(What follows is a very long, comprehensive post filled to the brim with everything I’ve learned about going solar. Our installation is now feeding green energy into the grid, I obsess about cloudy days, and I’m looking forward to our new investment paying us back in both money, and in knowing we’re contributing a great deal towards a green future. Cross-posted on my blog, Left in Lowell.)
The flurry of activity in and around my homestead during two days in the week of October 7th was very disturbing to my poor dogs, but exciting for us. After a journey of more than five years in researching and planning (more on that in a bit) the contractors we hired, NuWatt Energy Inc, were on our roof installing our 4.16kWh solar electric system. A system that, it is estimated, will be providing around 80% of our current electricity usage.
Why did it take us so long, and how did we finally decide on the path we did? The answer to that, I’m hoping, will give other people a shortcut to the knowledge we got the hard way, and give you several paths to solar for your own home or business if you think you’ve got the roof for it.
When we bought our home, it wasn’t for the solar-perfect south-facing second story roof. But it wasn’t hard to see that we’re situated well for panels. There are trees behind our home but they’re set back (because of a small road behind our house), and while in winter, a couple of large leafless trees back there will, with the low mid-winter sun, lightly shade the bottom of that roof at midday, we’d be getting the most out of those panels the rest of the year.
2008-09 – the Beginning of Our Journey
When the City of Lowell put on its Getting to Zero contest, which included a team of UMass Lowell engineering students coming to your home to do an evaluation, and a MassSave home assessment (which is free for anyone), I signed up. The concept was that homeowners would put together a plan for getting as close to a zero-carbon footprint as possible with $25,000 – and the winners (with two winners – one in a moderate-income category and one with no income restriction) would get those funds to do the work. We became finalists, but didn’t win. However, I will say, I became hugely educated on many fronts, and it was a worthy enterprise.
In our GTZ plan, we included an installation of solar panels. At the time, you could buy PV outright of course, but it was expensive (moreso in 2009 than now), and would have eaten up all of our $25,000 contest winnings, or more. But there was a new option in Massachusetts, a business model just imported to Mass that allowed you to get solar without much cost – called solar leasing. Again, things have changed somewhat since then, but I want to explain the incentives for going solar, which apply in all cases, so I can then better explain solar leasing and its pros and cons. Because ultimately, we decided not to lease, but to own. I think both paths are valid, but first you need to understand the numbers.
Money Money Money
There are a number of incentives lined up for purchasing solar in Massachusetts. I’ll go over each in detail.
• Federal tax credit
• Massachusetts state tax credit
• Massachusetts Commonwealth Solar II Rebate Program
• Solar Renewable Energy Certificates (SRECs)
Federal Tax Credit
First, the big one: the federal tax credit which pays for 30% of the total installation cost of the system. That’s for starters.
That’s money back from the taxes you paid in the calendar year you installed the panels. So, let’s say you paid $9000 in income and other federal taxes. When you go to do your tax return, and you installed a $17,000 solar panel system on your roof in that tax year, you’ll get 30% of that install cost back, out of the taxes you paid, as a refund. For that $17K system, that’s $5,100. So long as you paid more than $5,100 in federal taxes, you’ll get back that amount.
The only drawback here is that there is a ticking clock on the federal tax credits. They will be up on December 31, 2016, and would need to be renewed to keep this incentive in place. This is something to keep in mind if you are thinking of solar; if Congress fails to renew this program, then you lose out on a lot of money if you wait too long.
Mass Tax Credit
Then there is the Massachusetts Personal Income Tax Credit. This is a tax credit of 15% of the total cost, up to $1,000. Most installations will qualify for the full $1000 (we did).
Commonwealth Solar II Rebate
The third incentive is a straight-up, nearly immediate (less than 4-6 weeks after install) rebate under the Commonwealth Solar II rebate program. This is in addition to the state tax credit. (Yes, Massachusetts is generous to solar adopters!) The base incentive is $.40 a watt. The “Moderate Home Value or Moderate Income Adder” is another $.40/watt. Most residential home owners will qualify for this additional $.40. There’s another $.05/watt if you use components made in Mass. We did not qualify for that because our contractor used panels not made here; that incentive can be good but you might find a lower cost panel or a better panel not made in MA, so ask about this incentive but you or your installer might decide to skip the MA-based components incentive.
All told, we qualified for $.80/watt for the Commonwealth Solar II incentive. I’ll detail what that translates to in our rebate later on.
There is one last really great incentive to understand: the Solar Renewable Energy Certificates (SRECs). After Governor Patrick, upon his first swearing in, signed the RGGI (Regional Greenhouse Gas Initiative), it entered Massachusetts into a regional cap and trade system. That system puts a cap on emissions, such that carbon-polluting utilities must purchase green credits (SRECs) to offset their polluting.
