That 30 percent tax credit on solar panels that was supposed to expire in 2016? It’s been extended, all the way to 2019. I feel like we just got an extension on a term paper — but if we don’t start writing now, the deadline is going to be here again before we know it.
To get the full Solar Investment Tax Credit (ITC), we’ve got to get our panels purchased and put up in the next three years. After that, the credit fades out: to 26 percent in 2020, and then to 22 percent in 2021. By 2023, the residential tax credit will be $0. And after that, who knows? We may all be living in egg-shaped, self-reliant, solar-powered tiny homes. The time really is now.
The price of solar panels — even for top-rated panels from SolarWorld and Canadian Solar — is down. It’s fallen by more than 75 percent since 2009, according to prominent environmentalist Bill McKibben. This drop reflects increased efficiency, both in the manufacturing process and in the panels themselves. Still, the initial cost of buying and installing a full system, including panels and supporting parts, can run between $10,000 and $40,000.
But, you don’t need to have a spare $10K to plunk down. Options like leasing and power purchase agreements (PPAs) from well-known solar names like Solar City and Vivint allow you to generate solar energy without up-front costs. Depending on where you live, there might even be a way for you to buy power from a solar farm.
There’s more than one route to the best solar panels.
If you own your home, and you can afford it, buying your panels outright is the best option. It’s the only way to take advantage of the ITC and other incentives, and it’s the only way to earn renewable energy credits (RECs) — actual income from selling your excess power back to your local utility.
Although solar panels are expensive up front, they pay off in the long run. According to EnergySage, a solar energy marketplace, the average solar payback time (or time required to recoup costs) is eight years. Panels, by contrast, last upward of 25 years, leaving you with a potential 17-plus years that’s pure savings.
A recent study by the Lawrence Berkeley National Laboratory shows solar energy systems add value to homes — in its comparison of California residences, every kilowatt of brand-new solar panel system added $5,911 to the selling price. (Granted that value decreased by $2,411 for every year the system had aged.)
Many solar installers will also give you the option to lease panels, and an increasing number are beginning to introduce PPAs as an option. But buying is the simplest option — it just requires cash up front, or you can take out a loan.
When you lease solar energy, the company you lease from will install panels on your roof at no charge. It’ll take care of maintenance, and you’ll pay a set monthly fee (think of it like a subscription) for the length of your lease, which will likely be about 15–20 years. The company, not you, will get to claim the ITC and other benefits. Just like with a car lease, at the end of your term, you’ll have the option to buy your panels, but solar developer Tom Kacandes cautions against buying. “Unfortunately, the leased systems I see sometimes have used second-tier panels and old technology string inverters to make more profit for the leasing company,” he says, “which bothers me as an advocate for solar power.”
The PPA option is very similar to leasing; instead of paying a subscription, you’ll pay per kilowatt-hour (kWh) of solar energy that you use. (If you need more than your panels produce, you can buy more energy from the grid — aka the power company you used pre-panel.) The biggest name in PPAs right now is SolarCity, chaired by Tesla and SpaceX’s Elon Musk, with Vivint not far behind.
Leasing, and its sibling the PPA, sound like lower commitments than buying. In a couple of ways, that’s true: You have no up-front cost (or at least a comparatively low one, if you’re asked to make a down payment), and maintenance is included, which can feel like a big weight off your shoulders. But solar leases have much longer terms than the ones we’re most familiar with: car leases.
I chose a three-year lease for my first car for a few reasons: I didn’t want to worry about maintenance; I wanted the lower monthly payments on a fuel-efficient car I wouldn’t otherwise be able to afford; and I wanted the option to walk away after three years in case I moved to a new city. In the end, I bought out the lease and paid more than I would have if I had just financed the car from the beginning (or bought a used car). I wouldn’t make the same decision now, but as a 22-year-old, I was paying for the privilege of a low commitment.
