Cost of home solar power and how to pay for it

It's been a couple of weeks since I last wrote about 1BOG (One Block Off the Grid), the web site that helped me get up to speed on solar power for the home.  In that time, I talked to the nice folks at 1BOG, and they set me up with an in-home appointment with a company called groSolar.  1BOG has negotiated a group discount with groSolar for 1BOG members in the San Francisco Bay Area; groSolar then sent a knowledgeable representative to our home to discuss what is involved in installing solar.  After the appointment (which I'll write about in a different post), groSolar sent me an estimate showing how much it would cost to install panels, and the return on investment over time.

I've also done some research on how to pay for this stuff.  To set some context, our electricity bill averages about $120 a month, from a low of about $80 in the late spring and summer months to a high of about $135 in late fall and winter.  This corresponds to electrical consumption ranging from about 525kWh (kilowatt-hours) per month to about 750kWh per month.  Prices will vary depending on where you live, of course, but for us in the East Bay, this is how the numbers work out.

In order to meet our need, the estimate we got says we'll need to generate about 575kWh per month on average; in terms of the number of solar panels we'd need to install, that looks like 20 panels, each generating 230 watts for a total of 4600W DC, which turns into about 4030W AC.  The cost to install this much power on our roof?  About $25,000, give or take, minus applicable rebates and credits (if we do it right now, we'd get a state rebate of about $2,400 and a federal tax credit of about $7,000).  After the incentives, that means solar would cost us about $16,000.  These are really rough numbers, and most of these variables change depending on how and when you use your power, and where you live; your mileage may vary, as they say.  To summarize, here's our story:

• $120 / month average electrical bill from PG&E
• 4kW of generating power to install on our roof
• ~575kWh / month of solar electricity generated
• $16,000 to install this much solar generating capacity

So, the rebates and incentives are nice, but that's still $16K to pay to get clean power.  And since our annual electric usage amounts to about $1500 a year, it's going to take a while for that investment to pay off.  So I wanted to know what options we had for paying for all of this.  From the research I did, it looks like there are three ways:

1. Pay cash
2. Work out a leasing deal
3. Use the PACE (Property-Assessed Clean Energy) program

Of these three, the PACE program looks the most attractive to me.  Unfortunately, this program appears to be on hold for the time being, so we won't be able to pursue it.  Briefly, the way the program works is that you don't pay any money up front for your solar; the PACE program lays out the initial cost, and it spreads out your payments by turning them into additions to your property tax bill.  When you sell your house, the next owner takes on the payments since they're just part of property tax.  Sounds fair to me, and I love the idea of not having to pay anything up front.  But since this addition becomes the first lien on your property, the Federal Housing Finance Agency said it doesn't support the program; as a result, mortgages backed by Fannie Mae and Freddie Mac can't work with PACE.  As a result, PACE programs are on hold while local and federal government legislators furiously try to negotiate PACE back into action.

So, no PACE.  Bummer.

Paying cash?  I think that's pretty self-explanatory.  I will say that one benefit of signing up with 1BOG (for free) is that they've negotiated a discount with groSolar, so it's a bit cheaper than it would normally be to install solar on our homes.

Finally, the leasing option.  We can ask groSolar to finance our installation via a company called SunRun.  SunRun would own the solar panels, they would give us an 18-year lease, and we would buy our electric power (mostly) from them, at a rate SunRun sets to be lower than PG&E's rate.  We would pay a minimal amount up front (it varies, but our estimate says we'd pay $2,500).  SunRun would fully maintain the panels for the entire 18 year lease period.

If we consume more power than our panels generate, my understanding is that we'd buy that excess power from PG&E, at their normal rate.  Since we'd be consuming very little power from PG&E, we would be buying at PG&E's Tier-1 (i.e. cheapest) rate, so as long as we don't overconsume too much, we're still in great shape.

If we generate more power than we consume, that excess power goes back out to the PG&E grid and PG&E is obligated to pay us for that power.  At the end of the year, PG&E "trues-up" with us, figuring out whether we are owed a credit or not; the rules for this change in 2011 and it becomes a bit more complicated, but you can read all about it on the PG&E website's section on "Net Energy Metering Billing".

At the end of the 18 years, we have three options with SunRun:

1. SunRun comes and removes the panels, no cost to us;
2. We renew our agreement, going to a month-to-month deal
3. We can buy out the system

Oh, and by the way: if we move during the 18-year agreement period, we have three options:

1. Transfer the agreement, at no charge
2. Pay out the electricity remaining in our contract
3. Purchase the system outright

I'm liking option 1 in this scenario, but we're not at that point yet.

We can buy out the system at any point in the agreement.

So, at the end of the day here's what it looks like to me: we deal with groSolar to do the installation.  If we pay cash, that's all there is to it; groSolar warranties the installation, but we are responsible for maintenance (basically, keeping the panels clean so they generate maximum power).  If we decide to finance via SunRun, groSolar will hook us up, and we do that deal.

So we've got some thinking to do.  I'll write more in a future post about the estimates and our decision trade-offs, but overall, getting solar power is looking like a fantastic deal in the long run, and possibly a really good deal in the short run if you're willing to give up some long-term return on investment.

Have any of you heard of any other options for paying for solar power?  If so, leave a comment here and tell me what you know.  I haven't done any research into ideas like getting a line of credit or a home equity loan, but it seems there's never going to be a cheaper time to borrow money, so I'd be interested in hearing if anybody's done research there, too.

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