The cap is working. This year, the cap got lowered (for 2014) by 45% – between burgeoning renewable energy projects, more energy efficient buildings, the drop in natural gas prices (which means more plants using gas and less using oil and coal), and also the Great Recession, emissions overall were plummeting, and therefore the price of SRECs on the open market went down (with less demand for them). The lowering of the cap will sustain the SREC market and continue the downward pressure on carbon-producing utilities.
So what is an SREC? Basically, as a producer of green energy, my roof generates credits, which can then be sold on the open market to polluters. The company we used to install our panels uses a third-party bundler of credits, to which we have to report our production and they will help sell our credits (selling them yourself would be a pain). We get to sell these SRECs for the first ten years. It’s estimated (conservatively) we’ll be getting around $1000 or more per year for our SRECs (if current prices hold).
A Word on Technical Stuff Like Selling SRECs
Part of the reason that I’ve published this piece more than a month after our solar was installed was that installation is not the only end game. The install itself, as mentioned, took only a couple of days. Once installed, the work needs to be inspected by the city, and once you get your inspection approval, your contractor should be the one notifying your electric utility, who has to come and do the final hookup. I was pleasantly surprised that National Grid, which has a rather, er, slow reputation, had us hooked up to the grid in about two weeks.
Residential solar production in Massachusetts means net metering, which is to say, when you are producing more than you are consuming via your renewable source, the meter “runs backwards” and you gain credit from the utility. Then when you use more than you produce, you get that credit back. If you overproduce – let’s say, you go super-efficient in your electricity usage, installing LEDs and forgoing the use of ACs in the summer – my understanding is that you will not be getting a check from the utility company here in MA. And Even if the law in MA allowed you to get a check from the utility for overproducing, it’d be at the very low wholesale rate, not the retail rate.
Since most residential installations are limited by the available space, you’re not likely to run into a problem. Our (best) south-facing roof can only fit enough panels to cover 80% of our current usage, so we have some wiggle room for efficiencies we might want to deploy. But this is something to keep in mind when planning out your solar with your contractor.
As for SRECs, there are a few details to keep in mind. An SREC is created for every 1000 kWh (kilowatt hours) you produce, aka 1 megawatt hour. The SREC gets “minted” at the end of the quarter in which it’s produced – if our installation fails to produce 1000 kWh by end of December, which is likely, given the winter sun, we won’t mint our first SREC until the spring quarter. An SREC will then be available for sale in the next quarter after it’s been minted. So for us, we definitely won’t sell anything until spring, but more likely, our first SREC sale will be in the summer quarter.
SRECTrade.com, the outfit we’ll be selling our SRECs through, doesn’t just sell your SRECs at the quarterly auctions. They are looking for the best price (you make more money and so do they) and that often happens between auctions. For our size installation (under 50kW) the fees in total are 7% of the price of the SREC they sell for you.
They also have an option for people who want to try to play the market. You can set a “minimum price” for your SRECs, kind of like an Ebay auction (you pay the same fees). It’s not recommended generally, and the customer service rep I talked to mentioned that the studies they’ve been able to do (remember, this market is only a few years old) shows that on average, their managed SREC sales do slightly better than the average sales where a minimum was set. But if you think you can do better gambling, you can try it if you want.
If SRECs don’t sell, there is a last-chance auction (the Solar Credit Clearinghouse Auction or SCCA) at the end of the fiscal year (July). Massachusetts has been pretty aggressive in making sure there is at least a fall-back fair price for SRECs, including the Department of Energy Resources offering to buy any extras. To quote another SRECTrade blog post, “The [last-chance] auction was designed as a ‘price support mechanism’ for the Massachusetts SREC market, but it does not represent a ‘price floor,’ a common misperception.” Also, remember that past performance does not give you a guarantee for future prices in the SREC market.
If your SRECs don’t get sold, but go into the last-chance auction, they are reminted for another three years. For more on the markets in each of the states in which there is an SREC market, go here. There is a lot more information here about the Massachusetts SREC market.
To Lease? Or To Own?
Now that you’ve got an idea about the incentives available in Massachusetts, let’s talk leasing versus owning.
Solar leasing is a program whereby for little or no outlying cost to you, a company comes in, installs the solar panels, and you sign an agreement (usually 18-20 years) to buy your power (up to the amount expected to be generated by the panels, and any excess energy need would be supplied by your regular utility at their price) at a price negotiated at the time you sign the contract. The price per kWh is very competitive (or else why lease?) with modest increases built in, and what they tell you is that if electric prices do what they have always historically have done, your price over the 18-20 years will be significantly less than what your non-solar neighbors buying direct from the utility are paying.
