How to Buy Residential Solar

Written By Tommy Parisi

Disclosure: I only recommend products I would use myself, and all opinions expressed here are our own. This post may contain affiliate links through which I may earn a small commission at no additional cost to you. Read the full privacy policy here.

So you’ve decided to take the plunge and install a solar panel system for your home.

Solar-electric or photovoltaic (PV) technology converts sunlight directly into electricity. A properly installed solar system provides many benefits including cost savings, increased home value, and a positive environmental impact. There are several factors to consider before you sit down with a vendor to discuss a purchase. Let’s dive in!

What’s my current electric bill?

When crunching your energy usage bills, you’ll find that there is an estimated payoff period. It may take 5–6 years for the initial investment in solar to pay off. The higher your bill, the sooner this number will pencil out, and vice versa. Utilize a Solar Return On Investment Calculator like the one found here: https://unboundsolar.com/solar-information/return-on-solar-investment to crunch the numbers.

Consider your current and future energy needs, as this may impact your year-end True Up.

True Up

According to solarrights.org, The True-Up statement is what the utility sends solar users on the anniversary of the date your solar system turned on. The True-Up reconciles all the cumulative energy charges, credits, and compensation for an entire 12-month period.

A common mistake that people make is underestimating the amount of energy their system is creating or offsetting. Your new system is not an unlimited source of energy. If you use more than you produce, you will have a true-up cost on your annual anniversary date. This will cause sticker shock, as a year’s worth of overconsumption can be covered in one payment! 

NET Metering

According to www.energysage.com Net metering is an electric billing tool that uses the electric grid to store excess energy produced by your solar panel system. Under net metering, the energy that your solar panels produce and you don’t use is credited back to you. 

If you overproduce but underconsume, you may find that you will receive a credit from your utility company. The ratio that your utility company will pay you for overproducing versus what they charge you for overconsuming is horribly skewed in their favor (that’s life in the big city!). Don’t expect to make money from overproduction.

When deciding how many panels to install, factor in your future energy use

-Electric Vehicle charging

-People always at home (ie. starting a family, adding roommates)

-Installing a pool (pool pump equipment, though Variable Speed Pumps are quite efficient compared to older technology)

-Annual Christmas Decorations that would make Clark W. Griswold jealous? 

How long will you stay in your home?

If this is not your “Forever Home” or you plan to sell within 5 years, solar may not be the best allocation of your finances. Unless, of course, your financing option is close to the cost of your energy usage, as we saw in the example above. A solar system will allow your home to demand a premium when you sell it (put yourself in the buyers’ shoes), but don’t expect to recoup 100% of your initial investment.

Thinking about holding on to your home and turning it into a rental someday? A solar installation may allow you to charge a rental premium considering the tenant-paid utilities will be significantly reduced.

Will you make the leap to an EV?

I don’t miss pulling into a gas station…unless I need to use the restroom!

Last year, I purchased an EV. My $/miles went down significantly. However, my electric bill went up significantly. When I crunched the numbers compared to gassing up my car, my annual savings were roughly $4,000. Keep in mind; I put around 25k miles per year on my vehicle.

You can utilize an Electric Vehicle Savings calculator like this one https://chargevc.org/ev-calculator/ to forecast your potential savings and increased energy usage.

If I were to do it over again, I would have added additional panels to account for future EV use. I may still do so somewhere down the road. If only there were a decent blog to explain this stuff!

Where to Start:

Do you know how much electricity your home consumes?

Do you know how much energy your home can produce?

Your electric bill

The important number is the annual kilowatt-hours (kWh) of energy used by your home. This is the total amount of energy consumed throughout the year. 

Hop over to Google Project Sunroof (https://sunroof.withgoogle.com/) Plug in your home address to G.P.S., then Google Analytics estimates how many hours of usable sunlight per year your roof receives. G.P.S. will also estimate the available square footage on your roof for panels. From there, it projects the estimated size of the system that you may need to fulfill your energy needs (crazy, right?). You can also plug in your average electric bill, and Google will give you a rough estimate of what size Kilowatt (kW) system you may need. There are also some cool metrics with regard to the positive environmental impact of your estimated system.

