Is now a good time to invest in solar?

  1. My state (NJ) is offering rebates of $1.75 per solar watt installed up to 10000 watts ($17,500 max) Feds are giving 30% tax credit (approximately $18,000 after state rebate is subtracted), utilities in NJ are forced to purchase SRECs to show they are complying with regulations to use green energy sources. These are at current market values of $680 per 1000 kWh solar electricity produced they will be issued for 15 years (a system can produce electricity 6.5 hours a day in my area so 10 kWh will produce about 23 SRECs a year or about $15,640 a year at current market value). Solar is a home improvement that is exempt from property taxes in my state. All the incentives add up to paying off the investment in just a few years not even counting the electricity saved.

    My wife and I are considering installing a grid tied system of somewhere between 6.5 and 10 kW (cost will probably be between $60,000 and $80,000). What do you think, is now a good time to go solar?
     
  2. jcsd
  3. FredGarvin

    FredGarvin 5,087
    Science Advisor

    Just in our local news last night was a fight that is going to court because a homeowner purchased solar cells but his subdivision association won't let him put them up. He already has permission by the county but apparently homeowner associations here carry some clout. It may be something you want to look into if this could affect you.
     
  4. Thanks FredGarvin. I have been considering the effect on my neighbors. I am considering a ground mounted system as my roof faces the wrong way and I have a lot of land around my house. That could be an issue.
     
  5. russ_watters

    Staff: Mentor

    Well you tell us Artman - what kind of payback can you expect? Anything under 5 yrs is probably worth doing.
     
  6. mgb_phys

    mgb_phys 8,952
    Science Advisor
    Homework Helper

    Payback is still >10 years now.
    There are a few companies that will rent you the panels and even some deals where they install an over capacity for free, sell the power back to the grid and you just pay your existing electric bill but at todays power prices guaranteed for the next 20years.
    They are betting on being able to replace the panels with more efficient ones in the future or being able to sell premium 'green' power to the power companies.

    The trouble is that people putting in solar panels are normaly interested in being green - so they also go around adding insulation, efficient appliances and CF lamps - then having halved their power consumption they find the panels will take 50 years to pay back!
     
    Last edited: Jul 10, 2009
  7. My wife and I went to a seminar held by Home Depot on solar power. They claim that the incentives will cover 100% of the cost through the rebates, tax credit and sale of SREC's for at least $475.00 each. Above that the power saved is gravy, amounting to approximately $51,000 from a 10kWh system over 15 years (assuming price of electric to double in fifteen years). Payback should be about 5 - 6 years, I estimate because the federal tax credit will have to spread out over that long.

    In NJ you can only sell back to the Electric utility 5% over-production per billing cycle, so they are pretty careful to not exceed 100% design of the solar system (except for future additions such as an electric car or converting to a heat pump from oil or gas heat, etc).

    I guess what I am mostly wondering is, is there a paradigm shift coming in solar electric generation in the near future that I should wait for? Will my system be obsolete long before it pays back, if I buy now? Incentives are probably at their peak for my area right now, with bailout money funding many of the government programs.
     
  8. How much do you pay for a kw-hr in NJ? Is it really 68 cents?! The utility companies can buy a megawatt hour on the spot market for about $75 (or 7.5 cents per kw-hr).

    I will be the first to admit ignorance on the financials of solar, but something doesn't look right in your numbers.
     
  9. mgb_phys

    mgb_phys 8,952
    Science Advisor
    Homework Helper

    The srecs aren't really the price of the power they are also a sort of tax - the power company only has to buy a small amount of power at these prices to make up it's 'green' requirements.
    The price varies, $680 is at the top of the range for winter months - it can go down to $100 - you also don't know if the scheme will be in place next year or next president.
     
  10. I think tax or penalty for not using green energy describes the SRECs pretty well. State of NJ promises that SRECs will be available for 15 years, but there is no guarantee they will hold their value. They are a commodity and are traded as such. Yes they do swing in price, but they can be held for a couple of years and some brokers will lock in an average rate of say $475 over several years hoping to cash in by selling them when they are high. I was told other states are beginning to buy these as well, NJ residents can register to sell theirs in these other states. I think it costs the government very little to issue these, so there is a good chance they will be available the full 15 years.

