click to home pageHOW TO MAKE MONEY WITH SOLAR ELECTRICITYclick to home page
Overview of the value of going solar
Selling power to the electric company
Why is tier 1 & 2 not as big of a problem as tier 3,4 & 5.
OVERVIEW: With the state and federal incentives solar electricity is no longer a burden, in fact it is actually profitable.
First of all there is no doubt we have to take better care of our planet.
Solar electricity is not just a home improvement it is an investment and a way to help the ecology.
Solar electricity power can give you a well deserved sense of pride, you may save a little money doing it or you may save a whole lot.
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What is it? In the 1980’s solar water heating was big, this is NOT the same. Solar electricity is produce with no fluids and no moving parts. The solar electric panels are much thinner and better looking then the water heater panels. They don’t leak or need maintenance. They are required to carry a 20 year warranty and last longer then that.
The material that produces the electricity is Silicon Crystals. These crystals react to the irradiance of the sun. The sun shines on them; molecules in the crystals move and make electricity.
The power from the array of solar panels is produced in direct current. The DC electricity needs to be converted to alternating current so you can use it. This requires an inverter. Basically an inverter is the same as the little transforms we all use to plug in our lap tops and charge our cell phones. The difference is transformers change ac to dc and the inverter changes dc to ac. The inverters handle a lot of electricity and eventually need to be replaced. They last about half as long as the solar panels. The ones we use have slide out components so you just replace the part that wears out. The inverter also has a cool LED screen that shows you how much power you have generated. This information and other information is sent through the internet and is monitored by a company we use.
The power that the whole Photovoltaic system creates is connected to your house on your side of the utility company’s meter. When the PV system generates more electricity then you are using it runs your meter backwards. The sight of this always deserves a smile. Can you imagine if your fuel efficient car could run a gas pump backwards?
Here in Southern California our electric usage is lower in the winter and higher in the summer. If your PV system is the recommended size it will pump electricity to the utility company in the winter, spinning your meter backwards, this gives you credit that you will use in the summer.
The cost of the system obviously is the determining factor of weather to put a system on your roof. The perfect candidate would be someone who has a bill over $150 a month, has a south facing roof with no shade and has investment cash. If that person took the money to buy the system and spread it out over half of the life of the system they would see $100 in power for every $46 they spend.
If you have to use an east or west facing roof you lose just 15% of the efficiency. Shade from trees, buildings, power lines and vents, also reduces the power output.
THE FINACIAL SIDE OF SOLAR
For the following scenarios I am going to use a small 2 kilowatt per hour (kWh) system that produces $70 in power per month. Doubling the size doubles the power output and almost doubles the cost. All figures will be base on a south facing system with no shade (exempt typical clouds), standard slope roof, in the foothill communities of the western Inland Empire, with the governments NERL determined amount of usable sunlight. Utility rate increases are estimated at 5% per year.
What about leasing solar? Leasing solar has become very popular. There usually is no down payment and your monthly payments are often less then what you would have to pay to the utility companies. Instead of paying the utility companies you can make a lease payment and help save the earth. At the same time you may save 15% per month in the first year and 30% per month in 9 years.
Leases are usually for 15 years and compound at 3.5%, if you sell your home you can try to have the next homeowner take over the lease or you can add the buy out cost of the lease into the selling price of the house.
My main concern about leasing is that you understand you are committing to the whole lease. If you have a $60 lease payment and it compounds at 3.5% you owe $13,500 on day one compared to $6000 if you bought it.
Lease or Loan: For Homeowners; If you get a 15 year loan at 10 to 12% apr you break even with a lease if you stay in your house for 15 years. If you stay in your house only 7 years you could of got a loan at 19% and still made more money then if you had leased. If your not going to stay in the house very long I really don't think a person should do a 15 year lease. And please don't be fooled if someone says they can modify the lease every 5 years, you still owe for 15 years. The good thing is if you sell at 7 years; the economy will be better and paying off $9000 is not a big deal.
