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Q&A Spotlight

Solar Now or Later?

A homeowner wonders whether investing in a modest photovoltaic array is a good use of his money

Declining costs make small-scale PV systems attractive. Homeowners still have to weigh long-term costs carefully before taking the leap.
Image Credit: 10 10/ Creative Commons license/ Flickr

Prices for photovoltaic (PV) systems have been dropping steadily, making the investment in residential-sized arrays more appealing than ever. Lower prices and a decision in Congress to extend the federal investment tax credit means that ever larger systems are within reach of more homeowners.

But what about homeowners whose construction budgets strictly limit the size of the PV system they can realistically afford? They are people like James Timmerberg, who is building an all-electric house in Ohio and would like to invest in solar — if it makes economic sense.

Writing in a Q&A post at Green Building Advisor, Timmerberg explains his situation this way: “I’m building an all-electric home. I am currently paying 7.22 cents per kilowatt hour. I’m poor, but could possibly budget $5,000 for solar power, if 30% of that $5,000 is returned to me as a tax credit. Would investing that $5,000 in solar power make sense? (This question is premised on the cost to me, after the tax rebate, being $3,500.)

“Or,” he continues, “would my $5,000 be eaten up by installation costs, and leave me generating enough electricity to operate an LED light fixture? It doesn’t matter what I could do for $15,000 or $20,000. I don’t have that much money to spend on solar power, unless I want to live in a garden shed.”

Should he spend the money on solar? That question is the focus of this Q&A Spotlight.

What you get for $5,000

The cost of a PV system can vary a good deal depending on where you live, as previous studies have found. But for argument’s sake, Stephen Sheehy has picked $3.50 per watt as the cost of a typical system, and Timmerberg won’t be buying much electricity with that.

Sheehy suggests that Timmerberg get in touch with a local installer,…

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13 Comments

  1. Expert Member
    Armando Cobo | | #1

    It also depends on house quality
    One of my TX clients just told me over the weekend that his 5K sf house is been averaging less than $150 per month in utility bills for the last year. An installed SunPower327 10kw system cost is $42K, and net cost is $30K. The house had a HERS46 and 1ACH50, and at that level of performance, it’s hard for him to justify the PV system unless he wishes to be totally ZEH. He’s ROI is around 3 years compared to existing housing, which is leaky and drafty, but still it could be 16± ROI years for his own home.

  2. Expert Member
    Malcolm Taylor | | #2

    Terms
    This weekend I saw an advertisement for "felled oak shelves", My restaurant server told me the dessert was made from "single source Peruvian chocolate", and now I see "Solar South". Language has lost its meaning.

  3. Reid Baldwin | | #3

    Net Metering rules
    Another thing to look into is local net-metering rules. These differ by state and many states are in the process of trying to change them, usually to be less favorable. If the local net-metering rules are unfavorable, 1kwh of generation will not necessarily reduce the electric bill by the retail cost of 1kwh supplied from the utility.

  4. Alan B | | #4

    That 5k will disappear, no
    That 5k will disappear, no house comes in on budget, in fact i would make sure an extra 20% of the house cost is available (larger mortgage, loans, whatever) otherwise it won't get finished or many details will have to be scaled back and the OP will be kicking himself for many years.

    All that said, once the house is built, pick a safe and fluid savings vehicle and make monthly payments that are not touched for the solar system and buy when the money is available and the price is right.

  5. Eric Sandeen | | #5

    Break-even on cabinets, solar on a tight budget
    I actually get a little weary of the careful ROI calculations for solar as part of the budget for a new home. Is any other part of the budget constrained by the ROI? The cabinets, the tile floors, the tub? I'm guessing no, just the solar.
    Solar isn't quite to the point in most parts of the country where it's a clear financial win. Rather, you'd do it because you want it - it's cool, it's green, it's smug, it's clean, it's moral, it's status - whatever floats your boat. Like the fancy knobs you splurged on for the cabinets. ;)
    So if the budget is really that tight, it's like any other part of the project; get it if you want it more than the other things you could buy with that money.
    If it's only about the money, I'd say skip it for now. You can always put it on later, but plan ahead for roof design, loading, panel space, raceways, etc to make a later installation simple.

  6. Jim Baerg | | #6

    DIY?
    Are you at all handy? I just put a 3.84 kW system on my roof by myself. Pretty easy, other than the 12:12 roof. Cost $8k for the parts, $5k net after credits. You should check to see what your code and utility requirements are, in terms of electrical work.
    Otherwise, sink your $5,000 into permanent energy improvements such as air leakage, insulation, good appliances and fixed socket LED lights. Do the PV later when you've caught up financially.

  7. Torsten Hansen | | #7

    Is the building envelope all that it can be?
    $3500 does not buy a lot of PV but it goes a long way to improve the building envelope. Invest the money in proper air sealing and high R-values. By all means prep for solar panels but this is your one chance to get the envelope right. We work in Mr. Timmerberg's part of the country and it is amazing how often homeowners will find the thousands for the latest sexy gadget - be it geothermal, solar or whatever - but not the funds to upgrade from the builder standard fiberglass in 2x4 walls.

  8. Leigha Dickens | | #8

    worthwhile to solar installer?
    If wanting to go the "hire a solar installer" route (or if using a solar installer is required to by your utility), just like and kind of sub-contracting, there's a minimum job size under which it's not worth their while because they won't make enough money to justify the time spent. I would imagine a $5k job may be under that for some installers.