The Empire State Building would be a fine place to mount some panels, but the ROI may take a while to pan out. Image from Google Project Sunroof

Costs:

The average cost may range from $2.40-$5.00 per watt

For Example:

5kW (5,000 watt) system may cost $12,000-$25,000

5kW (15,000 watt) system may cost $36,000-$75,000

The cost will shrink or grow based on your home’s overall energy usage and your roof’s ability to generate electricity (think back to Google Project Solar’s estimate of your roof’s sunlight exposure).

Other factors that may affect the overall cost of your project include the type of install, roof condition, distance to the interconnection point, shading and weather, and the type of installation needed for your panels.

But wait, aren’t there Tax Credits for the installation of Solar Panels? Why yes, there are.  

Tax Credit: Let me start by saying that I am not a Tax Professional. I can only speak from my personal experience. When I purchased my panels, I enjoyed a 30% reduction in my Federal Tax burden and have since enjoyed running the A/C all Summer long in beautiful Northern California.  

According to www.energy.gov, a tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. For example, claiming a $1,000 federal tax credit reduces your federal income taxes due by $1,000. The federal tax credit is sometimes referred to as an investment Tax Credit, or ITC, though it is different from the ITC offered to businesses that own solar systems. 

The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar PV system paid for by the taxpayer. The installation of the system must be completed during the tax year.

Solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. In August 2022, Congress passed an extension of the ITC, raising it to 30% for the installation of which was between 2022-2032. (Systems installed on or before December 31, 2019, were also eligible for a 30% tax credit.) It will decrease to 26% for systems installed in 2033 and to 22% for systems installed in 2034. The tax credit expires starting in 2035 unless Congress renews it.

Technology Primer:

There is a lot to unpack here. Please refer to the links below for a deeper dive.

Image from Sunpower.com

Here are the Cliff’s Notes

Your Photovoltaic (PV) module collects “photons”. Photons are particles of energy emitted by sunlight. 

The solar panel feeds this electric charge into inverters, which change it from direct current (DC) into alternate current (AC) electricity

A solar inverter takes the DC electricity from the solar array and uses it to create AC electricity. Inverters are like the brains of the system. Along with inverting DC to AC power, they also provide ground fault protection and system stats. You’ll get a sweet app to track your energy production and even be able to show your friends: how many trees you planted and the carbon emissions you reduced.  

AC electricity runs through your electrical panel and is distributed throughout your home

Excess solar energy may be stored in a home battery or pushed onto the grid to power local systems (like your neighbor’s house!) 

Features to consider when identifying a quality panel:

Longevity

PV modules are very durable and have long service lives. In general, modules carry a warranty of 80% of their rated power for 20 or more years.

Degradation

Solar panels have what is known as a "useful life" period. What that means is that the panels produce less energy as they age. You might notice a significant drop-off in how much energy you are getting from the panels roughly 25 years after the installation. For instance, many warranties guarantee 90% of panel production for the first ten years, and 80% for the remainder of the 25–30 years. But that doesn't mean they're immediately useless, and they can still produce energy for a long time. You will pay a premium for more efficient panels that come with a longer warranty.

There are several manufacturers that make effective panels, competing for your business. I chose Sunpower for my home system. In doing so, I knowingly paid a premium compared to other manufacturers. However, I wanted a panel that would last a long time.

Through my research, I found that Sunpower was consistently recognized in the industry as a leader in quality manufactured panels. To date, I have been very pleased with my system and would suggest anyone check them out when considering a purchase.

Strategies for ownership

Purchase

When you buy solar panels, there may or may not be a payment plan available. There are often additional credits available to people who purchase solar panels based on the state's or the manufacturer’s reimbursements. Still, there is bound to be an upfront investment when you purchase solar panels. It’s always best to check with your chosen solar company or installer for quotes. You can purchase it with cash, a HELOC, or even a special Solar Loan. Most dealers will offer financing options. Your loan payment may be as much as or even less than your average electric bill!

