For homeowners installing solar panels in South Carolina, two-thirds of the system cost is paid through federal, state, and utility company incentives. Many other states and utility companies are doing the same for their residential customers.
Thanks to net metering, customers that go solar (regardless of any local or federal cash incentives) are learning how to significantly reduce, and eliminate, their utility bill altogether.
But it’s not just residential energy consumers “going green” to lower their costs and increase the equity in their home: house flippers and building contractors are going solar (homes and subdivisions) to increase the value of their investment and make sure that the homes sell faster.
Rooftop solar panels have been around for some time, but only in recent years are you likely to have a neighbor or two with panels. HOAs are split between embracing panels on the front of the home (to increase the value of the neighborhood) and banning panels altogether (for aesthetic reasons). The recent popularity of solar panels presents “growth problems” as energy consumers adjust their awareness for the financial and environmental benefits of renewable energy and as solar vendors try to keep up with demand.
Like any “new” thing, there are attempts from all sides to overly discredit or to exaggerate the benefits of solar panels. Naturally at Coda: Intentional Entrepreneurs, we endorse all products which break open new industries, create new jobs, and ultimately improve the quality of life for society: so naturally, we are wildly excited about recent developments in rooftop solar panels.
Why is the federal government paying you to go solar?
Established by the Energy Policy Act of 2005, the investment tax credit provides a tax credit of 30 percent of the value of solar projects. Annual solar installations have grown at a compound rate of 76 percent since the act was implemented in 2006. Under the new scheme, the 30 percent solar tax credit will extend through 2019 and then decline gradually to 10 percent in 2022. After 2022 the credit will be eliminated for residential solar installations and will continue at 10 percent for commercial ones. Overall, the move by Congress will add an extra 20 gigawatts of solar power over the next five years, according to Bloomberg New Energy Finance—more than the total installed in history up to the end of last year. – Richard Martin, MIT Technology Review
The United States’ dependence on fossil fuels raises foreign policy, health, and environmental problems. The federal government is gradually weaning the country off of foreign fossil fuel dependence: “In 2015, U.S. net imports (imports minus exports) of petroleum from foreign countries were equal to about 24% of U.S. petroleum consumption, the lowest level since 1970” (U.S. Energy Information Administration). Renewable energy, such as solar energy, enables the federal government to continue lowering our dependence on foreign fossil fuels.
Additionally, the burning of fossil fuels (coal, natural gas, and oil) are responsible for health problems related to breathing toxic chemicals in the air. Greater environmental concerns, such as smog and global warming, trace problems back to the burning of fossil fuels. With the increase of oil spills around the world, environmentalists are scrambling to save entire ecosystems.
Why is your state paying you to go solar?
If you are looking to add rooftop solar panels in South Carolina, your state pays you 25% of the cost of your solar system in the form of tax credits. Massachusetts, Arizona, and California also offer tax credits. States continue to progress in their solar incentives to promote cleaner air. See where your state falls in the spectrum of solar incentives and benefits.
Some states are even requiring utility companies to integrate net metering. Net metering is the debit/credit system that allows customers to reduce and eliminate their bill with their local power company. We will discuss this more in a moment.
Why is your power company paying you to go solar?
Again, if you are installing solar panels in South Carolina, Duke Energy “offers a rebate of $1 per watt” (this averages between $4,000 – $9,000 in cash) to you for purchasing your own system. Since most people finance a solar panel system, the system cost replaces the power bill each month, and the utility incentives serve to lower their monthly loan payment or shorten the term loan.
Solar Renewable Tax Credits (SRTCs) are awarded to power companies that lower their carbon footprint. Utility companies that offer solar incentives seek to capture these tax credits to significantly lower their cost.
What exactly is Net Metering?
A helpful analogy for explaining net metering would be contrasting a credit account and a checking account.
With a credit card, you are permitted to spend, so long as you pay an agreed rate (with interest) on the amount that you spent. With a credit card, you owe rather than own the money you spend. Most people maintain a “credit card” relationship with their power company: they use, then they pay off their “debt” to the power company.
With a bank account, the money you spend is the money you own. Most banks offer some form of overdraft protection which allows you to reconcile a deficit within a reasonable amount of time at no charge. With a bank account, you enjoy the benefits of a positive cash balance. People with solar panels and net metering enjoy a similar relationship with their power company: the energy they use is the energy they own.
Solar panels capture the sun’s energy (direct current), convert it to alternate current (which your home uses), send the power into the power grid, and your home accesses power from your utility company’s grid same as everyone else. On a cloudy day with low sunlight, your power remains uninterrupted since you access the grid like everyone else. Net metering tracks the power generated from your solar panel system and awards a “debit” to your “account.” At the end of the month/year (depending on how your local power company operates), you “settle up.”
To make the most of net metering when shopping for a panel system, be sure to understand how your home qualifies for solar using the term “energy offset.” A panel system with 90% offset or higher is producing enough energy for you to power your home without having to pay for additional energy from your power company. With additional energy savings products/habits in your home, net metering will enable you to get a check in the mail from your power company for using less energy than what your solar system generated. Disclaimer: most power companies still charge a “connection fee,” a fee you pay to access the grid. For customers with solar panels in South Carolina, Duke Energy’s connection fee is less than $10 per month.
Shopping for panels: where to begin…
The most popular form of solar panel systems for homes is the rooftop mounted system, often referred to as rooftop PV (stands for “photovoltaic”). Depending on who you ask, the average rooftop solar panel system costs between $15,000-$25,000. However, most people never have to pay the full system cost. For solar panels in South Carolina, homeowners pay no more than 45% of the total system cost, and after all incentives take effect, they usually are paying even less.