  9. Fred Greenhalgh | | #9

    Economics are tougher for small PV systems
    Didn't see this comment added yet so I will - there is a relatively high amount of fixed costs involved in PV systems - local permitting, interconnect with the utility, getting a truck + electricians to jobsite, putting rail on a roof w/ proper safety regulations, etc. such that the solar panels themselves are some of the lesser fraction of the solar project. For a tiny system (5-6 panels) a higher portion of the project cost would be tied up in fixed-fee costs, whereas the extra $$ to bump up from 1kw to 5kw or even higher is much smaller. As the cost of PV has plummeted, we've seen system sizes creep up to where 8kw+ is increasingly common on the residential scale.

    With this kind of tight budget, I'm really empathetic with the homeowner - $5k is not much to work with, probably better to save for a bigger system or get financing vs. pay a high cost relative to the production capacity. Make sense? 7.22c/kWh is a bit tough to compete on at $3.5/watt installed price (we typically see 14-16c/kWh here in the Northeast) but long-term the economics will pan out.

    - Fred
    ReVision Energy, Portland, ME
    http://www.revisionenergy.com/

  10. James Timmerberg | | #10

    At what price does a PV system begin to make sense?
    I didn't think that a $5,000 investment in solar was going to make sense, and a lot of helpful comments have confirmed my thought. The obvious follow-up question is: at 7.22 cents/kWh, what size investment would be necessary for a PV system to be worth considering?

    In response to Torsten's comment, I would note that when I spoke with a builder about adding exterior foam insulation, he recommended a geothermal system instead. And, several builders with whom I spoke opposed the idea of wall insulation beyond what can be installed in 2x6 wall cavities. Other builders simply don't return phone calls when you mention building a well-insulated house heated with mini splits. Given the broad resistance among builders to change, it's hardly surprising that homeowners, who, for the most part, only know what builders tell them, turn to the latest gadget for relief from sky high heating bills. When consumers purchased Dodge Polaras back in the early 1970s, it wasn't because they didn't want a Camry, it was because the alternative on offer was a Ford Pinto or a Chevy Nova. Camry's weren't available.

  11. Fred Greenhalgh | | #11

    RE: price per kilowatt-hour to make PV competitive
    In Maine at $3/watt installed price (reasonable for most locations w/ high-quality but not premium grade solar panels) it works out to a 25-year price of electricity of around 10 cents per kilowatt-hour. Utility rates around here are better than 14 cents and sometimes higher, so it is a pretty good deal for anyone with a long-term outlook. Even better in markets like MA with SREC revenues to add in to that.

    I don't have the figures in front of me for solar insolation in Ohio, but it looks like it's not all that different from Maine, not sure how snow loads compare. Question is not just what is the dollar cost today, but also, what is the value of a future kilowatt-hour and do you have the ability to get in with net metering at the best retail rate, are there local rebates to look at, etc... all that local policy stuff that makes it ideal to speak to someone with local knowledge.

    - Fred
    ReVision Energy, Portland, ME

  12. Ulrich Libal | | #12

    Photovoltaic smallsystem
    1) Ok Ilve in Germany and wonder about these low energy costs. Wonderful - I have to pay 27.8 Euro Cents / kWh - and my compensation to feed power to the grit is 17.9€ct. So the economics are a bit different - but any way my photovoltaic system with 7.5KW /peak made sense as the total energy cost (calculated grid intake / grid delivery and IRs stuff makes that my 1600 sqft. Home has an total energy consumption of 40€ monthly. Without PV it would be ~150 to 170€.
    2) So if the amount available for the PV is too small I would also consider at first that under certain conditions ( stepness of the roof / manual capabilities of the owner) most of the install can be done the DIY way as this no rocket engineering. Mounting the panels and hooking them up to each other is easy and uncomplicated. So some money could be saved. The inverter and the commisioning of this unit and the hook-up to the grid is professional work. Even I as an electronics engineer did not touch that issue. But own manual work could bring some more "punch on the roof".
    3) As the budget for photovoltaic in the mentioned case is relative small I would also look into solar water heating support - that comes cheaper - Ok a bit more complicated as you have piping to run to the water heater. In my house 38deg. Roof slope facing south and close to the Alps on sunny days in wintertime (minus degrees) 80sqf solar panel provide a water temperature of around 60deg.C for heating and warm water production.
    From mid march till Mid October I do not use the air/ water heat pump at all. The solar panel produces warm water & occasional heating is still possible - Electricity is saved too as we use the hot water in summer but also on sunny days in wintertime for the dishwasher (generally connected to hot water tap) and the washing machine (connected to the water supply via a thermostat controlled shower temperature mixer which we manual adjust to the desired washing temperature.
    Over the span of 4 years we got from our solar heater system around 16000 kWh of free solar heat into the house - so I love the total ROI of the project which at the time when planned and asking for a loan for my banker made "commercially calculated absolute no sense!"

  13. olivermasson99 | | #13

    To those people up there, who say that solar is no use- let me say that they are totally wrong. In my defense i will say, we produce a lot of energy and we don't even need solar energy. Yet, we go solar, not because we need it but we want to save the world and we want to save the plants and money.
    Read this and you will know how much can you save with going solar.
    http://www.perfectsolarhome.com/how-much-you-save-with-solar/

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