by Brian T. Lynch, MSW
Let me tell you about my free rooftop solar energy system which I recently had installed.
I’ve wanted solar energy for a long time, mostly because my wife and I are concerned about the global warming. We didn’t convert years ago because of the high cost and slow rate of return on the initial investment. We live in Northern New Jersey which has considerably less sunlight than, say, Arizona. When I first looked into it, solar panels were far less efficient than they are today so the cost/benefit for us couldn’t be justified.
Now we are retired and improved solar panels have really lowered investment recovery times, but we may want to downsize or relocate in the next few years. We don’t want a solar energy project that won’t be paid off before we sell.
The solution for us was one of the new solar energy lease program that installs and maintains the entire system for free over a period of years. The solar panels send power directly to the power grid in an arrangement with the utility companies know as “net metering”. The solar electricity generated is deducted by the utility company from the power that I use. When we generate more power than we use the utility company gives us a credit. On months when we use more power than we generate we apply the accumulated credits and pay for any difference.
There is a catch, of course. The company who owns the system on our roof also owns the electricity it generates. We pay them for the solar electricity that we use, power which the original utility company no longer supplies. In effect, the solar energy company becomes our energy provider. For the use of our roof the solar company sells us this electricity at a discounted rate. In our case we paid nothing for the system, we will pay nothing for its maintenance over the next 20 years and we will save on our electricity bill each month. Our solar electric rate is structured to increase the amount we will save each year over time relative to our current provider. We were told that over twenty years we should save about eighteen-thousand dollars by switching to solar through this lease program.
The real beneficiary in all this is the environment. Over the course of one month we prevent over a quarter ton of carbon from entering the atmosphere. That’s three tons a year or sixty tons over the next twenty years. Through conservation measures our electric use is already half what a typical homeowner uses, so most people would save even more on carbon emissions. If everyone on our block had rooftop solar the atmosphere would be spared well over 3,000 tons of carbon a year.
How did we pick a solar energy company? I would like to say we shopped and compared, but it didn’t happen that way. I stopped to talk with a person offering information on rooftop solar at a kiosk in Home Depot. This lead me to invite a sales representative from Rooftop Diagnostic to come to our home. The representative explained how the lease option worked and confirmed that our house was a candidate for a solar based on our homes orientation and the amount of sunlight it gets. Rooftop Diagnostics only designs, installs and maintains the system for a company called Enphase Energy and neither of these two companies are affiliated with Home Depot.
Under a net metering arrangement homeowners are not allowed to produce more power than they use. This means that rooftop solar installations can’t be designed to produce more than 100% of the homeowners average annual energy use. The initial electricity rate the solar company charges is somewhat negotiable, but it should be at or slightly below what the utility company charges now. Under our Enphase Energy contract our initial electric rate will increase by 3.5% per year, which they say is half of the historic rate increase for our current energy provider. That might sound like a lot, but the inflation rate over the past 10 years is 2.3%, so inflation alone accounts for most of the increase. In our specific case, our energy charge would start at about $36.00 per month and it will end up about $67.00 per month in twenty years. The power utilities also charges a delivery service charge each month based on energy use. Since about 96% of our electricity will come from the electricity generated on our roof, our delivery service charge will be 96% less per month as well. Also, while our current electric rates vary seasonally, our solar energy rates remain the same each month.
After I first met with the solar representative, I searched the internet for more information to comparison shop, but didn’t find what I was looking for. I wanted a database listing companies that provide solar leasing options but there are none at present. A lot of companies on the internet offer solar instillations but important details are lacking. Unfortunately, internet information about solar electric companies is not as organized as is information about the sham alternative energy retailers that “compete” to sell you lower electric rates. These companies are wholesale purchasers of electricity who offer crazy gimmicks and low introductory rates to get you to buy power from them. It is a dog and pony show masquerading as a competitive energy market, but the only real competition the utility companies face is from the nascent “distributed energy” alternatives such as rooftop solar and wind power systems. Even though these true alternative energy sources are a tiny fraction of the energy market, the big utility companies are already organizing to protect their business model and market shares. If you think you might be interested in a rooftop solar system, to buy or lease, it would be wise to act soon because the current financial incentives will disappear if the energy industry has its way.
[PS: If you live in New Jersey and already have a rooftop system from Rooftop Diagnostics, they will pay you a referral fee for any new customers you refer to them. Other companies might offer similar incentives,so if you are thinking about getting a system, check with friends and family members who might benefit from this incentive program. To be clear, I am not soliciting referrals and I have no pecuniary motivation in writing this post.]
Call me crazy, (many have) but I find the cap which limits the system you can install based on your usage to be insane. Not all rooftops are oriented so as to make solar appropriate. Why wouldn’t we, as a society, want to generate as much energy as possible from every installation? For this enlightened approach, we’d need to rethink the delivery systems–and make solar pay its fair share of the freight, but it’d be worth it to maximize the alternative production.
I agree with you. The net metering approach is a federal initiative that serves as an incentive program to jump start rooftop solar. As you can imagine the utility companies see it as their having to buy generated electricity at retail, rather than wholesale prices. I’m sure it would never have passed in congress if limits weren’t set. Essentially, a residence can’t act a a power company. So part of me gets it,but as you said, not every home is suited to solar. If you look back a few posts you will see (if you haven’t already) my post called, “Carbon vs. Climate and Our Future in a Mirror” in which I wrote about the energy challenges we face.
The following is reprinted from a Facebook dialogue:
FS: Nice, just a few questions. What happens if the solar energy company goes bankrupt? Who would take over maintenance of the panels. If the panels are damaged and in turn damage the roof, who is responsible for repairs? When you sell the house and the new owners don’t want the panels, for whatever reason, who is responsible for removing the panels and replacing the roof. If I was buying a house, I wouldn’t want one with holes that were repaired. I would want a new roof.
ME: If the company goes bankrupt another company would likely buy up the contracts since they have significant investment value. 2. The solar company is responsible to repair any damage to the solar panels and to the roof if the panels should damage the roof some how. 3. The panels and the contract stays with the house and get transfered to the new owners. I suppose if they don’t agree to paying lower electricty costs they can choose not to buy the house. I’ll take that chance. 4. If you don’t want to buy a house where holes in the roof were repaired then you also don’t want a house that once had satillite T, I guess. But keep in mind that Rooftop Diagnostics, who maintains the system, is a professional roofing company.
FS: You said the panels go with the sale. But you also said that after twenty years the LEASE is no longer free. Do the new owners have to pay the lease on the panels? What is the lease worth?
FS: Another company is “likely’ to take over the lease. Does that change the terms of the original lease? I think it would. Or you might just be left with useless panels on your roof, right?
ME: When you sell the solar company, Enphase Energy remains the electricity provider until the contract expires. At that point the homeowner can buy the system for a depreciated price or renegotiate a new contract. I can’t say for sure what would happen if Enphase went out of business but it seems likely that another solar company would buy up the contracts to collect on the energy sales.
RA: You said something about “downsize or relocate”?
ME: It’s just the math. It would take us 10 to 12 years to recover the initial investment cost, not including interest charges if we financed it. This is partly because we are already very energy efficient so our electric bills are low. If we financed it over 5 years we lower fixed income cash flow. If we don’t finance it we lose that much investment income over 10 to 15 years. It’s hard to project what we will want or need in the next 10 years or so. This lease option is especially good for people who move frequentnly, may move in less than 10 years, live on fixed incomes or needs to conserve their cash or savings, which includes low income households or retirees. It’s hard to find a good reason not to do this unless you are like Diaz (above) or in a position to purchase the system for yourself.