With a solar lease, you’re usually signing up for 20 years, which would have been long enough for you to purchase your own panels through a loan — and the subscription you’d have paid during that time could actually be more than the loan payments you would’ve made. If you lease and sell your house before the terms end, you have to either pay off your remaining time (eek!), or convince the buyer to take on the lease (eek again!).
“The lease system mostly benefits the banks, whereas owning the system outright yields a much greater return over the life of the system,” says Paul Maylone, a project manager for Standard Solar, a commercial installer based in Maryland. “However, I would encourage anyone thinking about a residential or commercial installation to carefully do the math and come to their own conclusions.”
So let’s do the math.
After contacting more than 10 solar installers in my area and receiving six quotes, I wound up with two top choices to compare, both from LA Solar Group: purchasing SolarWorld panels or leasing SunPower panels through my local utility. (Unfortunately, neither of the major PPA providers, SolarCity or Vivint, services my Southern California neighborhood.)
Because I currently rent an apartment, I used a sample 1,500-square-foot, two-bedroom house with the average monthly utility cost in my area ($152 for 9,125 kWh) to get my quotes. I asked to put $0 down so that I could show the highest monthly and total costs possible.
Lease: I’d save as much as $5,810 in 20 years.
With the lease, LA Solar Group estimates that I would be able to generate all the power I need with my SunPower panels. If this is true, my energy bill would fall to $0 and, with a lease payment of $136, I would save all of $16 per month. Over 20 years, if my utility bill stayed exactly the same, I’m projected to save $3,840.
But the US Energy Information Administration projects that the price of residential electricity is going to go up 11 percent by 2036. If that’s the case, and it increases at a consistent rate, I would save $5,810. (The plan LA Solar offered me includes maintenance, so my upkeep costs should be minimal.)
Buy outright: I’d save as much as $22,287 in 20 years.
If I were to buy SolarWorld panels, I would have a starting cost of $20,648. After the ITC and a utility rebate, that number would drop to $13,380. LA Solar Group thinks that with SolarWorld panels, I would still have to pay around $11 per month to my utility because my panels may not produce all the energy I need. So that’s a savings of $141 per month. Over 20 years, if my utility bill stayed the same, I’d save $20,460. If electricity costs rise by 11 percent, I’d save $22,287.
This plan includes 25-year warranties for the panels, inverter, and workmanship, so my upkeep costs should be minimal here too. Plus, there’s always the property value I’d be adding.
Get a loan: I’d save as much as $18,561 in 20 years.
My quote also came with two loan options: an 8-year term or a 20-year term, both with $0 down. With the 8-year loan, I would pay $17,088 total (about $178 per month). With the 20-year one, I would pay $26,160 total (about $109 per month).
Over the course of 20 years, if power costs stay the same, I’d save $16,734 with the 8-year loan and $7,661 with the 20-year loan. If power costs increased 11 percent, I’d be saving $18,561 with the 8-year loan and $9,488 with the 20-year loan — all not including the theoretical uptick in my property value.
My verdict: I’d choose to buy and do it outright if I could swing it. But these are just my numbers, based on my neighborhood, climate, and available rebates and installers. You should absolutely get some quotes and do a cost-benefit analysis of your own.
If you aren’t in a position to buy right now, keep an eye out for community solar.
Community solar (or a shared renewable energy arrangement) lets you use solar energy without having to install panels on your property. Instead, you’d use energy from panels on a solar farm. The energy generated by the farm goes into the grid and is disbursed to members through a credit system. There are 89 community solar projects operating so far, but the only state where it’s widely available is Colorado. This option isn’t just the lowest-commitment model out there — it’s also available for apartment dwellers like me who are interested in switching to green energy.
Don’t leave any credits or rebates on the table.
