To Solar or Not to Solar, that is the Question…
While we can’t answer that question for you, we can help you make an informed decision by sharing lessons learned from our experience.
In 2019, we met with five separate solar panel installers. After vetting their proposals and asking lots of questions, we proceeded with one company, and now have solar panels on our roof and a power meter that often runs backwards.
And ever since, we have been happy to entertain family, friends, and neighbors’ solar panel questions. Some are interested because of the online videos promising free solar. Some are interested because a salesperson has come to their door. Some want to take the tax credit opportunity.
Since folks continue to ask us about solar, we wanted to share our lessons learned with the larger community. We hope that we can reduce your learning curve with the information here, organized into seven main points. Enjoy!
Table of Contents - the Seven Main Points:
How Your Power Bill Changes with a Solar Panel System
A Year’s Worth of Data to Right Size Your Array
If You Want Power When the Grid Goes Out, You’ll Need to Add a Battery System
A Few Home Items to Consider
Reviewing and Understanding the Financials in the Proposals
Single Inverter Versus Micro-Inverters
Three Proposals at Minimum and Take Your Time to Decide
Now onto further detail for each point …
1. How Your Power Bill Changes with a Solar Panel System
Despite with those emphatic video ads on the internet say, our power bill after installation of a solar system has not been zero dollars a month. Let’s talk about what to expect on those bills based on our experience, and you can verify that the process is similar with your local utility.
During the installation process, the local power utility replaced our existing meter with a net meter. A net meter can read both the power that the home draws from the local utility’s grid and the power generated by the home’s solar panels. When the home generates more power than it consumes, it sends the excess energy to the local energy grid (the solar contractors call this running the meter backwards). When that happens, our local utility (PGE) puts that number of kilowatts (kW) in essentially an “energy savings account” on our account that we draw upon when we use more power than we produce. Therefore, after installation, the monthly power bill shows the total amount of energy used, the total energy our home generated, and the net difference. However, there are two important caveats:
The energy savings roll over each month until April 1st and then PGE wipes out any remaining balance, down to zero, without any payout for excess unused power, and then the savings begin accumulating again starting from zero.
There is always a minimum utility charge to be connected to the grid, and energy savings never negates this value. In our case, that value is $11/month, and it is labeled “Basic Charge.” Therefore, our energy bill has never been zero dollars.
The Takeaway: A solar power system will not completely negate your utility bill. Find out how your utility compensates for excess solar and what the minimum connection fee is.
2. A Year’s Worth of Data to Right Size Your Array
We were so eager to explore solar that we reached out to solar contractors within a few months of moving into our home. We knew that the home had a fairly new roof, and there weren’t many big trees blocking the sun from hitting the roof, so we thought we were ready to go solar! Well, that proved to be a bit premature as we had no idea what our annual power usage would be in this new home, and therefore, had no idea what size solar array would take care of a targeted percentage of our electrical bill. For that reason, having a full year’s of energy data is prudent to decide on a solar array to target a certain percentage of your energy usage.
In order to understand your power usage, solar contractors will ask to see your energy bill. One energy bill typically shows your total annual usage and monthly maximum energy usage. This information helps them to determine how much solar power you will need to generate if you want the solar array to provide 100% of your power.
An array of that size is most able to minimize your electrical bill (though not completely negate it, as explained above). Of course, you can decide to have a smaller array and target a lower percentage of your overall power. A larger array (targeting more than 100% of your energy usage) could be appropriate if you anticipate a larger electrical load soon (such as an electric vehicle, or switching from a gas furnace to an electric heat pump, etc.). However, if such additional personal demand did not materialize, the local utility likely would not compensate you for the excess energy generation, as noted above; it would essentially be an energy donation to the local grid.
Additionally, it’s possible that your roof position is not conducive to maximize solar energy, leading to a smaller array or no array at all. Elements that affect a roof’s ability to capture solar energy are tree cover (less is better), orientation (south is best, though west and east have potential), roof pitch or slope (shallower is better), size of roof (larger open expanses are better), and location of skylights and other roof penetrations. For example, one family member could have the same size array as us (7.3 kW) with just 20 solar panels compared to our 22 solar panels because their roof layout was more conducive to solar power generation; their array would be entirely south facing without any shading, whereas our array is broken into sections facing different directions with some shading at different times of the day.
