The Cost of Residential Solar Panels
When we started looking into the cost of residential solar panels, we figured it’d be too expensive. In reality, the economics are affordable and potentially a no-brainer: when you consider a) monthly financing, b) tax credits/incentives, and c) savings on your utility bill.
Lotta super sexy numbers coming at you, but I'll do my best to explain the economics of solar through a breakdown of our situation.
SOME introductory Disclaimers
DISCLAIMER #1: These are the numbers as I understand them now, today (in February 2020), on paper, BEFORE our system is live. The true test will be comparing these theoretical estimates to ACTUAL numbers in a few months, so stay tuned…. [Note: I’ve since updated this post as of 2022, see below, but TL;DR I’m still excited about the economics/savings of solar.]
DISCLAIMER #2: People hate math. I’ll round some figures to make this simpler, and here’s a cute video of Jack to make this more enjoyable.
DISCLAIMER #3: I won’t get into the weeds on electrical terms that I don’t understand anyway. The basics are:
kilowatts (kW) and kilowatt-hours (kWh) are very different things, and I’ll be talking about kWh.
a single kWh is the amount of energy it takes to keep a 1000 watt appliance running for an hour, or a 100 watt lightbulb running for 10 hours, or a small 10 watt CFL running for 100 hours, etc.
DISCLAIMER #4: Tax policy and all other info here is as I understand it in February 2020. Incentives and tax credits change all the time so please don’t take my word for it, do your own research, maybe talk to an accountant, but hopefully this post serves as a decent starting point.
Okay!
the BASICS of Residential Solar costs
BASELINE ELECTRICITY USAGE
First, take a look at your utility bill/website or any number of online calculators, and you can determine your monthly/annual energy use. We use about 25,000 kWh annually, and our monthly bill is about $220/mo.
WHERE TO SITE SOLAR PANELS - ROOF VS. GROUND?
To figure out what size solar array we could fit and afford, we had to first figure out where to put our panels. Usually, the size of a roof dictates how many panels one can feasibly install, but again, roof-mounting was a bad idea for us. We’d have to cut down Bobo, our beloved maple tree growing through our deck, plus ash and oak trees also shading our roof. We got estimates for this tree work and the LOWEST one was $15,000!
F that right in the A.
Aside from the actual and emotional cost of tree work, these trees shade our house, increasing its efficiency. It didn't make sense to add renewable energy while raising our consumption.
So we looked into ground-mounting. Based on our Sun Map, we had space and sunlight to install in our North Field, IF we took down one oak tree at the corner of our garage and a small dead pine (total cost: $4100).
IMPORTANT: the work involved with preparing a site for solar is typically eligible for the same federal tax credit as the solar system itself, so we factored in a 26% discount on the tree work need for ground-mounting (post-tax-credit cost: $3000).
PREPARING THE SITE/LOCATION FOR SOLAR
TREE WORK & SITE PREP
People can argue that it’s stupid to cut down ANY trees while attempting to lower one’s carbon footprint. But we kept the firewood and wood chips for various uses, and more importantly, according to SunDay Solar the carbon impact of installing our solar array is equivalent to planting 3,164 new trees every year.
To prepare our site for ground-mounted solar, Cox’s Tree Service came by and in a couple days cleared the sky, bringing full sun to our site. The oak was right up on our house, so getting rid of the tree’s stump and roots and addressing the resultant grading and drainage issues added another $7250 (post-credit cost: $5365).
Expensive, but less than the $15,000+ it would’ve cost us to prepare for roof-mounting.
The rest of the site prep—taking down smaller trees, removing a section of fence and some defunct passive solar panels installed by the previous owner—I decided to do myself (cost: Free).
Total Site Prep Cost (post-tax-credit): $8365
HOW LARGE OF A SOLAR ARRAY CAN I FIT?
Getting the PROPOSAL
Sunday Solar’s modeling software estimated that we could fit a 22-panel array (6.82 kW), measuring 33 ft long, 8.5 ft tall, and 9 ft deep. It should yield 8,375 kWh/year. That’s about 33% of our current annual energy use.
On a parallel track, we’re eliminating “energy vampires” (appliances that use energy even when they’re not in use, and account for up to 20% of a home’s consumption) and taking other steps to reduce overall consumption, which is the vital flip side of adding renewable energy. As we add more tools to live more sustainably, our family goal is to reduce consumption to about 17,000 kWh annually, the point where the solar panels are providing about 50% of our energy needs.
