Solar power: Year 1 review

Note: this article heavily focuses on Northern California. While some concepts may be similar in different locations, do your research on local specifics.

I’ve gotten a number of questions about my solar system since I put it in over a year ago. I wanted to put together one article that contains all of the key topics. It’s a long read, but if you’re considering solar it’s worth the investment in time.

Overall, I couldn’t be happier with my solar system. My electricity comes from a renewable, green source and I will most likely have all the power I need for the next 20 years. Other than a small grid connection fee ($10/month) I don’t pay power bills. The solar system generates the power needed to offset the house and most of the transportation costs in the Chevrolet Volt.

Why do you want to go solar?

Not everyone wants to go solar for the same reasons. I was driving a LOT of miles for work in a truck that wasn’t super efficient. I knew there had to be something better. What came up as important?

  • Being power neutral: I wanted to know that I was contributing at least as much green power to the system as I was using.
  • Price stability: I wanted to lock in the cost of power over the life of the solar system. With my solar system, I pay about 0.09 per kilowatt hour – far less than the 0.30-ish market rate here in Northern California.
  • Locally sourced: I also want to generate and consume power locally reducing the need to pull power from large generation plants far away.

Others may consider solar to go off grid. Solar power in these situations charge batteries which power the house. Other solar customers may look to reduce (but not eliminate) how much they pay the utility. In Northern California, the more power a household uses, the more expensive that power gets per kilowatt hour. Solar can reduce the amount of high-cost power in these situations.

Are you a good candidate for solar?

The first thing to consider is how much power your household uses. Homes that consume larger amounts of power generally are better candidates for solar – all other things being equal. There is a start-up cost in adding solar to your home that drops with increasing amounts of solar power. As a first step, consider using Google Project Sunroof to understand how solar might help in your particular situation. Using patterns of the sun as well as building and foliage data from Google Maps, Project Sunroof highlights the roof of your home with how much solar power can be harvested. Use this is very rough guidance.

Secondly, make sure your roof has at least 20 years of remaining life. The solar system will be on your roof at least that long and you want to make sure the solar system can stay in place. Also, you want to make sure your electrical system, particularly the breaker panel, can handle the demand placed on it by the influx of solar power. Make sure to ask your installer if you need a panel upgrade.

Enter Net Energy Metering

Most of the utility’s customers only buy power from the power company. With solar, customers will buy power from the utility and sell power back to the utility depending on the quantity of power consumed by the house and generated by the solar panels. Net energy metering or NEM allows the consumer a bidirectional relationship with the power company. Let’s take a look at my last year’s power use patterns:

In the summer solar panels generate significantly more power. In the graph above, from April 1 to October 30 the solar panels produced more power than the house consumes. Because of this excess, the power company stores a positive balance. If we look at one summer day we can see the solar panels are generating more power by the hour than the house is using.

In the winter, solar panels produced significantly less electricity. The house then consumes more energy than the solar panels produce. Let’s take a look at a winter day to compare:

Consumption during the winter burns down the positive balance with the power company. The goal for NEM customers is to have a small surplus or balance owed to the power company at the end of the plan year.

Understanding your rate plan

Pacific Gas and Electric Company has different ways to charge customers. These are called rate schedules. The most common rate schedule for residential customers is called Tiered Rate plan E-1. The most important concept to understand with rate schedule E-1 is the baseline allowance. PG&E assesses the climate the home is in, whether the heating is gas or electric, and the number of days in the billing cycle to determine how many kilowatt hours of power are allocated to the house at the lowest price. The more power you use beyond the baseline allowance the more expensive power gets per kilowatt hour.

Solar customers are on a time of use plan. Time of use plans work similarly to long distance plans back in the 1980s. Put simply, when you use power determines the price of power more so than the quantity used. The power company wants to discourage power use during weekday afternoons in the summer due to high demand straining the grid. As of this writing, customers on the E-TOU-A rate plan pay more for power between 3 PM and 8 PM. Power during those hours in the summer is 0.39 per kWh. Power at all other times during the day is 0.32 kwh. Let’s take a look again at my summer time usage:

The area in the chart that is shaded in red is the peak rate. That’s when the solar panels are generating the most revenue. With PG&E’s NEM2 agreement they pay retail rate for any power returned to the grid. That means the panels are generating a credit of 0.39 sent to the grid. Once it gets dark the house then pulls power at the off-peak rate of 0.32. The power grid during weekday afternoons in the summer often strains with the demand of air conditioning and the work week.  Solar reduces that strain. Any credit at the end of the year is paid at the wholesale power rate (0.035), not the retail rate.  Use what you have!

West facing panels maximize generating power at the highest payback rate as they harvest afternoon sun most efficiently. South facing panels will generate more power during the winter. It’s generally not recommended to have your primary panels face north or east if with PG&E.

Tip: In Northern California, PG&E distributes power to most of us. However, some municipalities have opted into buy power from other sources. All of the information above assumes PG&E is your power generation company. For instance, Marin Clean Energy has different rate schedules and solar payouts than PG&E though PG&E distributes and bills power to MCE’s customers. Read your bill carefully.

Sizing Your Solar System

I’d use Google’s Project Sunroof to get a ballpark estimate for how big of a solar system your house will require. Solar systems are measured by kW (kilowatts or power) – not kWh (kilowatt/hours or energy). The kW rating of the solar system is a measure of power that the system can produce. When the system goes into service it generates energy which is measured in kWh. The same 8 kW solar system will generate more energy if it’s in full sun than if it’s in partial shade.

Note: Always make sure to get a kilowatt hour estimate for what your solar system will produce each year. You can then compare the kilowatt-hours generated by the solar system to the kilowatt hours used listed in your power bill.