Note that in Oregon, the Energy Trust of Oregon offers homeowners rebates (through the installer) for installing solar panels, but only for panels that “have access to at least 75% of the sun available to that spot” (https://www.energytrust.org/faqs/). A panel with less than 75% access to the sun might be blocked by a tree, shaded by the building, or otherwise obstructed. The Energy Trust wants to incentivize only panels that harness a significant amount of solar energy; they don’t want to help pay for panels to sit in shade on a roof and do nothing for energy. Therefore, 75% access to the sun is a good baseline for you as well.
When the salesperson meets with you, they will use modeling software to see your home and the sun’s path across the sky in 3D. They layout the solar panels on the roof, see how much energy that they can expect each of those panels to generate, and ensure that the panels meet the Energy Trust’s 75% requirement. Feel free to ask the salesperson to confirm the layout meets that 75%.
In our final design, we right sized our solar array by installing the maximum number of solar panels on our roof that could meet the 75% minimum from Energy Trust of Oregon. We went that route because we didn’t have one year’s worth of energy data and were not able to target a percentage of our energy usage.
The Takeaway: If you can, wait to solicit proposals until you have one full year’s worth of energy bills. Ask the contractors to ensure that all solar panels in the proposed layout will have access to at least 75% of the sun. From there, ask the contractors how much of your annual energy usage the proposed array will use. Use this information to right-size your solar array.
3. If You Want Power When the Grid Goes Out, You’ll Need to Add a Battery System
You may hope that if you have solar panels, you will have power even during a power outage. We certainly wanted that! But that isn’t the case unless you add a battery system.
Why is that? In order to keep the linemen safe when they are working on the power lines to restore power during a power outage, they have to make sure that no power is running through the lines. Power from a downstream solar array that makes the line live with electricity could be deadly for those workers. Therefore, the power utility requires that the solar contractors install a disconnect on your system that blocks the solar power from feeding into your home or the larger electrical grid.
To have solar power even in a power outage, you will need to install a battery backup system tied to your solar array, essentially creating a closed loop on your side of the disconnect until grid power is restored. The home uses the battery power, the solar panels recharge the battery (if the sun is shining, which it might not be if a winter storm has knocked out the power), and repeat.
Many of the solar contractors can provide (supply and install) battery systems, and they can help you determine what size of battery backup system to purchase. We ordered a battery backup system about a year after installing the solar array, after the wildfires, ice storms, and associated power outages of 2020 impacted us.
We called up our solar panel installer and talked through our options. There are multiple manufacturers of battery systems including Tesla, Samsung, Enphase, and Panasonic, amongst others. Just like with the solar panel array, we worked with the salesperson to figure out what size battery system we wanted. Based upon our energy usage, he explained that with two Tesla Powerwalls, we could power our home comfortably for 3-4 days without needing the sun to recharge the batteries (as might happen during a winter storm). To make it that long, we could keep the general lights and receptacles available for some use, and keep the refrigerator and HVAC system going, but we would not be able to charge an electric vehicle or use the electric stove, oven, washer, dryer, etc. much during that time. If we added a third Powerwall, it would extend our battery power to 5-7 days with similar usage. Again, if we rationed ourselves more, or even flipped the breakers at the electrical panel to ensure certain appliances or lights weren’t used, we could last longer on the battery system without solar panel recharging the batteries. We ended up deciding the two Powerwall system was the right size for us.
Note that the Federal tax credit applies to battery backup systems. The state of Oregon currently offers battery incentives through the Energy Trust of Oregon as well.
The Takeaway: A solar panel array alone cannot prevent loss of power. You would need to invest in a battery backup system as well if maintaining power during a power outage is your goal.
4. A Few Home Items to Consider
As you consider solar panels, there are a few specifics about your home that can impact your budget and how quickly your home could be ready for a solar installation.