Okay, so at just over $3 per watt, the initial sticker price of our project was about $23,000. Yikes, holy sh*t, that’s the cost of a car, right? But that’s before the tax credit and before financing. Right now, most of us RENT energy from utility companies.
I think it’s helpful to think of this process in terms of BUYING an apartment, house or car…
SOLAR TAX CREDITS
The tax credit (26% off, as of 2020; the percentage is slated to decrease in 2021) brings the actual price tag of our large purchase down to about $17,000. If you can afford to pay all of that up front, good on you! We went the financing route. We pay a monthly utility bill (rent), so why not shift that to a monthly loan payment. If this was a car, typically we'd make a down payment. To keep this simple I’m going to consider that $8365 of site prep our down payment (which you can disregard if you're thinking of roof-mounting or have a big open space all ready for ground-mounting and don't need to do tree work). Now, to figure out a monthly payment we can afford...
FINANCING SOLAR PANELS
Some solar companies try to sell you on a preferred financing partner. They make a big chunk of their money this way, offering borderline predatory deals. SunDay Solar did NOT recommend/push any lenders, which I greatly appreciated. I’ve heard horror stories from neighbors who were told they could pay $0 for the first 12 months, only to get hit with “late fees” after a year and find it impossible to actually pay or even track down contact info for the lenders. A lot of scams out there. Please do your research!
Our community credit union has a “PowerSaver” loan for renewable energy, which was attractive and reputable, but ultimately we financed with a Home Equity Line of Credit (HELOC) at Bank of America.
HELOCs are a form of revolving credit you can use as needed over the “draw period” (say, 10 years) and pay off over the total term of the loan (30 years total). Interest rates are typically low, in the 3-6% range (ours is roughly 4.2%; ask for discounts and first-year incentives). Like a car loan or mortgage, we'll pay it off over time.
The difference between buying a car vs. solar is the panels SAVE money off your utility bill, like buying a car that uses much less gas. By producing 8,375 kWh of our own energy per year, SunDay Solar estimates we’ll save about $75 off our monthly bill, about $900/yr. We can work down our HELOC loan by making the SAME payment of $75/mo and our overall expenses will be identical ($0 difference per month)!
So that was our affordability answer: WE CAN FEASIBLY PAY THE SAME AMOUNT AS WE’RE SAVING FOR THE NEXT 30 YEARS AND NOT FEEL IT IN OUR MONTHLY BUDGET. It’s the same as if we just kept renting power from the utility company until we’re 70+ years old, the way most people do.
CALCULATING INTEREST
Maybe climate change will make world a chaotic hellscape by 2050, where banks are gone and money is not a thing? In that case we might keep our monthly payments low! If we’re feeling optimistic we might realize that taking 30 years to pay this off means paying a LOT in interest (roughly $13K extra) over the life of the loan. Maybe we don’t want to give extra money to BofA any more than we want to give it to Dominion Energy. So…it’s a matter of what we feel we can afford, how long we want to take to pay it off, how much interest we want to pay over time.
With the information we have, we’ll probably try to pay off the panels in 10 years, which means a monthly payment of about $175, which will feel like $100/mo when we subtract the $75/mo we’re saving on utilities. If our financial picture changes, or if we hate paying interest, we can set a lower/higher monthly payment. There's VA legislation that might make solar even more affordable. But we're still talking only about money...
WHAT WE’RE REALLY SAVING
A huge reason to go solar is the environmental impact, as Jack clearly sees. Our system is estimated to save 132,520 lbs of coal over its lifetime, and is the equivalent to removing 27 cars from the road each year.
Hope this helps demystify the process!
YEAR TWO: SOLAR SAVINGS UPDATE
Note that we use the Budget Billing feature with our utility company, which averages our our energy expenses over time and recalculates a couple times per year.
BEFORE installing our solar array, our monthly bill was Budget-Billing-adjusted in the range of $325/month.
AFTER installing our array, that monthly bill is down to about $90/month (and we’ve since installed a new mini-split HVAC system in my studio outbuilding).
You can see some of the energy production numbers below. Note that certain dips were due to extended power outages (need to get that solar battery backup next!) or the Wifi extender going down (I didn’t realize) so while we were still producing energy the data simply didn’t transmit to the MySolarEdge app. But all in all very solid savings and few, if any, maintenance issues. Two thumbs up, 10/10, would highly recommend!