There are pros and cons to leasing versus owning solar panels. I think both paths are valid ways to get green – your circumstances might better be served by one or the other.
Advantages to leasing:
One big advantage to leasing is that you are not expected to maintain the panels – the leasing company monitors the output. Since they guarantee you the power you’ll buy from them, they are incentivized to keep the panels in top working order. Otherwise they would have to supply you from the utility, which if things work the way they are expected, will cost more and lose them money.
This includes replacing the inverter should it fail during the leasing terms. The inverter is one component that isn’t expected to live as long as the panels, and can cost money to replace. The good news is (for owning) is that inverters are expected to cost less in 10-15 years.
With leasing, the upfront cost to you is pretty negligible. In effect, all you’re doing is swapping power companies and probably getting a better deal. When we first looked into solar leasing (in its infancy in MA) they wanted $2,000 from us up front to help offset the installation costs. The last quotes I got more recently for leasing were for $500 up front cost, or even zero cost. It depends on the current market for SRECs and other things, as to whether or not the solar leasing company can make enough money to front all the costs of buying and installing the panels. You should be able to find a zero-cost leasing company (and is one thing you should look out for when getting quotes – if someone wants a lot of up-front money on a solar lease, beware!).
When the lease timeframe is up (18-20 years is the norm) you can renew the lease with them, or buy out the remainder of the value of the panels outright and own them yourself. (Keep in mind solar panels do degrade over time, up to 1% a year generally.) Or, you can opt out entirely and they’ll remove the panels.
The lease is transferable if you sell your home. The new owners can take up the lease for the rest of the contract terms.
Cons to leasing:
You don’t own the panels, and you get none of the incentives – all the SRECs, tax rebates, etc go to the leasing company. If you do the math, you find out that you’ll make out ahead if you own the system (even making money on it!) but leasing means you don’t get any of that.
Some leasing companies might have additional incentives, like giving you the SREC money, but that is something you will have to check with leasing companies. It’s a great question to ask!
Advantages to owning
When we decided to own, it was the math on the incentives that did it for us. If we played our hand right, we could actually break even and start making money on the system within 4-5 years, including any interest on the loan we got. We got our loan with the bank with whom our contractor has a relationship. More details on our loan are further down the post.
Outright, after next year’s tax season and all our rebates and tax credits, we’ll have gotten back 55% of the cost of our panels (not including the loan closing costs, just the installation and component costs). I’ll go over the numbers later, but that is a pretty attractive incentive. On top of that, we’ll get 10 years of SRECs to sell (around $1000/year or more) and 80% of our power will be generated for us, leaving us with only 20% to pay National Grid for electricity. Less if we can do some home energy efficiencies like replacing all light bulbs with LEDs. (That’s the plan!)
So, leasing might save you a little bit in your utility costs over time, but you can fare much better monetarily by owning them.
The final advantage to owning is that your home will be worth more. If you sell your home while leasing your roof to a solar company, there might be some value there, but if you own the panels and they come with the house, that value is all yours. Our panels were estimated by our contractor to add $13,371 of value to our home.
Cons to Owning
Of course, there are cons to owning as well. The big one is the outlying costs. Our system was $17,264 and our loan total was $19,024 after closing costs. The ideal scenario would be to have 100% of your solar panel install cost in cash, of course, followed by having around half of your cost as a down payment – then you could get a loan for the rest, which means having to pay closing costs but then you’d pay off the entire loan as soon as you get all your rebates and tax refunds. If you have home equity, using that would give you the advantage of a lower interest on secured home equity loan.
But no matter way you slice it, and despite the much lower costs of panels these days, it’s a pretty large commitment.
Another con to owning is maintenance. You will be responsible for the panels (which are unlikely to need much maintenance but you never know) and for replacing the inverter that is likely to go within the lifetime of your panels. This can be a couple thousand, though as stated before, this component may be quite reduced in price by the time it’s a problem.
Other than the price and maintenance, though, there aren’t any other cons to owning that I can see (so far!!). Make sure the company you hire is reputable (there are many companies coming out of nowhere to take advantage of solar installations) and ask them if they will be doing much of the paperwork for the rebate program. Find out if they will help you get loan if you need it. The nice thing about participation in the Commonwealth Solar II Rebate program is that the state of Massachusetts has some minimum requirements of its participating contractors. To that end, make sure the company you hire is certified with the program so you get all of these incentives! If you talk to a company that says you’ll get the tax credits, but fails to mention the Commonwealth Solar II rebate, that is a huge red flag.