In addition to the big ITC, there are often state and local credits to cash in on. Both Kacandes and Ruby Theresa Nahan, an independent communications specialist focusing on energy efficiency and renewable energy, recommend checking the Database of State Incentives for Renewables & Efficiency (DSIRE). I also like Solar Power Rocks — it’s the antidote to dense, all-gray government websites, like this one outlining Vermont’s solar benefits, and is big on color-coding. There are detailed ratings of all 50 states based on available incentives and overall solar friendliness. (California earned a nice green “B” and Oklahoma is feeling the sting of a big red “F.”) Use all these helpful sites to get a general sense, but ask your local resources for help; your installer, utility, and local government will have the most up-to-date and definitive information.
“My advice would be to always check with your electricity provider regarding any incentives or billing programs they may provide for solar-producing homes (or other efficiency upgrades!).”
Home performance consultant
If you’re living on a limited or fixed income, you might qualify for even more. Arleen Novotney, the executive director of the nonprofit Association of California Community and Energy Services (ACCES), works with several California departments such as the Department of Community Services and Development (CSD) that handles state and federal low-income energy programs. She explained to me that ACCES and other groups like it (including GRID Alternatives) operate under the philosophy of energy equity, the belief that we should all have equal access to efficient, clean energy. To sort through this tangle, she suggests that you look to your state’s consumer-facing solar website, like Go Solar California.
At the end of the year, the power company might even pay you.
Your panels are usually going to be connected to the grid — unless your power company doesn’t play nice with solar. (If that’s the case, and it is with some smaller power companies, you’d have to get a massive battery to store all your energy. Not ideal.) When they produce more energy than you need, the excess energy flows into the grid and serves other customers in your area.
Meanwhile, your meter measures your energy use. If your utility provides net metering, when you produce more energy than you need, your meter runs backward, subtracting from the energy you used. You will only be charged for your net use. If at the end of the billing year, you have produced more than you used, you will be paid for that extra energy — that is the utility will buy your energy off of you in the form of a renewable energy credit (REC). In some states, all utilities are required to net meter; in others, it’s optional. (And in others still, there are smaller utility companies that don’t play nice with solar at all. In those situations, you’d have to store all your solar energy in big batteries on your property.)
Ready to go for it? You can start with a manufacturer or an installer.
All of the experts I spoke to recommended the latter option: Once you decide you’re going to buy, you’ll want a trustworthy and experienced installer who’ll be there to service your panels. But your approach doesn’t have to be all one way or all the other.
“In my experience, quality installers pride themselves on their service and product choice alike,” says Andie Marsh, a home performance consultant at TreeHouse, a sustainability-focused home improvement company in Texas. “If you find an installer you trust, odds are they are partnered with a trustworthy vendor/manufacturer. Always get to know the people who will be working with you and ask them the questions that matter to you.”
According to Marsh, these questions might include where panels were made, the fine print of warranties, or the specific technology you’re signing up for: Are you getting an outdated string inverter that measures all of your panels as one unit, for example, or a microinverter that can tell you which specific panel is falling below expected output? “If they cannot provide answers to the questions that matter to you,” she says, “then they’re not the right fit.”
Pick the right manufacturer (and its best solar panel).
Reviews.com evaluated 188 solar manufacturers and walks through its process for finding the right panel and the right manufacturer. It stresses four things:
1. Longevity. In this new, and rapidly evolving industry, companies can come and go before your warranty has a chance to run its course. Look for manufacturers that have been around for at least 10 years and seem likely to stick around even longer.
2. Power. Your roof only has so much space, and not all of it will face the right direction, or have the right angle or exposure to accommodate solar panels. Having fewer, more powerful panels will maximize your roof space and lower your installation costs. Go for panels that pull in at least 230 watts each.
3. Efficiency. Again you’ll want fewer, more powerful panels. The magic number here is at least 16.5 percent — it’s the average efficiency rating of the best solar panels, so scoring even higher means your panel is doing its job pretty well. (Efficiency is a measure of the power output in relation to the panel’s surface area and power input from the sun.)