    Electric charges in my area are about 15 cents per kWh, but expected to double within the next 5 years.
     
  11. russ_watters

    Staff: Mentor

    Considering all the incentives you listed, I'm surprised it is that bad. But if that includes covering it with a home equity loan, it might be worth doing. But considering the condition that the US economy is in right now, a better place for your money over those 5 years is probably the stock market, though obviously the risk is greater. However:
    No, you shouldn't expect a major revolution in solar technology in the near future. Enough money has been spent in researching it over enough time that it just doesn't seem likely to me that something obvious has been missed.

    But the more important question is probably the political one: can you expect those incentives to get better or worse over the next few years? And that's a difficult question. With a democratic president and congress, you can expect them to be friendly toward such things for a while. For NJ, I don't know your politics or budget situation, so I can't help you there....

    But it is important to remember that right now residential solar is such a small potatoes energy concept that the government can afford to throw absurd amounts of money at it without many people realizing how rediculous it is to do that. If a lot of people start to take advantage of this, I think people will start to realize just how bad the return on investment is for the government and these incentives will go away. So you may want to consider how long these incentives will actually be around and get while the gettin's good.
     
  12. russ_watters

    Staff: Mentor

    I've been looking over your numbers....
    Sounds about right to me.
    That sounds high to me. What is the 6.5 hours based on? Is this a single axis tracking system? I would expect an average of about half that if it isn't due to the angle of the sun varying and clouds.

    Anyway, continuing, I get a capital cost of $44,500 for an $80k system minus those first two incentives. Then subtracting the SREC at your rate gives a payback of just under 3 years, not including the energy you generate. So it doesn't sound to me like you've actually run the numbers. You really need to if you want to be able to make an educated decision here. And you really need to include the energy generated, since that is a big part of the benefit! It is also critical for sizing the system. Start by checking your electric bills and seeing both how much energy you use per year and what the summer and winter usage is. You probably want to size the system at around 50-75% of your summer months peak (I'm assuming you are going to use storage to cover you at night). If you produce/use 10,000 kWh per year, that's about $1500/yr.

    Anyway, the SREC number is the critical number here. If it really is that high (and does that get bought every year at that year's market rate?), this is a rediculously good mid-term investment. Including the energy produced, you get your $44,500 investment back in 2.5 years and have it doubled after 5...$125k profit after 10 years, and $210 k after 15. That's an average of a 32% profit per year over 15 years. Note that since the return is constant dollars per year and not constant percentage per year, it doesn't compound like interest and so loses ground to an interest based investment - but over 15 years, that's extremely good.

    If you're financing it with a home equity loan, of course, you'll need to subtract that from the return.

    If the SREC is half what you think, the payback is about 5 years.
     
  13. Thanks Russ, You're right, my SREC's number was too high. The 6.5 is the approximate number of hours that a fixed South facing solar panel will produce a high percentage of output at my latitude. This number is available on several websites, I think it is pretty accurate and even a little conservative. I have a large open field where the panels are planned to be, but they are still talking about removing some trees to get better unobstructed light.

    I tallied my electric bills yesterday for the year and we used around 11,000 kWh, that would be 11 SREC's, now at 680 apiece that that would be more than 600 per month, which should cover the payments on the loan, then we pocket the electric bill money saved (or more likely kick it back into paying off the investment as soon as possible.

    The sales people have been saying things like "a conservative return of $50,000 profit over 15 years," "make $3 for every $1 spent over the life of the system," "pocket $90 per month after all incentives."

    Thanks everyone for your responses. I appreciate the thoughts. It is a very large investment.
     
  14. Well, we're signed up. We will be installing an 8.8 Kw ground mounted panel grid system made of 40 panels rated at 220 watts per panel. Payback is estimated at 5-10 years (there are a lot of variables, hours of direct sunlight, SREC prices, rising cost of electricity, availability of taxable income to take as credit). It should be online by November 30th. I'll let you know more later.
     