How old is your roof? The solar installer will likely as you this question when putting together your proposal. If your roof will need to be replaced in the next ten years, you likely want to take care of that first, before installing a solar panel array. Otherwise, you will have to hire the solar installer to temporarily remove and then reinstall the solar panels whenever the roof is replaced.
Do you have or do you intend to have an electric water heater, or a heat pump for the HVAC system, or an electric vehicle? These items impact your overall energy usage (item 2 above) and affect how many breakers are available on your electrical panel. The solar installer can likely add installation of an electric vehicle charging station for minimal cost, as the travel or trip cost is already accounted for in the solar panel installation cost.
How big is your existing electrical panel? The solar installers will likely take a photo of your existing panel, and you can ask them to confirm that you have enough space (breakers) available for the solar panels before proceeding. If your home is older, it may not have a large enough electrical panel, and you may need to upgrade it separately with another electrician. Such a project alone could cost several thousand dollars.
The Takeaway: Consider the age of your roof, any intended changes to your electrical load, and the size of your existing electrical panel. These items could mean more cost, another contractor, and/or additional time in the process to add a solar panel system.
5. Reviewing and Understanding the Financials in the Proposals
The solar proposals for our home were lengthy and a little confusing due to many tables, graphs, and diagrams. There are all sorts of numbers listed trying to show different things and encourage people to say yes to what is for many folks, a significant investment. So how do you make sense of these proposals and understand what you are signing up for?
To see exactly what the initial system cost is, you are looking for “System Price” or “Out of Pocket.” If you are considering a loan (financing) the system, you want to identify the proposed interest rate and the monthly payment value.
Beyond that basic information, the solar contractors are trying to prove two main points: 1) how local rebates and the federal tax credit will reduce the overall system cost, and 2) the long-term benefits and cost savings of the upfront cost. Let’s break down some of the key terms and items to consider.
Rebate: A standard rebate is often a check in the mail, returning the value to the consumer. With solar rebates though, some jurisdictions (such as the Energy Trust of Oregon) require the solar contractor to handle the rebate paperwork, and they send the rebate value to the contractor. The contractor passes the savings onto you, the consumer, by reducing the initial cost that you owe to them. However, if the jurisdiction has limited funds, a solar contractor may have fine print that does not guarantee the rebate value; if you see that text, you’ll want to ask the contractor how to ensure the rebate value before you sign the proposal.
Federal Tax Credit: With the 2022 passage of the Investment Recovery Act, the federal tax credit for solar panels is set at 30% for solar panel systems and battery storage systems put into service (installed and operational) by December 31st, 2032. The federal tax credit is a delayed benefit, realized through your taxes the year after your solar system was installed. The solar credit either reduces the amount of tax that you owe or increases your tax refund (https://www.irs.gov/credits-deductions-for-individuals); you will not necessarily receive a check in the mail for that 30% value, since it all depends on how much you owe in taxes. See resources below for more info and please contact a tax professional with questions.
Amortized Payment: If you are looking at financing the system, the proposal may show an initial monthly payment amount and an amortized monthly payment amount. The amortized value assumes that you will receive the full value of the tax credit as a check and apply the full value to your solar loan, thereby wiping out 30% of the principal. Your monthly payment amount would then decrease to the amortized value. This is a best-case scenario. You and your tax professional are in the best position to project what size tax credit you may receive, and from there, figure out your amortized monthly payment value.
Long Term Benefits: Finally, the proposals talk a lot about long term benefits in an effort to persuade you that they will outweigh the initial upfront costs. These include: 1) increasing the home value, 2) stabilizing your energy costs over time while the power utility is likely increasing consumer prices (avoiding increasing energy costs), and 3) the environmental benefits such as the amount of carbon dioxide avoided and its equivalents (number of trees planted, or number of cars off the road).
Other Financial Considerations:
Low or Middle Income: If you are on a fixed income, or considered low- or middle-income, ask the solar contractors if there are any available programs from the State or local jurisdictions to help low- or middle-income citizens afford solar. For example, when we met with a solar salesperson to discuss solar panels for a retired family member living on a fixed income, the solar salesperson was able to pull up two current state programs targeted for folks of low and middle income and check in that moment if our family member would qualify.
