Solar Co-op

[KYFIRE]

I'm working on my carbon impact and of course while reducing usage is 1st priority, I'm looking at where the energy I use comes from.  I'm investigating solar and while I'd like to just put up my own system I'm also reviewing our local energy co-op's program.  Basically, pay $460 for 25 year lease on panels. Their estimate is each lease is  ~460kWh annual generation.   I think this comes to ~$3/W which seems pretty good once consider purchase/install/maintenance compared to installing at home. 

I'm sure there's a glaring issue with them but does anyone have any experience with similar system?  Insite I'm missing?

Thanks,

[uniwelder]

I don’t have any experience with this, but am curious. Would that be around an 8 year break even based on your current electric rate?  If you sell the house, can you keep your share of the co-op?

[KYFIRE]

Yeah, based on their estimate (which not having all the actual specs is best I can do) is around 9 year pay back.  That seems on the low end for payback but I don't think unreal.

As for moving, I believe it will stay with the house or if I'm still within the co-op coverage I can move with my account.

[Abe]

Could you specify what time period the $460 is over? Per year?
Also I’m not sure you have the output data correct.

For reference I have a 10kW system that produces about 34 kWh on average per day (over the course of the year, Average in December is 25, in august is 40. That comes out 11,000 kWh per year). Final install price was $2.5/W before federal tax deduction. That’s $1000/year ($83/month) over a 25 year warrantied lifespan (but the panels don’t just die at 25 years, they are warrantied for 80% production at that time).

$3/W is about right for install cost. After federal tax deduction, $2.5/W is more common. With a lease you do not get a tax deduction.

In general leases are not recommended for a variety of reasons, the main one is that people won’t want to take them on if they buy your house, so you’ll end up paying up early to settle the contract, but have little to show for the extra cost.

If the lease is not related to home installation, but a share of a community power project (the more common scenario), then the lease issue I mention isn’t a problem - unless you move out of the service area of the co-op.

[KYFIRE]

Thanks Abe, great info!

So, you're right, I think my numbers of course were off after reviewing your info but strangely it means it's closer to $1.25/W!???

So to answer some of your questions.

The $460 is a one time payment for a panel.  It's a large solar installation in my area so there would be no installation at my own home.  I can also use at another home if I stay in network or give to someone in network or with the house once moved.

Taking your numbers (not sure what part of the country you're in so certainly some error possible there) and checking against the info the co-op provides it appears this would be around a 370-380W panel.  Your 34kWh daily from a 10kWh array comes to ~1.24kWh / W / year.  So taking the 460 kWh divided by the 1.24kWh annual = ~370W. 

Please figure where I'm wrong, I know something has to be.  It seems too good.

For reference here's the co-op:  https://www.cooperativesolar.com/

[Abe]

Thanks Abe, great info!

So, you're right, I think my numbers of course were off after reviewing your info but strangely it means it's closer to $1.25/W!???

So to answer some of your questions.

The $460 is a one time payment for a panel.  It's a large solar installation in my area so there would be no installation at my own home.  I can also use at another home if I stay in network or give to someone in network or with the house once moved.

Taking your numbers (not sure what part of the country you're in so certainly some error possible there) and checking against the info the co-op provides it appears this would be around a 370-380W panel.  Your 34kWh daily from a 10kWh array comes to ~1.24kWh / W / year.  So taking the 460 kWh divided by the 1.24kWh annual = ~370W. 

Please figure where I'm wrong, I know something has to be.  It seems too good.

For reference here's the co-op:  https://www.cooperativesolar.com/

It's hard for me conceptually to think on a per-panel basis since it's so little power. But, using the same idea (how much to own a panel?) for my system of 29 panels, it was 20,000 / 29 = $689 per panel. Your price makes sense since ground-mount panels on a commercial scale should be a bit cheaper per watt.

I think their estimate for production seems reasonable when I put in 29 panels to compare to my system (13 MWh vs 11 MWh, probably due to less shade issues on a flat field versus residential roof).

If your goal is to offset energy use on an annual basis, this seems a reasonable (and probably the most economic) approach. The one caveat that this raises is the 25-year lease limit. After 25 years I"d still own my panels and they would likely work for at least another 10-15 years to some degree. Then again, I paid 150% compared to the co-op price, am responsible for any repairs, and so things probably balance out in the end.