  15. russ_watters

    Staff: Mentor

    Congrats. That's a neat project. Keep us informed about how it works out. Does the system include any type of monitoring that will tell you total kWh generated and differentiate it from kWh from the grid for consumption in your house? If so, by June 21st of next year (after 6 full months of generation, covering every conceivable sun angle), you'll be able to pin down your payback almost exactly.
     
  16. mheslep

    mheslep 3,531
    Gold Member

    Wow, double? That's aleady 50% above the national average at 15. Any idea about the main reasons for such an increase in NJ? EIA shows NJ is half old nuclear (that is, bought and paid for). Oyster creek is old but small. Then there's 16% coal, 31% gas, and there's a large gas glut now.
    http://www.eia.doe.gov/cneaf/nuclear/page/at_a_glance/states/statesnj.html
    This must be due to some governmental regulation or tax interference if true.
     
  17. Make sure you check with your electric company to see if they support sharing. The way it works out here is that for every kwh you put in, you can take a kwh out free of charge. Unless of course you have a surplus of power for a month, then the power company will only give you something like 2 cents per kwh you supply.

    My university has solar powered apartments that were built almost 10 years ago I guess and from what I hear they have almost paid for themselves.
     
  18. russ_watters

    Staff: Mentor

    It is often said in the media that the removal of rate caps will cause the rate to double, but what might double is just the generation portion of the rate, which accounts for perhaps 30% of the total. So it is more likely that rates for states where rate caps are about to come off would go up by 30%....

    ....but no one really knows just what's going to happen.

    [edit] Wait, have rate caps already come off in NJ? This link implies they have: http://www.mwn.com/files/FileContro...9aa917d8cf/Presentation/File/RATE CAP FAQ.pdf

    If they have and the increase has already been seen (which would explain why they are already so high), and future rate increases won't be as dramatic.
     
  19. Artman--- You are correct inn that your SREC numbers are way too high. Look to the OCE's website on the 8 year legislated schedule of SREC values based upon the Solar Alternative Compliance Penalty. Currently SREC ceiling are set to go down 3%/year---There is currently a shortfall in the RPS standard which should be made up for in the next few years. When we quote customers we use 500-511 for the next 8 years which is the weighted average. There are also a number of securitization efforts going on and we have been pushing our LSE's to commit to long term contracts at halfway decent numbers.

    For SREC gen you can use a multiplier of 1.1-1.2 on the total KW of your system.

    For reporting your inverter should have reporting capability but there are also aftermarket services that provide web based reporting for additional cost.

    As the first company to be approved by the OCE back in 98' we have provided design and installation for 5-10% of all systems in NJ. This is a great time to go solar.

    On a side note I'm pretty confident that HDs numbers are pretty high. I hope you got a couple quotes. They also 100% subcontract.

    Any questions let me know.

     
  20. Energy Year SACP (SREC ceiling price)
    2009 $711
    2010 $693
    2011 $675
    2012 $658
    2013 $641
    2014 $625
    2015 $609
    2016 $594



     
  21. mheslep, The reason for doubling in five years is that the electric utilities facilities in NJ are nearing their capacity for production of electricity, unless they expand by building new generating plants they will have to purchase electricity from other sources, either scenario could raise prices quite a bit.

    Russ, our system is supposed to have a real time meter on the solar to tell us our production and a connection to the installer to let them know if there is a drop in production so they can check it.

    ktech311, thanks for checking in. Yes, they have all used a figure of $475 for calculating the SRECs value. I think the price is a little high because we are a ground mount system, about a hundred feet of trenching is required, and we need five large trees taken down. They are going to use Schott Solar 220 watt panels, which seem pretty nice from what I read. They told us we could expect higher than rated production that is part of the reason for the meter, we can give exact numbers for SRECs based on actual production. Our installer suggested we find a decent long term price for the SRECs and lock in. I like that idea as well. I suspect as more people go solar this value will drop.

    Thanks for replies all.
     
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