How big your system should be in kW depends on a couple of factors:

  • Houses with full sun exposure will generate more power per panel and need fewer panels to produce the same amount of electricity. More sun means a smaller system will generate the same amount of energy as a larger system in a shadier environment.
  • Panels do degrade over time. Expect a 10 to 20% loss over the 20-year life of the panel.
  • Your life situation may change such that more power is required (kids, electric car, hot tub, etc)
  • With access to cheap power, you may use more power as it’s less expensive to consume.

Most savvy solar installers will use modeling software to build a simulator for your solar system with software like PVSketch. This software allows the installer to virtually place panels on your roof and add in trees or other objects that will shade the panels.  The software will calculate a target kWh output for each month of the year. You should get an agreed production target like the graph shown on the right.

Since there is a start-up cost to add panels to the house, it may make sense to toss in a few extra panels to grow into down the road. The power company may have restrictions on how big of a system you can put on your house based on historical usage patterns. Check with your installer on the local regulations.

Financing Your Solar System

There are several ways to finance putting solar panels on your house. I’m going to focus on three here:

  • Buy outright in cash
  • Finance with a home equity loan
  • Enter into a lease agreement with the solar company

With the first two options, you own the panels. You are responsible for the maintenance and upkeep of your panels. Maintenance will involve cleaning the panels as they get dirty (not often).  If a panel goes bad, make sure your monitoring software is set up to notify you of any error conditions.

Self-financing the panels will include a monthly payment which may be similar to the monthly payment to the power company. The key thing to note is that if something goes wrong with your panels you have to pay for the repairs if it’s outside of the warranty.

With a solar lease or a power purchase agreement the solar company owns the panels. Solar leases often require little to no money down to get started. They are responsible for maintaining the equipment. In return, you agree to buy power from the solar company. Solar lease contracts also include a yearly escalator (3%) so that power gets more expensive each year within the lease. Power at the local utility may go up more or less than that amount. A solar lease locks in increases.

Alert: Solar leases can make a house more complicated to sell.

If you choose to sell your home, the buyer must assume the solar lease or you must pay it off before the home is sold. The future buyer of the home may have a different power footprint than you do. Solar leases lock in how you use power for the future buyer. It could make your home harder to sell. Solar panels bought outright almost always add value to the home as the buyer will have a reduced or no electric bill.

Cost, Payoff, and Tax Credits

Solar installers will often tout the payoff period of the solar system. This refers to the date where payments to the utility would outpace the cost of the solar system. Solar installers often quote the price per watt ($3-4 as of this writing). Panels that can generate more power or have longer warranties generally are more expensive. Also, consider how the panel will look on the roof. Since I have a dark roof I wanted panels with minimal silver in them so they blended into the roof. The cost per watt doesn’t map to what you pay the utility. Always make sure to get a cost per kilowatt/hour. This ensures they are including how much energy your system will actually generate and allows comparison with what gets paid to the utility.

Here in Northern California the payoff period is between five and eight years. We tend to get lots of sun and power is relatively expensive compared to the rest of the United States. Buying outright will have a faster payoff period as there is no escalator increasing power in each subsequent year.

Would solar be the best use of the cash outlay versus other investment opportunities? That’s tough to say but it’s unlikely that power is going to get cheaper in the next 20 years with increasing demand and inflation.

Installing solar panels on your home generates a 30% tax credit (not deduction) through the end of 2019. The tax credit still remains in future years but the percentage will reduce. Make sure you pay enough taxes to offset the credit within that tax year.

How solar systems turn sunlight into power

When the sun hits a solar panel, the solar panel generates DC current. Your house uses AC current. One of the key components of the solar system is the inverter. The inverter changes DC power produced by solar panels to AC power that is consumable by the house. In systems with string inverters, DC power is generated by the solar panels and sent down the wire to the string inverter which converts all of the DC power into AC power by one unit. String inverters generally fail about halfway through the life of the solar panels. In contrast, microinverters convert DC power to AC power right next to the panel. AC power then gets sent down the wire into a combiner box to be used by the house.

Note: Make sure it’s clear how the power generated gets back to the breaker panel. If you live in a 2 story house, will that power line run inside or on the outside of the house?

There is some controversy (small) that the inversion process generates electrical noise known as EMFs. In doing some research on the issue, it was unclear if EMFs at the level solar systems generate were actually bad for humans. It appears that microinverters generate less noise than string inverters. Since the microinverters from Enphase Energy appeared to generate less electrical noise and had a 25-year warranty vs a known replacement in 10 years with a string inverter I decided to go with Enphase.

Choosing your installer

Choosing the right installer is one of the most important parts of your solar system. Their craftsmanship will directly affect the performance of the solar system. If issues arise, having a local advocate to work with the manufacturer to resolve issues is important to me. In general, I found that solar installers fall into three broad categories:

  • Solar Companies
  • Roofers that install solar
  • Electricians that install solar

Solar companies have an advantage in that all they do is solar. They’ve specialized in that skill set. Remember, this is a 20 to 25 year investment. Ask your solar installer how long they’ve been in business and what their plans are to grow that business in the next few years. In doing my own research I found only one company in my area that had been in business for more than 30 years.

I didn’t need a roof at the time so I didn’t research roofing companies that installed solar. I did, however, have a number of electrical changes I wanted to be done in the house after the installation of the solar system. My local electrician was able to look at my house in its entirety and develop a plan for how we were going to integrate all of these changes cohesively. That skill set was invaluable to me. In my opinion, you want somebody who is a part of your community. You want them around if issues arise or your panels need maintenance.

As I said in the beginning, I couldn’t be happier with my system. If you have questions, feel free to reach out.

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