pays at least 3-7% for 20+ years. The main risks (which aren’t really) are:
          Incompetent installation , cheaper energy, and maintenance. Since there is no contract, selling your house is easier. There aren’t many investments now for common folk that have that risk/reward profile.

          SunRun etc. is not free money without risk. It is a 20 year debt contract with penalties upon breakage, requirements on transfer and fees upon end of contract. It is money paid in after tax income.
          Yes it decreases your bill currently ( but is still a bill to pay) , is environmentally friendly, and requires no capital cost, but it is not monetarily or risk free. You are basically renting the space on your house for discounted energy.

          With net-metering the best outcome is net-zero. No electricity bill.
          This saves more than the just the bill because the bill is paid in after tax dollars ( you need to make $100 to pay $75) which even further increases the IRR the closer you get to net-zero. Most would love to be able to sell extra energy to the grid and not just bank it, but that would probably lead to oversizing.

          Not sure how to economically justify paying Sunrun increased power rates (2.9%) every year for equipment that hasn’t changed nor requires much maintenance except for calling it a maintenance fee or built in profit. The glory of PV is the sun shines and the meter spins backwards.

          If one can take advantage of the tax credit, which most who pay tax can because it is carried forward for 5 years ( the tax credit actually expires in 2016, so 3 years if implemented this year unless renewed), the purchase makes you your own power company and you are getting the profit on your own capital.

          Putting PV on the roof is not just environmentally friendly, it is a business decision and should be evaluated in business terms.
          What is the difference in IRR? What are the terms of the contract? The break-even is less important of a comparison because the contract is for 20 years! but it is important if you are only going to live in the house for 5-6 years.

          Don’t get discouraged by my comments. You did a great thing by being an eco-pioneer. And if your other investments are going to get 10+% risk free over 20 years, more power to ya.

          • The other option, which most people exercise, is to not go solar in any fashion. I could have done that too.

            You are not privy to my entire portfolio. A small business is involved. I would not trade owning the PV system for investment in that. Yes, it is growing rapidly.

            What fees do you think I owe at the end of my SunRun contract? Have you read my contract?