Cash or Loan for Part or All of the System: Do you have the cash on hand to pay part or all of the solar system cost? With our system, the solar contractor required 10% of the cost at time of signing, 70% of the cost when it was time for them to order the equipment, and 20% after installation and inspection by the local authority having jurisdiction when the system was operational. Paying some of the cost out of pocket will reduce the loan principal and thereby reduce the monthly payments and total amount of interest owed. You can see how the total interest owed over the life of the loan will vary depending on the principal owed using free online calculators.
Who Provides the Loan & How Does that Work: Does the solar contractor offer the loan through their company, through an affiliated bank or credit union, or do you have to approach a bank or credit union on your own? What is the interest rate, and what is the length of the loan? Our selected solar contractor put us in touch with an affiliated credit union with 15-year green energy loans with a decent rate. (Since it was a good enough deal, we didn’t search for other loan options.) From there, we had to open an account with them for $5 and donate $40 to become a member of a local energy coalition. After that, the loan paperwork was standard and easy to complete remotely. When the loan was approved, it acted as a line of credit, and our monthly bills didn’t start until we drew money from it. To pay the solar contractor, we emailed the invoice with the amount due to the credit union, and they sent the check to the solar contractor. The following month, our monthly bills started, based upon the amount of credit used, the interest rate, and the time that had lapsed.
Big Picture: Factoring in all these credits, rebates, and long-term financial benefits, solar could look pretty good to you. However, it is important and prudent to consider your overall financial situation. Do you have any outstanding credit card debt or student loan bills? Are you struggling to meet your monthly payments? Do you have a three- or six-month emergency fund? As much as you may love solar energy or want to capitalize on the tax credits, you want to be realistic with yourself about whether or not paying for a solar panel system is the most prudent financial decision for you at this time. If in doubt, seek the services of a certified financial professional.
The Takeaway: Consider your overall financial picture including your current debts and assets, expected tax liability for the current tax year, and whether you need a loan for all or part of the solar panel system. On the proposal itself, you are looking for the values labeled “System Price” or “Out of Pocket.” If rebates are listed, ask the solar contractor to verify that you will receive those.
6. Single Inverter Versus Micro-Inverters
A single inverter is a piece of equipment that receives the power from all of the solar panels at one location and transforms the energy from DC power to AC power. Micro-inverters are smaller versions of that piece of equipment that converts the solar power from DC to AC power and they are located at each solar panel; therefore, instead of one inverter, you would have the same number of micro-inverters as you do solar panels. When were received proposals for our home, one company offered a single inverter instead of micro-inverters as a cost savings of about $1,000, and suggested that it was a more efficient way to transfer power if we had an electric vehicle or battery system (which we didn’t have). However, our concern with a single inverter was that if one solar panel stopped working, the whole array would stop sending power to our meter; that doesn’t happen with micro-inverters. However, it is possible that the technology has changed since we installed our system, and a single inverter may be sufficient.
The Takeaway: Understand if the proposals include a single inverter or micro-inverters, ask the contractors to explain the benefits and downsides of each, and do your own research as well to make an informed decision.
7. Three Proposals at Minimum and Take Your Time to Decide
Asking three contractors for a quote or an estimate is a general rule of thumb. With this many proposals, you can compare the contractors’ approach, cost, and recommendation, and use what you learn from one contractor to question the others. In addition to the points above, here are questions you may consider asking and comparing across the contractors:
What size (in kilowatts or kW) solar array do they suggest? How much of your annual energy will such an array produce (50%? 100%? More than 100%)?
How many solar panels will it take to achieve that size?
What is the layout of the panels? Did the contractor account for any obvious obstructions, such as a skylight, in their layout?
What is the initial total cost, before any rebates, tax credits, or other deductions?
What is the final total cost after any rebates, tax credits, or other deductions?
Durability - How efficient will the panels be in 10 years? 20 years?
