savings & investment

Everyone knows that solar is a great technology for the environment, but figuring out how good of an investment is less obvious. This is compounded by the many different types of solar companies offering as many different financial promises. True to our mission to make solar simple we have broken down the nuances of solar as an investment below.

 
 

TOU rate structures maximize solar savings, paying a premium for kWh produced in summer periods.These summer kWh are then used to offset proportionally more winter kWh. 

Utility Companies and NEM

All California utility companies have a Net Energy Metering (NEM) program that allows homeowners to get credit for energy produced by their solar system. In these programs solar systems are Grid-Tied, meaning they are directly connected to the utility grid. This is important because most solar systems don't have energy storage onsite and energy that isn't used immediately would otherwise be lost. With NEM every unused kilowatt hour (kWh) is tracked through your bi-directional meter and credited to your account. 

Part of the NEM agreement is that solar homeowners switch to a Time Of Use (TOU) rate structure. This rate structure charges different kWh rates for different times of day, the week and seasons (see info graphic). You receive market rate for your kWh at the time they are created. This can result in a situation were you over produce in the summer at Peak rates that are then used to offset proportionally more winter rates. Different array orientations can be used to maximize this effect. One final component of rates are fees called Non Bypassable Charges (NBC's) that cant be offset by solar production. Fortunately it's a very small amount (~$0.025/kWh).

Overall the NEM program in California is one of the most consumer friendly, making solar a very attractive financial investment, scroll down for more on solar financing and investment performance.

 

Solar is a great investment. No matter how you finance your project the end result is huge lifetime savings compared to continuing to pay PG&E.

Financing Options

There are now more financing options than ever and we can help you determine which best fits your needs. We've broken down the 3 most popular below:

  • Cash Purchase - Considering Lifetime Savings this option is hard to beat. It immediately reduces/eliminates electricity bill, pays for itself though bill savings in 5-6 years, and homeowners get all incentives. The one challenge is the large initial cash outlay.

  • Loans - Solar loans are usually $0 down with flexible terms and interest rates in the 4-8% range. Most homeowners can achieve a positive cash flow immediately and the homeowner gets all available incentives. This is a great option for those who don't have the cash for a purchase, but the downside is you will pay more for the system due to interest payments, reducing Lifetime Savings.

  • Lease/PPA - This is essentially a long term (20 year) rental that terminates with the option to extend the lease, give back the equipment or purchase at fair market value. Lessor gets the 30% Federal Tax Credit and any other incentives available, homeowner gets lower monthly bill, less than electric bill savings. It used to be the only financing option available, but since more attractive solar loans have appeared few people go this route.

There are other options, Property Assessed Clean Energy (PACE) is gaining popularity and with todays historically low interest rates a Home Equity Line of Credit (HELOC) if available is a great option.

 
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Solar Investment

Solar offers so many financial advantages that it often seems too good to be true.

  • Federal Tax Credit - You get 30% of the system cost back as a Federal Tax Credit. It's important to note that it's not a deduction, it's a dollar for dollar credit against any Federal taxes you paid that year. 
  • Retirement Planning - A great way to reduce fixed costs when thinking about retirement. It's a hedge against increasing electricity rates. Historically PG&E has increased rates 5-6% per year. 
  • Home Value -  A recent study by the Lawrence Berkeley National Laboratory found that in California buyers paid a $4.17/W premium for homes with solar systems compared to those without. The average cost of installing solar in California is $3.50-$4.00/W before the 30% Federal Tax Credit, so from this perspective you make your money back as soon as your solar system is installed. This benefit is not factored into standard solar payback calculations.
  • Payback Period - A typical solar system will pay for itself through electric bill savings in about 5-6 years. Imagine putting an extra $100, $200 or $300 a month into your savings account instead of PG&E's pocket.