Why Solar, Why Now? A Homeowner’s Guide to Residential Solar PV Systems
- April 25, 2016
- Jeff King
- No Comments
Solar is quickly becoming a high-demand service for our major residential remodels. You may be wondering, what’s the rush when today’s energy prices are so low? There are three lasting benefits to going solar: cost savings, energy independence and environmental impact. To get the full scoop, we sat down with resident expert Nick Donzelli at Green Air to outline what homeowners need to know about going solar in 2016.
Residential Solar PV Systems in a Nutshell
We take a well-rounded approach to intelligent building by matching your long-term needs with the opportunities of your existing structure. From high efficiency LED lighting and ventilation systems to aging in place and LEED Platinum certification, we consult with you to find the right home energy infrastructure.
Many clients who want to save money on their energy bill also ask about solar panels during a major renovation. Roof replacement is the ideal time to install a solar system as it improves waterproofing and ensures the roof will last as long as the panels (at least 25 years).
In general, going solar in 2016 has many benefits:
- Excellent tax incentives
- PG&E net metering guaranteed through 2019 (including San Francisco municipality)
- New technology for cost effective power storage
- Quick return on investment and potential to sell excess energy
- Offset the city’s carbon intensive energy infrastructure
The Basics: What is Solar PV?
A residential solar PV power system uses photovoltaics (a method of converting solar energy into direct current electricity) to supply usable power to a home. Solar panels are often mounted on the roof and connected to the PG&E grid. Emerging battery technology will soon make off-grid power affordable to the average solar PV household. In fact, in-home battery prices are expected to fall at least 50% in the next few years (you may have heard about the newsworthy Tesla Powerwall).
Cost Benefits for Going Solar
Homeowners can save thousands of dollars per year through Energy Star products, window systems, insulation and other high efficiency home performance systems. You can also offset utility bills with solar-generated power. To understand the true costs involved, let’s start with some definitions:
What Is a Solar System ROI (Return on Investment)?
The return on investment is the amount of time it takes for the energy bill savings to equal the amount of money spent on the solar system.
What Is Net Energy Metering?
According to Go Solar California, net energy metering (NEM) is a special billing arrangement that provides credit to customers with solar PV systems for the full retail value of the electricity their system generates. Under NEM, the customer’s electric meter keeps track of how much electricity is consumed by the customer, and how much excess electricity is generated by the system and sent back into the electric utility grid. Over a 12-month period, the customer has to pay only for the net amount of electricity used from the utility over-and-above the amount of electricity generated by their solar system.
What Is the Federal Tax Credit for Installing Solar?
Unlike a tax deduction, the Solar Investment Tax Credit is a “dollar-for-dollar reduction in income taxes that a person claiming the credit would otherwise pay the federal government.” Congress has extended the 30% Federal tax credit through 2019, meaning homeowners pay only 7 out of every 10 dollars of setup costs.
Now that we’ve got a basic understanding, let’s look at the numbers:
- Average return on investment (ROI) is 2.98 years
- 6.7% return on investment (through net metering) after solar has paid for itself
- Government incentives through 2019 including tax rebates and net metering
- Average PG&E inflation of 6.7% over past 30 years
“If you’re in the PG&E district, your rates have been going up about 10% per year since 2014,” explains Nick from Green Air. “For homeowners on a fixed income, that means you’re suffering by not hedging against utility inflation. It’s safe to say rates are going to continue to go up.”
Guaranteed Savings before 2019
In a nutshell, installing a solar PV system before 2019 will save you money. That’s how long homeowners are guaranteed the 30% Federal tax credit and net metering rate. With or without these incentives, investing in a solar PV system will still create a positive cash flow in the long term.
“The minute you go solar, you’re buying a product that’s going to pay you back at a rapid rate,” advises Nick. “Right now you can save 30% on capital costs, but solar is still a great idea after 2019. PG&E loses money on solar homes and everyone else pays the subsidy. It doesn’t matter if you have solar panels or not, you’re still paying for it.”
What Happens If PG&E Gets Rid of Net Metering?
PG&E is currently lobbying against net metering, which may increase solar energy bills after 2019. Luckily, recent technological advancements in battery storage will allow homeowners to go off the PG&E grid. The cost of lithium ion batteries is expected to fall at least 50% by 2019, and this will revolutionize the market. Benefits of battery storage include:
- Excess power stored during sunlight hours to be used at night
- Backup power in case of emergency
- Cost-effective alternative to net metering
- Potential 100% grid independence
How Much Does a Home Solar PV System Cost?
When choosing a solar system vendor, the cost-per-watt value is more important than the sticker price. Every home is different and some clients can expect to pay $8,000 while others invest as much as $76,000. Cost estimates should include the size of the solar system in DC kilowatts (i.e., 5.64 kW, wattage of the module, multiplied by the number of modules, divided by 1,000) and an estimated ROI.
“A $32,000 bid for a 8kw system means that the cost per watt is $4.00, while a $15,000 for a 3kw system means that the cost per watt is $5.00,” says Nick. “Comparing the cost per watt is the only way to find the best value for your dollar.”
When contacting your local professional for a custom quote, be sure to ask about cost per watt.
Long-Term Costs & Returns
The best thing about solar PV systems is that once in place, they require few expenses for the next 25-40 years. Green Air recommends maintenance every 1-2 years for a cleaning and checkup.
“After 25 years, the warranty will be up, but your system will still be producing power at 83%,” says Nick. “It’s a static system with no moving parts, and if installed and maintained properly, can produce income for many years.”
When considering your next San Francisco residential remodel, we will work with you to find the best energy infrastructure for your needs. Read more about our intelligent building practices here.