Those choosing to go solar do so to replace their power bill with a loan payment that adds equity to the home. California provides the most reliable residential solar data to date, and analysts “found that solar homes sold 20% faster, for 17% more than the equivalent non-solar homes.”
Thus, homeowners appear to recover approximately 97% of their [solar] investment costs – in addition to the savings associated with reduced energy bills [and state/utility incentives]. By contrast, a luxury kitchen remodel brings a 60% payback, according to Hanley Wood’s 2010-2011 Cost v. Value report. A new steel front door brings a 102% payback. For the Hanley Wood report, click here. Of course it depends on your personality as to whether you get more enjoyment out of ushering guests through a steel door, showing off new granite countertops, or leading a tour of the mechanical guts of a photovoltaic system. – Ashlae Ebeling, Forbes
Ultimately, more and more home-buyers squeal with delight at the thought of a home without a power bill. As HOA committees fight amongst themselves to adjust to the times, some HOAs may begin to require panels on the front of homes to raise the value and economic status of the neighborhood.
If this all were not enough motivation for homeowners to upgrade to solar, power companies retain the right to increase their rates dramatically each year. Homeowners upgrading to solar panels in South Carolina are able to avoid these rate increases, unlike other Duke Energy customers that must see their power bill increase by almost 15% each year for the next three years.
The intangible benefits of solar (renewable energy means making a difference environmentally) indicate a new status of sophistication. A middle-income homeowner with solar panels suddenly reaps the benefits of a home on the edge of environmental technology with long-term benefits.
With these thoughts in mind, let’s discuss the solar system hardware.
What does a rooftop solar system consist of?
In layman’s terms, your system consists of the panels and the inverter.
The highest quality system – generating the most power over the least amount of space with the greatest longevity – is called a monocrystalline solar panel system with an optimizer inverter. So long as the system manufacturer is based in the United States and offers a good warranty (at least 20 years on the panels and 10 years on the inverter), this will be a “Tier 1” system, meaning top-of-the-line.
Monocrystalline panels look uniform and are the most efficient of solar panels. Its less expensive counterparts are polycrystalline panels and thin film. Is a polycrystalline or thin film system a bad purchase decision? Thin film cannot keep up with the production levels of mono or polycrystalline panels. Both mono and polycrystalline panels will work well (unless the manufacturer has a reputation for poor quality), and for a polycrystalline system you will pay less. Tier 1 systems often incorporate polycrystalline panels.
The most expensive part of your solar panel system is the inverter. Inverters convert the direct current (power collected from the sun) to alternating current (what your home uses) before sending the power back into the grid. Without an inverter, DC power collected from the sun goes nowhere.
String inverters were first on the scene, and the wiring resembles Christmas lights. Unfortunately, the system efficiency also resembles Christmas lights wherein the power conversion rate submits to the efficiency of the weakest panel. If one panel is shaded, all the other panels operate as if they are also shaded. If one panel goes down (which is rare), all panels go down. String inverters are lower cost than other inverters, and they are still reliable.
Micro inverters solve the string inverter efficiency problems and are typically the most expensive type of inverter. Many customers have observed that the micro inverters tend to get very warm and lose efficiency as a result. If you are homeowner in a hotter part of the United States, you may need to stay away from micro inverters altogether.
Optimizers solve both the “Christmas lights” problem as well as the heat problem. Optimizers run more expensive than string inverters but less expensive that micro inverters.
Regardless of the panel and inverter type, the most important consideration for your system is the quality of the manufacturer. Make sure the company is based in the US and that your system comes with a manufacturer warranty. A good manufacturer that builds systems with polycrystalline panels and string inverters will produce a more reliable system overall than a poor manufacturer that builds systems with monocrystalline panels and optimizers.
One common objection to rooftop solar panels is the voiding of roof warranties. If the system installer is not used to working with a roofing company, this could be a real concern. Some installers go the extra mile to “coordinate with your [roofing] contractors.” Ask your solar installers if they do this: if they don’t, you can take the initiative yourself to involve your roofing contractor in the solar installation. Considering that federal and state legislation has had no problems persecuting power companies and HOAs for discouraging solar installs in the past, most sensible roofers will gladly accommodate your solar upgrade.
Before you hire a solar company to install your panels, make sure that they take care of filing for all permit and inspections. The actual install is quick – less than a week actually. But the entire paperwork process will take much longer. A good solar company handles these details for you.
Solar installers aren’t just putting panels on your roof. They also have to deal with inspections, permitting and approvals. The median residential solar interconnection time is 52 business days. Getting panels installed and then inspected is by far the fastest part of the whole process (a few days), while the application review and approval process is the longest with a median of about 3.5 weeks. – My Energy Offset
When negotiating with a solar company, be sure that you are buying the panels, rather than leasing the panels. If you find you are talking to a solar company that leases panels, you need to be aware of the following:
- If you sign a lease and back out before the 20 year agreement, you will have to “buy out” your lease, and it could cost you more than if you would have bought the whole system in the first place.
- Some companies do not inform you that they may put a tax lien on your home (SolarCity and Sunrun are notorious for this).
- Leased panels complicate the reselling of your home.
- The solar company that leased you the panels receives all tax credits and incentives, not you.
- Leased panels will not increase the value of your home, and in some cases may decrease the value of your home.
That said, not all (or even most) solar leasing companies are dishonest. And choosing solar over fossil fuel energy is the environmentally responsible choice. Many cannot afford the monthly payments of a financed system over the lower monthly payment of a leased system.
Whether buying or leasing, the cost of going solar is dropping quickly around the world. Federal and state incentives to customers are at an all-time high and will not last forever. Because of this, the “Black Friday” of rooftop solar panels may have only just begun.