Lease

Leasing solar panels will cost between $50 and $250 per month. This cost is determined by multiple factors, i.e., how much energy you use, the company, your location, and your credit score. Plus, some solar companies require a down payment, while others allow you to lease with a $0-down agreement. These costs should be considered when determining if you should lease a solar panel system.

Consider the following if you choose to lease:

Ineligible for rebates and incentives

With a solar lease, you do not own the system and therefore do not qualify for government or private rebates or incentives for the solar panels. Depending on where you live, the cash-based incentives may be significant enough to make purchasing solar panels a much better option.

Your Home May Be Hard to Sell

Although solar panels in general add value to a home, a home with leased solar panels can complicate a real estate transaction. If the panels cannot be moved, or the lease cannot be transferred to the new owner (either because they are disinterested or the lease originator will not agree), then you may have to pay more to break the contract.

How to negotiate when purchasing your panels

Rebates

Rebates range from the obvious (the Federal Tax Credit) to the less obvious. If you are purchasing your panels, you may be eligible for manufacturer reimbursements. Distributors of panels will offer referral fees, monthly promotions (in the form of discounts or reimbursements), and additional rebates. Type “Solar Installation” into a Yelp search, and you’ll find how many vendors are out there fighting to earn the right to hang out on your roof!

Figure out which panels you want to go with. From there, you can find the local dealers. Work with them to confirm the size of the system that you will need to meet your energy consumption needs. Get several quotes from different installers. Let them compete for your business.

Choose the most reputable installer (first and foremost as workmanship should always be a priority) providing you with the best value for your money. Ask that they charge you full price for the system, yet provide the discounts, incentives, and promos as a rebate following the completion of the work. This allows you to maximize your Federal Tax Credit, then take advantage of the promotional discounts on the back end. 

Image from AAA.com

Easy $1,000

If you drive a car or travel, you should have a AAA membership. (If you don’t, sign up today with this link:… ). AAA offers a promotional $1,000 Visa gift card when you purchase a Sunpower Solar System as one of your many member perks and discounts.

The Future of Solar (just my two cents):

Panels

They will continue to become more efficient as technology evolves. Panels will produce more energy in a smaller footprint at higher efficiency

Net Metering Changes

Apparently, Public Utility companies are not happy about losing income from your energy usage. As of the writing of this blog, California (the greenest of all states) is releasing metering rules that continue to change in favor of the Electric Company.

According to solar.com, The California Public Utilities Commission (CPUC) unanimously voted to approve NEM 3.0. Under NEM 3.0, customers of PG&E, SCE, and SDG&E with solar systems will receive an average of 8 cents per kWh for the excess power they push onto the grid. This is roughly 75% less than the average export rate of 30 cents per kWh under NEM 2.0. IOU customers have until April 13, 2023 to be grandfathered into NEM 2.0 by submitting a complete interconnection application for a new solar system.

Even with the federal solar tax credit back at 30% until 2032, Californians have plenty of reason to go solar sooner rather than later.

On December 15, 2022, The California Public Utilities Commission (CPUC) passed NEM 3.0, a new net metering policy that will ultimately reduce the monthly energy bill savings for new solar owners.

Home batteries

Home batteries will allow one to store overproduced energy. You may tap into this during a blackout (ironically caused by grid failures, among other things) or during times of peak energy costs (refer back to the above NEM 3.0 changes). Currently, home batteries are expensive, but as more players enter the market, you may find the costs come down and the capacity to store go up.

Electric Vehicles

As we make the shift to EVs, there will be an entire market for recycled batteries. Think about it: my EV’s battery is no longer maintaining the charge it once did. Before that battery is scrapped, it may be recycled, repackaged, and utilized as a home battery! There are some incredible minds working away on this as I type these last few lines.

Nuclear Fusion

Hear it from my homie Dr. Marv Adams: so cool!

Tommy Parisi https://www.enoughaboutit.com
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