Free solar or free solar installation is a solar myth.
In the past few weeks we have noticed more news stories popping up about solar leases not being free at all.
In fact solar leases can be 2-3 times more expensive than just purchasing solar. So the question is how does a homeowner evaluate solar proposals to be able to compare a solar bids from different contractors apples-to-apples?
We have put together 6 questions to ask each solar contractor to boil down each proposal to more simple details. No matter how the proposals look or what is being suggested, following these Tips will give any homeowner confidence selecting the right proposal and getting a fair value for their solar installation project.
6 Tips to evaluate solar panel installation costs and compare proposals
1) Request each contractor provide the Top line Cost of the system being proposed, not the financing or monthly payment.
As home solar power has become more of a mainstream home upgrade, several new financing options have emerged. These include Solar Leases and Power Purchase Agreements. Of Course homeowners can always consider loans and other credit lines, but all those choices can make evaluating quotes difficult. Make sure the solar contractor provides the actual cost of the solar power system, regardless of the plan to pay for it. Having the price will help compare the quotes letting you make the determination of which quote is the best value and if you even need financing or not.
2) Calculate the solar price per watt figure on your solar proposal
One of the best ways to compare solar proposals apples to apples is to calculate the “price per watt”. Once the contractor has given the actual installation price (including equipment, labor, permitting and any extras) the calculation is simple division. Take the price and divide by the DC wattage to arrive at the Price per watt.
Don’t let a contractor avoid the cost question by talking about “Free installation”, $0 down or monthly payments.
If the system size proposals are the same wattage, the price per watt is an easier number to digest.
3) Determine the panel manufacturer and panel wattage being proposed
With an established price per watt of the solar proposal, it is possible to dig deeper about the panels and other equipment being used. You can also compare system sizes, vs price. Different solar contractors will be proposing different panel manufacturers with varying DC wattages. Ask your contractor what panels they are using and what the wattage for each panel. Knowing the panel manufacturer is another factor to help compare quotes. At a minimum, make sure that the installer is proposing solar panels from a UL listed, tier-one solar panel company. Other manufacturer considerations are manufacturing standards such as ISO certification, years in business and where the panels are produced. Panels produced under higher quality standards might be slightly more expensive but will typically have better production yield and better warranties.
4) Calculate the lifetime cost per kilowatt hour (kWh)
How much do you pay for electricity today? The answer to that question determines the impact of converting your home to solar electricity. Installing solar power to your home is about controlling electricity costs. When comparing solar quotes for your solar savings (especially solar leases against a solar purchase) is to look at the cost per kWh. For a rough calculation of the cost per kWh with solar you can do the following:
Sticking with the 6000 watt example from tip 3:
*All numbers here are illustrative based on general conversion rates. Utility rates assume standard rates in Northern CA. Production conversions assumes ideal production factors.
So then you can decide how much you want to pay for your power for the next 20 years.
Solar savings is the difference between the price per kWh from the utility vs. the price per kWh with solar. In the major California utility areas, with tiered electricity rate, a monthly residential electric bill of $250 per month has an average cost of $0.30 (thirty cents) per kWh. Converting to solar buying the panels cuts the cost of power by $0.184 (18.4 cents). The lower the cost of solar the bigger the savings for every kWh used day after day, year after year. Below is an actual comparison of a solar purchase vs a solar lease.
5) Ask about any payment escalators if leasing solar panels.
Be sure to as all contractors if there are escalation adders built into the lease agreement. With a cash purchase, there is no escalation. Of course with a loan or line of credit there is an interest rate to consider in the overall price, but loans typically won’t have early payment penalties. However solar leases and PPA agreements typically do have an escalator, so initial savings look great year 1 but as the lease payments increase, the monthly payment goes up and can eventually exceed the utility kWh rate. Make sure to ask specifically about escalators and don’t sign any lease with escalators before exploring purchase or other financing options.
6) Don’t forget to factor in the 30% Solar Tax Credit
Tax credits are still available from the federal government. Claiming the tax credit with shave 30% off the final installation costs. Make sure to factor in the tax credit when looking at price of a lease or purchase. It is important to note that the solar tax credit is only available for solar purchases. Solar Leases absorb the tax credit in exchange for a lower upfront installation cost. In California the average system size is a 5.0 kW system. By the CSI data the average cost for fully installed solar is $5.82 a watt. Using this average pricing data, 30% of that 5 kW system cost is $8,730 that is the potential tax credit for this scenario. Choosing a solar lease, that entire amount is given up directly to the solar lease company.