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Unlike many other investments, a solar energy system is an investment that can provide guaranteed returns. The environmental benefits of solar power are also widely accepted. We’ll focus on the financial returns provided and how they are achieved.
Given the right circumstances, installing a solar system will provide long-term, double-digit financial returns. Factors that affect returns on an investment in solar are how much electricity you currently use, how much electricity your solar system produces, how much it costs to purchase and install the solar energy system,and the current and future costs of electric power purchased from your utility.
Solar systems pay themselves back by offsetting the top three tiers of PG&E utility rates. Many companies will size a system to offset 100% of your electric consumption. This is unnecessarily expensive and creates a longer payback period.A good company also consults with their client to reduce electrical usage before sizing the solar system.
When designing an array, the contractor and customer must balance the considerations of aesthetics with production. An attractive and productive array keeps the neighbors happy and generates the contractor more business. How much electricity a solar system produces depends on how much sunlight the panels receive, air temperature,and the wattage rating and quantity of panels. A solar system’s power output is most efficient when oriented in a southerly direction with minimal shading. Most homes or businesses aren’t lined up perfectly for solar, but there’s a lot of flexibility in how the panels can be oriented. Some shading can be accommodated; every installation is different.An important factor to consider is how much your system costs to install. Costs vary with the type of system and the complexity of the installation. Products made in the USA are of higher quality and have better warranties than foreign (Chinese) products and cost just cents on the dollar more. When considering your system, the main concern should be compatibility of the product and future availability of the product should there be a need for replacement of individual panels. There are no moving parts in a solar system, so they require little maintenance and are very reliable. Panels are warranted for 25 years, and they have an expected lifetime of well over 30 years. Many systems installed 40 years ago are still in operation.
Installation costs are offset by utility rebates; federal and state tax credits and system depreciation for home-based or commercial business use. The Federal tax credit of 30 percent for solar installation is available until 2016. PG&E rebates are still available, but they are being reduced as more systems are installed. The current net cost of residential solar system is approximately 65% of its gross cost in the first year of operation due to rebates and credits. Commercial systems are typically larger and return even better financial returns due to accelerated depreciation schedules. If a site is well suited for solar, and electric usage demographics allow,a reasonably priced system can produce more power than is used at the solar site during the summer. In this case, the solar contractor should suggest a “solar friendly” utility tariff. The extra kilowatts produced during the summer will generate a greater proportion of winter kilowatt credits. The extra kilowatts that are unused by the system owner in the summer period (May-Oct) are used by PG&E; this reduces the need for additional traditional power plants. This is why the system owner will be paid by PG&E at a premium rate for their unused solar kilowatts. This further advantages the system owner, reducing payback and increasing long term financial gain.
Your electricity use is a fundamental piece of the investment equation. If you have moderate electric needs, you may reap lucrative returns typically in the 8-16% range over the life of the system. Based on past trends, PG&E electric rates are expected to increase an average of 6.7% per year for residential customers and 5 percent for commercial customers. During the 25-to 40-yearlifetime of a solar system, your utility bill is expected to increase more than fivefold. Investment in a solar power system now serves as a hedge against rising utility bills. These rate increases make solar a compelling investment.Waiting for “new technology” and “lower prices” is a red-herring; new technologies are becoming available, but they won’t be financially feasible for the average home or business owner for years. Delaying your installation to wait for lower prices will also be offset by smaller available rebates. It is ideal to install while system prices are reasonable, interest rates low, and while tax credits and rebates are still available.
Another benefit of a solar power system will be an increase in the appraised and assessed value of your property. Because of California law, an increase in assessed value as a result of this home improvement will not increase your property taxes. As long as rebates and tax incentives remain available to offset your installation costs, and as long as utility rates continue to rise, solar will remain a very savvy investment.
By Mark Becker, Semper Fidelis Construction Inc.
For more information, visit our websites, www.SimpleSolarKits.com, www.CaSolarPowerSolutions.com, or contact us for a free home consultation at 925.255.3345. (Mark Becker is president of Semper Fidelis Construction, a Danville-based solar power installation and consulting firm.)