From a societal perspective this is probably the most efficient way to encourage wide-scale renewable energy production since capital costs are paid for once all panels are subscribed, so builders get their return on investment relatively quickly and unlike "green energy" electricity plans there is a clearer path conceptually between the consumer and producer.  A few companies that I invest in have gone this route for renewable energy revenue streams.

[KYFIRE]

Thanks again Abe.  Your cost info is good comparison. 

The costs do seem competitive and like you say, I think the offset of maintenance would offset some of the ownership.  I'd also hope in 25 years time the tech would be more efficient and hopefully cheaper.

Thanks for the info.  I'm gonna reach out to the solar co-op and get a little more info but might go that route.

[bryan995]

Where do you live ? We are in SoCal with a 12kW array.  36 x 330W panels total.

Produce 50kwh in the winter. 85kwh in the summer. Around 20,000kwh/year.

No trees. No clouds. Just blue sky and sun :)

We went with Tesla. Even now the advertised cost w/ install is $26k - incentives = $19k
https://www.tesla.com/energy/design
$1.58/W installed or $633 / 400W panel installed (after rebate

I’d seriously look at buying over leasing. Leasing can cause major issues when trying to sell a home.

And for the value of solar. That very much depends on your utility costs.  Ours are beyond absurd. Which work in our favor when trying to justify solar.

63.9c/kwh peak!
https://www.sdge.com/residential/pricing-plans/about-our-pricing-plans/electric-vehicle-plans

[Jon Bon]

Where do you live ? We are in SoCal with a 12kW array.  36 x 330W panels total.

Produce 50kwh in the winter. 85kwh in the summer. Around 20,000kwh/year.

No trees. No clouds. Just blue sky and sun :)

We went with Tesla. Even now the advertised cost w/ install is $26k - incentives = $19k
https://www.tesla.com/energy/design
$1.58/W installed or $633 / 400W panel installed (after rebate

I’d seriously look at buying over leasing. Leasing can cause major issues when trying to sell a home.

And for the value of solar. That very much depends on your utility costs.  Ours are beyond absurd. Which work in our favor when trying to justify solar.

63.9c/kwh peak!
https://www.sdge.com/residential/pricing-plans/about-our-pricing-plans/electric-vehicle-plans

+1

Right this matters a lot. It's really the only (financial) factor to consider.

I feel most places solar does not work financially at all unless you do your own install. I mean lots of guys are like "yeah I spent 30k to save $1000 a year!" Those numbers are not good!

I would not lease. For the reasons Bryan said, you need lots of sun, terrible electricity prices, or both to make it worth your while.

[KYFIRE]

Thanks all, good points.

I'm in KY so not sunny SoCa unfortunately.   

As far as financial, KY has cheap electricity ($.11kWh) but it's very dirty (~1.8lbs/kWh) so my motivation is more on my impact.  Of course I consider payback and using their numbers and assuming some variation it looks like 9 - 11 ROI.  This seems in line with average no?

Also, I agree if I was installing at my property I would purchase.   The condition of this lease isn't what is normally done though.  It's a one time payment for 25 year lease of a panel at a large array near by.  So the panel would be there, maintained by the utility company.  If I move, I can continue to use if stay in network or give/sell to new owner or even someone else in area.  So a little different scenario compared with leased panels on the house.

I'm thinking of getting around 25% of my needs through this leqse and then install a smaller array at the house once all other reduction activities completed.

[NorCal]

Where do you live ? We are in SoCal with a 12kW array.  36 x 330W panels total.

Produce 50kwh in the winter. 85kwh in the summer. Around 20,000kwh/year.

No trees. No clouds. Just blue sky and sun :)

We went with Tesla. Even now the advertised cost w/ install is $26k - incentives = $19k
https://www.tesla.com/energy/design
$1.58/W installed or $633 / 400W panel installed (after rebate

I’d seriously look at buying over leasing. Leasing can cause major issues when trying to sell a home.

And for the value of solar. That very much depends on your utility costs.  Ours are beyond absurd. Which work in our favor when trying to justify solar.

63.9c/kwh peak!
https://www.sdge.com/residential/pricing-plans/about-our-pricing-plans/electric-vehicle-plans

+1

Right this matters a lot. It's really the only (financial) factor to consider.

I feel most places solar does not work financially at all unless you do your own install. I mean lots of guys are like "yeah I spent 30k to save $1000 a year!" Those numbers are not good!

I would not lease. For the reasons Bryan said, you need lots of sun, terrible electricity prices, or both to make it worth your while.