I always recommend getting multiple quotes of course, and also search online for reviews of any company you’re thinking of hiring. A few bad reviews among lots of good ones are probably to be expected, but if the balance of bad to good seems iffy, don’t hire them. Use the same judgement you’d apply to hiring any other contractor to work on your home.
Solar Leasing Companies
The first place we got a quote was with a reputable company which put together the program called SunRun. They have gotten even bigger since then, and I still think they are a good recommendation.
We also talked to Roof Diagnostics Solar about leasing, though I have no opinion good or bad about them regarding specifics.
There are other solar leasing companies, some with familiar names, including Vivint.
Solar Panel Installation Companies
I can highly recommend the company we went with for buying and installing our panels, NuWatt Energy. A friend of mine, John Tehan (email@example.com) is the salesperson we talked to, someone I trust and who loves what he does. We had a couple of hiccups, but they were on the city side (a lost permit request!) and no harm done. It did delay things a little bit. But in the end, I felt confident in the knowledge of the installers, and I was on site for their entire (very short) installation period of around two days, so I was monitoring things pretty closely. Everyone from John, to NuWatt’s owner, to the contractors on site answered all of my very many questions quickly and competently. They were a godsend in helping with the paperwork, and they are a one-stop shop, with a bank you can talk to about a loan, and helping to set you up with the SREC-bundler they work with to help you sell your SRECs (I can’t even imagine doing it on my own).
Our Installation By the Numbers
But what does all this mean? Here is where we get into specifics. Namely, I’m going to disclose all the details of our system, its costs, and our loan and its costs. (Doing this with the permission of my better half, of course!) I feel that a lot of this information is abstract until you see the numbers. So here we go! This is the cost for our installation in October 2013 (just so we’re clear).
Roof Mount 4.16 kW DC rated solar electric system
Substituting 81% of usage, assuming a $73 OR 497 kWh/month average bill.
|Total Cost of Equipment and Installation||$17,264.00|
|Massachusetts Base Rebate ($.40/watt):||($1,664.00)|
|MA Adder Rebate (moderate home value, $.40/watt)||($1,664.00)|
|MA Tax Credit||($1,000.00)|
|Federal Tax Credit (30% of installation cost)||($5,179.20)|
|Total Rebate/Tax Credits:||($9,507.20)|
|Net Investment after Incentives & Tax Credits||$7,756.80|
|% Savings on Installation after Rebates||55%|
|First Year Utility Savings||$669|
|Estimated 1st Yr SRECs (based on today’s market value of $210 /SREC)||$1,013|
So as you can see, the total rebates and tax credit numbers amount to 55% of the cost of our system. The SRECs have already rebounded slightly in price, so this is a very conservative yearly estimate. Of course, our SRECs will be subject to the market, so we’ll be watching that.
Moreover, here is our impact on our carbon footprint. Over 25 years, this solar system is estimated to offset:
- 106,959 Lbs. of CO2, the leading greenhouse gas
- 128,351 miles of your average auto driving in an average car, or
- 10,696 miles a year
Finally, a word on our loan. We went through the bank that our contractor works with, and got a 20-year, secured solar home improvement loan issued through the FHA. Our loan amount was $19,024 (the $17,264.00 cost of the panels and installation, plus closing costs). Our monthly payment will be just under $200 a month, but you can re-amortize once within the first year after you get all your rebates and use that to pay down the principle of the loan. Our interest rate is 9.95%. We plan on paying as much above the monthly minimum as we can, and adding our SRECs as we get receive those checks, to pay this loan down within 3-4 years, saving a bundle on interest.
Do I Have the Roof?
Don’t assume because you’re not totally south facing, or there are some trees around, that you aren’t a good candidate for solar. Of course, it should be pretty obvious if you have a perfect solar situation, but get an assessment anyway. The company(ies) you ask for quotes will come and measure your capacity with equipment that can track where the sun will be.
One proposal we got was for the east side of our one-story extension on the back of the house. Not ideal, but at the time we were worried about the structural strength of our second story roof (which is 108 years old, part of the original house). This was a proposal we got quite some time ago, before panels got lighter and cheaper and easier to install. At the time it appeared to be a viable option (this was for a solar leasing quote, so they were the ones guaranteeing a certain output). The most ideal is a south-facing, angled roof if you can get it. But a solar installer will give you more information once they assess your individual situation.
Of course, it could be the case that solar is not viable for your site, or at least not without major modification like trees being taken down. But it’s worth a free assessment if a company is willing to do that. (Often they do their initial assessment by Google satellite maps and rule out the impossible cases.)