Does the contractor offer different solar panel manufacturers / models? If so, how do the costs, number of panels, and durability of those panels vary?
How can you as the home owner monitor the system?
Does the installation company monitor the system and address issues with or without you notifying them?
What are their warranties on material and workmanship?
Do they provide a production guarantee (guarantee that the array will produce the amount of kW that they designed it to produce)?
Finally, take your time to consider your options. A door-to-door salesperson likely wants you to sign up that day, but such an investment is likely one worth sleeping on. One of the salespeople we met with had a formal presentation that ended with, “I’m going to step outside and give you two 5-10 minutes to decide.” I told the person there was no need to step outside because we would not be making a decision that day. Nice try, buddy, but nope! Most contractors note on their proposal that the price is good for 30 days, and ours were happy to answer questions during those 30 days. Reach out to any friends and family with solar, or to your financial or tax adviser and get additional opinions as needed. Your reaction to their advice will also indicate how strongly you do or do not want to proceed with solar.
The Takeaway: Gather three proposals at minimum from recommended or top-rated firms to help you judge the best system and solar array cost for your home. Take your time to make a decision.
In summary, here are the seven key takeaways:
How Your Power Bill Changes with a Solar Panel System
The Takeaway: A solar power system will not completely negate your utility bill. Find out how your utility compensates for excess solar and what the minimum connection fee is.
A Year’s Worth of Data to Right Size Your Array
The Takeaway: If you can, wait to solicit proposals until you have one full year’s worth of energy bills. Ask the contractors to ensure that all solar panels in the proposed layout will have access to at least 75% of the sun. From there, ask the contractors how much of your annual energy usage the proposed array will use. Use this information to right-size your solar array.
If You Want Power When the Grid Goes Out, You’ll Need to Add a Battery System
The Takeaway: A solar panel array alone cannot prevent loss of power. You would need to invest in a battery backup system as well if maintaining power during a power outage is your goal.
A Few Home Items to Consider
The Takeaway: Consider the age of your roof, any intended changes to your electrical load, and the size of your existing electrical panel. These items could mean more cost, another contractor, and/or additional time in the process to add a solar panel system.
Reviewing and Understanding the Financials in the Proposals
The Takeaway: Consider your overall financial picture including your current debts and assets, expected tax liability for the current tax year, and whether you need a loan for all or part of the solar panel system. On the proposal itself, you are looking for the values labeled “System Price” or “Out of Pocket.” If rebates are listed, ask the solar contractor to verify that you will receive those.
Single Inverter Versus Micro-Inverters
The Takeaway: Understand if the proposals include a single inverter or micro-inverters, ask the contractors to explain the benefits and downsides of each, and do your own research as well to make an informed decision.
Three Proposals at Minimum and Take Your Time to Decide
The Takeaway: Gather three proposals at minimum from recommended or top-rated firms to help you judge the best system and solar array cost for your home. Take your time to make a decision.
We hope that these lessons learned are helpful in making an informed decision about solar energy for your situation!
Additional Resources
If you’d like to learn more, here are other websites for solar research:
https://www.energytrust.org/known-scams/ - find out about known scams or misleading sales practices
https://www.energytrust.org/solar-request-analysis-bid/ - request solar bids from qualified contractor allies of the Energy Trust
https://www.energytrust.org/faqs/ - filter for “Renewable Energy” and you’ll see lots of common solar questions and their answers
www.solaroregon.org – offers webinars and learning events as well as general info
https://www.a-rsolar.com/blog/ - lots of helpful information
And more information about the Federal Tax Solar Credit is here:
Disclaimer: Information provided by Gamut Project Solutions is for establishing best practices, general risk management, and knowledge sharing purposes only. The information provided is only the opinion of Gamut Project Solutions (GPS) and other industry experts/resources (when cited). None of the information provided by GPS shall be construed as legal advice or counsel, or otherwise provide insurance coverage for the Client. As laws vary depending by jurisdiction, the Client should always consult with an attorney experienced in the laws and regulations of the appropriate jurisdiction for the formal legal counsel.