TWO WAYS TO PRODUCE $70 PER MONTH IN POWER NOW AND $138 PER MONTH IN 15 YEARS (at historic rate of increase)
LEASE a 2 kWh system; cost $60 per month first year; lease cost $96 per month in 15 years then buy-out at fair value. You save $4000 in power.
Buy at 8% apr: payments $57 in first year; $57 in 15years and you own it. You save $6000 in power
(8000 minus 2000 at 10 years for inverter component.)
Lease or Loan for Businesses; Lease can benefit you by not tying up your cash and you can write off your lease payments, but leasing does not allow you the tax benefits of depreciation.
Buying for a Business; you get excellent accelerated depreciation. Depending on your tax bracket you may have by far the most advantages of anyone going solar.
Lease or Loan for Non-profit, Schools, Municipal; Leasing is much more common since the lessor will get the tax benefits that you are not allowed (and theoretically pass them back to you with lower lease payments).
Selling power to the electric company:All of the details are not in yet. An important factor will be the rate that the electric company pays you for the excess electricity that you produce. It is nice that if you ever needed money you could turn off the air conditioner, the pool pump and turn off any incandescent lights to sell the excess power of your Photovoltaic system to Edison. I doubt that it is a good investment to purposely buy a system that is too big for your use. It isn't’t a bad thing to do but even if the rate they pay is 12 cents per kilowatt then it would take 12 to 15 years to pay for the extra panels compared to the 5 to 7 years of a system that is sized to only eliminated the higher tier 3,4 & 5 rates.. It would not be a surprise if Edison only pays wholesale prices (5 cents or so) then it would take much longer to pay for it's self.
Tier 1 and tier 2 is the lowest rates on your electric bill, when you use up these tiers you go to the next ones which are priced very high. From what I understand the tier 1 and 2 rates are regulated and will not go up as fast as the unregulated tier 3,4 & 5. Sizing the Photovoltaic system to eliminate the upper tiers is a great investment; paying for the bigger solar system to eliminate the lower tiers is nice-to-do but does not maximize your return on investment.
This is from SCE's web site: Many of our customers will experience little or no change, but because electricity is priced in different usage tiers, the impact on your bill will vary. While an average-usage household may see a change of about two percent, high-usage customers (in Tiers 3, 4 or 5) may see changes ranging from 3 to 10 percent.
What is the investment value? Better then anything on Wall Street! If you can invest your money in a way that benefits the ecology would you like that? If it turns out to be the best investment you ever made would you like it even more? Buying the system for your home is a great investment. If you buy a pv system for your home the return is often 14% per year plus the value of the system. The system pays for itself many times over; it is great for when you retire to not have much of an electric bill; the day you buy it you own a tangible item that you can see and touch and has a value of at least what you paid; a penny saved is a penny earned, this is guaranteed to save you money from day one.
ROI; An initial $6,000 investment would return an average of $1,000 per year every year for 15 years and an average of $2,000 per year every year after 15 years up to 30 to 50 years (if utility rates go up just 5% per year).
A optimally placed $6000 system averages $1000 to $2000 per year in electricity produced assuming rates continue to increases at historic rates. This is based on our monocrystalline silicon solar panels and averaged over the life of the system.
Monocrystalline panels are the type used by NASA and by DP Door.
Before you buy you can get a print out that is used for the State rebate, this shows details such as projected use and power generated. In addition our proposal shows return on investment and how much ecological impact it will make, how many tons of pollution you prevent and other helpful information. The power output reports are often audited by the state, it has to be accurate or our company would be penalized by the state.
Obviously buying solar is like no other home improvement or investment.
I am not a tax expert and before any decision you should talk to your tax advisor.
Owner D.P. Door Company and DP Energy Store Inc.
Claremont and Rancho Cucamonga 909 625-6000 License #562348
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