I guess I don't get the premise that those numbers aren't good.  And your price seems a bit high when factoring in tax credits.

$1K savings on $30K invested is a 3.3% return.  Okay, not great, but don't forget that's before inflation.  Your energy bills are impacted by inflation and your solar bills aren't. 

So add 2.5-3% to get a ~6% return.

In your mind, stock market returns are probably expected to be 7-8% over the long term, so it's not quite that good.

Except that the 7-8% stock market returns are before taxes.  While everyone's tax situation is a bit different and compounding is tricky to factor in, you should probably factor in a 10-15% tax penalty.  So that would drop an 8% return to something in the high 6% to low 7% range.

So you're adding an asset that has zero market risk, protects you from energy price inflation, and has returns above the fixed income piece of your portfolio, but slightly below the equity piece of your portfolio.  That's a pretty good deal in my book.  You just have to assess the risk of needing to move.

[Jon Bon]

Where do you live ? We are in SoCal with a 12kW array.  36 x 330W panels total.

Produce 50kwh in the winter. 85kwh in the summer. Around 20,000kwh/year.

No trees. No clouds. Just blue sky and sun :)

We went with Tesla. Even now the advertised cost w/ install is $26k - incentives = $19k
https://www.tesla.com/energy/design
$1.58/W installed or $633 / 400W panel installed (after rebate

I’d seriously look at buying over leasing. Leasing can cause major issues when trying to sell a home.

And for the value of solar. That very much depends on your utility costs.  Ours are beyond absurd. Which work in our favor when trying to justify solar.

63.9c/kwh peak!
https://www.sdge.com/residential/pricing-plans/about-our-pricing-plans/electric-vehicle-plans

+1

Right this matters a lot. It's really the only (financial) factor to consider.

I feel most places solar does not work financially at all unless you do your own install. I mean lots of guys are like "yeah I spent 30k to save $1000 a year!" Those numbers are not good!

I would not lease. For the reasons Bryan said, you need lots of sun, terrible electricity prices, or both to make it worth your while.

I guess I don't get the premise that those numbers aren't good.  And your price seems a bit high when factoring in tax credits.

$1K savings on $30K invested is a 3.3% return.  Okay, not great, but don't forget that's before inflation.  Your energy bills are impacted by inflation and your solar bills aren't. 

So add 2.5-3% to get a ~6% return.

In your mind, stock market returns are probably expected to be 7-8% over the long term, so it's not quite that good.

Except that the 7-8% stock market returns are before taxes.  While everyone's tax situation is a bit different and compounding is tricky to factor in, you should probably factor in a 10-15% tax penalty.  So that would drop an 8% return to something in the high 6% to low 7% range.

So you're adding an asset that has zero market risk, protects you from energy price inflation, and has returns above the fixed income piece of your portfolio, but slightly below the equity piece of your portfolio.  That's a pretty good deal in my book.  You just have to assess the risk of needing to move.

My numbers were made up and silly, I am sure you could do better/worse depending.

Stocks return 6-8% return forever and require no maintenance.

Even if panels made the same return they would still be much worse off because they require maintenance and eventually need to be completely replaced.

I just think its completely apples to oranges. If you want to help global warming by installing solar panels I think it is a great idea. Same as getting an efficient furnace or insulating the heck out of your house, its all good stuff.  If you want to get rich investing I would not recommend solar panels like I would mutual funds. The numbers still don't work for too many people.

[Abe]

People for whom that is a consideration of optimizing all their returns due to lack of capital probably shouldn’t get solar panels at that point in their life, unless they are committed to renewable energy for non-financial reasons. There are plenty of places, however, where solar panels do make sense financially within their lifespans. California is a good example. Even here in Texas I am saving about $1000 a year after a $20k investment, which is not bad.

[NorCal]

People for whom that is a consideration of optimizing all their returns due to lack of capital probably shouldn’t get solar panels at that point in their life, unless they are committed to renewable energy for non-financial reasons. There are plenty of places, however, where solar panels do make sense financially within their lifespans. California is a good example. Even here in Texas I am saving about $1000 a year after a $20k investment, which is not bad.

Here in Colorado, financing a system has actually gotten cheaper than the utility bill it's replacing. I would recommend:

1. For someone who is likely to move in under 10 years, get in on a solar co-op or other virtual purchase plans (depending on what's available in your area).  From my understanding, the prices are competitive with what you're already paying.
2. If you're not likely to move in under 10 years and you're maxing out your retirement accounts and still saving a significant after-tax percentage of income, you would be well served in buying a system outright.
3. If you're not likely to move in under 10 years, and not maxing retirement accounts, and are still early in your savings journey, look at purchasing a system and financing it.  If it's break-even or better with the utility bill it's replacing, why not?