4. Customer service. Hopefully, you’ll only ever need to contact your installer, not your manufacturer. But if your installer happens to go out of business, the only way you’ll be able to take advantage of your warranty will be through your manufacturer. The manufacturer’s website should be easy to navigate and it should have a way for you to call or email.
If you find a manufacturer that checks off all your boxes, call to find its preferred installer in your area. The Reviews.com top pick was SolarWorld, the largest US manufacturer, followed by Canadian Solar, Centrolsolar, Axitec, and Kyocera Solar; they might have installers they work with in your neighborhood, too.
Then, find the right installer.
Most installers, even before giving a rough estimate, want three months of energy bills and also want to stop by your house for an evaluation. A few I spoke to wanted to do a credit check as well. It makes perfect sense for companies to collect this information before drawing up a contract, but for the consumer with privacy concerns who wants to shop around, the process can feel opaque and intrusive.
My biggest lessons: Call for a quote. Don’t bother with online forms — I got slow responses from every single one.
During my search, I had the best experience by far with LA Solar Group. Its customer service and warranties were both excellent, and it was able to give me a handful of quotes to compare, including thorough information about projected savings, within minutes.
I also asked a homeowner (remember I’m an apartment dweller who called about a sample home) to call for a few quotes, this time in rural North Carolina. He had an easier go of it: Two of the four installers he called couldn’t service his home, but the other two gave him quotes with no problems. (His utility company, on the other hand, was one of the ones that don’t offer net metering — so if he wanted solar energy, he’d have to store it all on his own.)
Here’s what to look for when you call:
- Customer service. If you’re not getting great customer service now, imagine what it will be like to deal with this same company for the next (and far less lucrative) 25 years.
- Warranty. Look for 25-year warranties for panels, inverter, and labor. If you don’t have to replace your inverter before your panels, you’ll have one less thing to worry about. Accelerate Solar, one of the installers in North Carolina, only offered a 12-year warranty.
- Guarantee credit. Some installers, like LA Solar Group, will pay you per kilowatt-hour if your panels fall below their promised production rate. Keep an eye out for this and ask how the production rate will be tracked.
- Location. Kacandes says it’s best to go local. “Find a locally based business with a real person as the owner if at all possible — they are the best people to work for or buy from in my opinion,” he says. “Buying solar from a local business primarily means that the person who makes the ultimate decisions is accessible to you and accountable to you, or at least they should be. I think it is much harder for a regional manager in a big company to make hard decisions when their bosses are just pushing sales and cost goals down on them.”
- References. “Choose a reputable installer who readily makes referrals available upon request,” says Kacandes. “And you want a number of referrals, not their top happy customer and no one else. It’s worth talking to the folks they’ve referred even if it is not a guarantee that your result will be equally good. You can also run the name of an installer you’re liking the sound of past your local building inspector. They usually won’t bad-mouth anyone, but if they suggest you get more quotes, pay attention!”
- Certifications and licenses. “When I go to look for an installer, what I choose will depend on which route I want to go (e.g., buy, lease, PPA), but I will confirm the specific installer person doing the work on my roof is NABCEP-certified or, at the very least, could demonstrate quality training and competency based on qualifications set forth by a credible organization,” says Nahan. But she wouldn’t stop there. “I’d also check with any local or state licensing authority to ensure there are no outstanding complaints. IREC’s (Interstate Renewable Energy Council) solar-licensing database is a good place to start to find out how a local installer might be regulated, or not.”
- Consumer reviews. Nahan says it’s worth the investment to check with Angie’s List: “I would also pony up for the services of a consumer review or advocacy organization and ensure the company/installer has good reviews.”
The Bottom Line
To take advantage of the ITC extension before it starts to fade in 2020 you’ll need to buy your panels. But, that’s not the only way to go solar: Lease, enter a PPA, or join community solar and you can get still score major savings without any initial investment. To find the best option for you, get a handful of quotes and run the numbers.