As stated before, the structure of your roof can be a factor. Old roofs are just not built the same. Make sure whatever company you hire is willing to do an engineering study with stamped drawings. The city will ask for such things in order to give a permit, but you’ll want to have everything done right. This is a roof over your home, and between the weight, and the fasteners which penetrate the structure, you want to be sure you feel comfortable with the work done on your home, regardless of what route you take towards solar.
Other Things of Note in Going Green!
I have some idea of our next steps to becoming greener…and saving green! The first is to really get serious about our heating and cooling. There is a new technology spreading in the north (not quite new but improved for colder climates) called air-source heat pumps. There are also geothermal heat pumps, which are not tapping into thermal vents, but simply use the steady temperatures in the ground to do heat-exchange for cooling and heating for your home. Geothermal heat pumps can be expensive because of the required drilling (and in urban areas drilling is potentially problematic). However, the “air source” heat pump, which look like one of those fancy air conditioner units sitting outside your house, but in reality they are doing both cooling in the summer and heating in the winter, is now available for New England. With no drilling, installation is much cheaper.
Previously, air-source heat pumps were only practical down south in a warmer climate, but recent innovations in the refrigerant used in the closed system allows more northern climates to install these, viable down to near zero temps. It’s recommended you keep your regular heating system as backup in case the temp goes below the operating abilities of the heat pump (which is rare to never).
Why a heat pump? Because they can be 1.5 to 3 times as efficient as even the best, most energy efficient home heating systems relying on natural gas. They use a little electricity to run a refrigerant through lines between a small unit in the rooms you’ve installed it in and the outside unit, using temperature differentiation to heat and cool your home. (Bizarrely, this means “pulling the heat out of the air” in winter – which seems counter-intuitive, but the science works.) No more AC window units!! This system does both!
Heat pumps are installed on a per-room basis. What I like about this is, for things like our guestrooms upstairs we hardly use, or our back-door “mudroom,” we can simply not install a heat pump indoor unit there, driving the install price down and keeping the heat on only where we live. Then if you have guests, simply turn up the backup traditional system you kept. You can program the heat pump indoor units on a timer as well (similarly to programmable thermostats). And the per-room or per-area indoor units means you can keep different areas at different temps, again, so the places you live in the most stay warm while areas you don’t frequent can stay cooler (or vice versa in summer). It would also address a perpetual problem in our house – our kitchen is always hot in summer and cold in winter, as it is rather cut off from the front part of our open-concept first floor, and has little in the way of heat registers, or ability to put in window units for cooling in the summer. The kitchen would have its own unit suited to its square footage in a heat pump installation, and boy, would I just love that. I’m sort of sick of freezing my tail off in the kitchen in the winter!
An air-source heat pump would eat up more electricity than we current use (so our solar panels would cover less than 80% of our usage), but we would be getting rid of at least an average of $150 off our monthly natural gas bill. The efficiency of the electrically-run heat pumps could save us $600-1200 a year, according to my back-of-napkin calculations. Maybe significantly more. (Especially if we decide someday to install more panels on another lower, but still south-facing roof. Then we run our heat pump system with our own panels!)
Another energy-efficiency dream of mine in the next five years is to buy an electric car. Again, this would increase our electricity usage, and then our panels cover less of our usage annually, but we’d be getting much closer to totally green at that point. This is of course kind of a pipe dream right now, but definitely something that could be doable if the prices of electric cars comes down like they ought to.
In the beginning of our search, going solar felt like such a big and tough decision. I badly wanted to do it, but many of the programs were in their infancy and frankly, untried, though they were attractive even then. The initial lease programs wanted a couple thousand up front and that daunted me, when we didn’t win the Getting to Zero contest, which would have paid it.
Then, more recently, trying to suss out the pros and cons of both paths to solar, especially now that leasing programs’ up front costs are low-to-none, was even more intimidating. The idea of spending over $17,000 scared me, until my friend carefully went over every aspect of the incentives (more than once!). Between the rebates and tax credits totaling 55% of the installed cost right away (or at least by the next tax season), your total costs are quite low, comparatively. Cheaper than the cost of a low-end new car! Then you factor in the SRECs you get for ten years, and the decades of sun-made energy, and it becomes even more attractive.
I’m hoping that my assessment here, of how these incentives work and about owning or leasing, can help you take the solar leap that took us over 5 years to make. Especially with the federal incentives expiring in 2016 and renewal not guaranteed, and panel prices stabilizing and no longer dropping, I think you’ll agree, the time to go solar, if you can and you have the right roof, is soon!