[Jon Bon]

People for whom that is a consideration of optimizing all their returns due to lack of capital probably shouldn’t get solar panels at that point in their life, unless they are committed to renewable energy for non-financial reasons. There are plenty of places, however, where solar panels do make sense financially within their lifespans. California is a good example. Even here in Texas I am saving about $1000 a year after a $20k investment, which is not bad.

Here in Colorado, financing a system has actually gotten cheaper than the utility bill it's replacing. I would recommend:

1. For someone who is likely to move in under 10 years, get in on a solar co-op or other virtual purchase plans (depending on what's available in your area).  From my understanding, the prices are competitive with what you're already paying.
2. If you're not likely to move in under 10 years and you're maxing out your retirement accounts and still saving a significant after-tax percentage of income, you would be well served in buying a system outright.
3. If you're not likely to move in under 10 years, and not maxing retirement accounts, and are still early in your savings journey, look at purchasing a system and financing it.  If it's break-even or better with the utility bill it's replacing, why not?

Very good point. That is definitely a situation where I would jump on board with both feet. The issue I have with this plan and solar in general is I feel often the projections are completely bullshit compared to real world performance.

I just feel that it is almost impossible to get good data on the performance of your equipment, until you install it.  Please someone else chime in on this an tell me I am wrong. But with so many different equipment manufactures, set up options, and the fact that every roof is different I just don't trust anyone's numbers.

I looked into solar and the numbers are really bad for where I live. I just have zero confidence in the solar installers as they are more evangelists for solar rather than tradespeople doing a job.

[uniwelder]

…The issue I have with this plan and solar in general is I feel often the projections are completely bullshit compared to real world performance.

I just feel that it is almost impossible to get good data on the performance of your equipment, until you install it.  Please someone else chime in on this an tell me I am wrong.

A friend of mine owns a solar installation company and he says the projected output from pvwatts.nrel.gov get to within a few percent of actual.

[NorCal]

People for whom that is a consideration of optimizing all their returns due to lack of capital probably shouldn’t get solar panels at that point in their life, unless they are committed to renewable energy for non-financial reasons. There are plenty of places, however, where solar panels do make sense financially within their lifespans. California is a good example. Even here in Texas I am saving about $1000 a year after a $20k investment, which is not bad.

Here in Colorado, financing a system has actually gotten cheaper than the utility bill it's replacing. I would recommend:

1. For someone who is likely to move in under 10 years, get in on a solar co-op or other virtual purchase plans (depending on what's available in your area).  From my understanding, the prices are competitive with what you're already paying.
2. If you're not likely to move in under 10 years and you're maxing out your retirement accounts and still saving a significant after-tax percentage of income, you would be well served in buying a system outright.
3. If you're not likely to move in under 10 years, and not maxing retirement accounts, and are still early in your savings journey, look at purchasing a system and financing it.  If it's break-even or better with the utility bill it's replacing, why not?

Very good point. That is definitely a situation where I would jump on board with both feet. The issue I have with this plan and solar in general is I feel often the projections are completely bullshit compared to real world performance.

I just feel that it is almost impossible to get good data on the performance of your equipment, until you install it.  Please someone else chime in on this an tell me I am wrong. But with so many different equipment manufactures, set up options, and the fact that every roof is different I just don't trust anyone's numbers.

I looked into solar and the numbers are really bad for where I live. I just have zero confidence in the solar installers as they are more evangelists for solar rather than tradespeople doing a job.

Anecdotally, the dozenish people I’ve known with solar had their systems outperform the installers estimate by a couple percentage points. None have had it produce less.

The production side of the equation is pretty easy. The financial side of the equation remains easy if you have net metering.  It does get hard to predict if you’re in a jurisdiction that has the utility purchasing back electricity at a lower rate. In this case, I’d recommend buying a home energy monitor before getting solar. Knowing what time of day you are a heavy user would make a big difference in what makes sense for you.

[Abe]

The regional installers (with territories limited to a large state or a few small ones) are generally more reliable as they rely on word-of-mouth for referrals rather than advertising in Costco. In general they under-estimate the production to 1) sell more panels and 2) avoid a situation where the customer is under-performing and complains to others (or on review sites).