Here are a few questions to help you figure out if Photovoltaic (PV) solar is right for you:
- Do you own your house?
- Do you pay thousands of dollars in federal and state income taxes?
- Do you have roof space?
- Are you thinking of replacing your roof?
- Do you have an electric car?
- Are you thinking of purchasing an electric vehicle?
If you answered yes to at least one of these questions, there is big chance that switching to Solar NOW may be right for you!
TO DO LIST:
HOW RIGHT IS SOLAR FOR ME?
KNOW WHAT YOU NEED TO KNOW.
- Be more efficient using LEDs and CFLs
- Know your yearly electricity consumption
- Determine the approximate size of the solar system and number of solar panels you will need
- Understand your the solar investment
First, Cut Out the Energy Hogs
Think about all the places in your home where you can reduce your electricity consumption, and consider cost effective and easy energy efficiency improvements: Turn off unused lights, unplug unused appliances, unplug your electronics, and cut out your energy hogs in your home (mostly older appliances and TVs).Let your kids find the hogs for you by making it a game.
Switch to LEDs and CFLs
Remember, if you pay ¢9/kWh (National average is ¢12.5/kWh), every watt of power you don't use is $0.79 ($1.09) per year in your pocket. Think it doesn't sound like much? A simple 100-watt incandescent bulb burning
24/7 will cost you $79 ($109) every year! However, CFLs or LEDS use 10 times less, i.e. about 10 watts for the same amount of light!
In other words, for the same price spent in electricity, you can either use 10 CFLs, or use 1 incandescent light bulb!!! So, make sure you’ve switched all your light bulbs to Compact Fluorescent Lamps (CFL) or Light Emitting Diodes (LEDs).
Use swamp coolers instead of air conditioners
Swamp coolers use ~1/5th of the energy of air conditioners.
Insulate your home better
Look into (better) insulating your home which will result in long term energy savings: windows, doors, floors, attic or loft can all cause your heat to escape.
Switch to Energy Star appliances
Think of replacing your old fridge(s), as well as any other appliance (oven, water heater, etc.), and make sure to switch to highly efficient (ENERGY STAR) appliances. Old fridges are the #1 appliance hog. Often, people have another (older) fridge in their garage, which could be an even bigger hog than the main fridge.Financial Incentives: You Think you Can't Afford Solar? Think Again!
In the past, going solar was a pricey proposition which was only for the well-to-do. But that’s no longer true, thanks to the Solar Investment Tax Credits!
1. Every homeowner in New Mexico who pays thousands of dollars in income taxes can install solar panels on their roofs at a very reasonable cost even for the middle-income households until the tax credits expire:
- 30% Tax Credit from the Federal Government (until end of 2019, and will drop to 20% until end of 2020, and 10% to stay permanently at 10% after 2022);
- 10% Tax Credit from the State of NM (expired July 2016): While they legally expired Dec. 31, 2016, they effectively expired in July, when the $3 million cap was reached;
- No Gross Receipt (or Sales) Tax in NM, which is another 8% saving;
2. Solar electric (Photovoltaic – “PV”) systems are about 60% less expensive than they were just 5-6 years ago, have dropped by >100 times since 1977, and are getting cheaper every year.
Lawrence Berkeley national Laboratory produces a yearly report - Tracking the Sun - tracking the installed price of residential and non-residential photovoltaic systems in the United States. Their latest conclusion is that installed costs of solar continue to drop at ~8% rate a year, as recently as 2015.
For the last 4 years' reports, click on the associated year: 2016, 2015, 2014, 2013.
For NM related numbers, visit: www.emnrd.state.nm.us/ECMD/RenewableEnergy/solar.html.
Since prices could continue to drop at ~8%, you may think you can wait. But by waiting, you miss the possible 5%-8% return on investment (depending on the size of the system) - and if you wait too long, you will also miss the federal tax credits which reduce the project's cost by 30%.
3. Solar companies will help you with the tax paperwork, so you don't have to worry about that.
4. But keep in mind:
The solar system has to be up and running (i.e. producing electricity) by Dec. 2016 for you to claim the 2016 tax credits. The system installation usually takes between 3 and 4 months for most installers in NM (depending on possible delays with PNM screening, with materials or with inspections), so get started NOW!
5. The value the solar system adds to your house is not appraised, so it does not add any property taxes in NM, although it increases the house value. For your State, check for your TAX CREDITS, REBATES and SAVINGS from the Department of Energy.
6. If your house needs a new roof, do it before getting your system installed. Also, any part of the roof that you have to fix to install your system receives a 30% tax credit as part of the installation cost!
7. Most roof systems will not require that any holes be drilled, as these may cause leaks. For more detail on this, click here.
8. Lastly, most solar companies can finance the system for you! This may not save you more money, but it will allow many more people to buy a system now, while the tax credits are the highest! Federal tax credits are set to reduce from 30% through 2019 to 10% by 2022.
Finding out your electricity consumption in kWh
On your electric utility bill (e.g. PNM bill), you will see displayed your electricity consumption for the last 14 months.Add the last 12 months up for your yearly consumption. Or if you bill only shows a few months worth, take the average of those months and multiply by 12.
Let us say it comes out to an average of ~415 kWh/month or ~5,000 kWh/year.
Determine your approximate system size in kW
In Santa Fe, NM, the recorded Solar Radiation in kW/m2/day is 5.5-6, which translates (by multiplying by 365) to 2,000-2,200 kW/m2 in a year, say ~2,100 kW/m2 for our calculation (1 square yard = 1 yd2 = 0.83 m2 = 0.83 square meter).
Note that more solar radiation is not necessarily better, since the Solar Panels become less efficient at really high temperatures (in places like Phoenix, AZ for example).
NM is therefore a perfect place for installing Solar Panels. Find you region on the map and multiply by 365.
The size of the solar system can be determined by a simple formula:
Divide your yearly usage (kWh/year) by 0.8, and multiply by the average solar radiation you receive per year ( kW/m2 ), this will yield your approximate system size needed in kW.
E.g. for a usage of 5,000 kWh/year, the system will be approximately: 5,000/(0.8*2,100) = 2.97 kW.
Refine and understand the variables in your system
Now that you have a better idea of your system size, you can refine and understand the variables in your system, Go to NREL (pvwatts.nrel.gov/pvwatts.php) for a handy PV calculator, which will yield more detailed information about the production of your system.The following steps will help you use it:
- First, enter your home address (and pick the closest solar resource data to your house).
- Then click on the large ORANGE ARROW on the right hand side.
- Next, you can chose your system size (2.97 kW), panel type (Standard, Premium or Thin Film), a fixed roof mount (most likely), the system loss (use 14%, or use the calculator), the tilt (some providers will tell you to use 30°, but if your system is ballasted on your roof, 10° is safer to not catch the wind), the azimuth angle (180° is facing South).
- Then click the large ORANGE ARROW on the right hand side. This will display the average expected solar radiation received at your location, the expected Energy production per month and the value of that energy (based on local average rates). You will see the total yearly calculated value here will be different then our original estimate above.
For example depending on the variables such as Tilt and Panel type you can get answers ranging from 5,300 kW/year down to 4,968 kW/year...
| Tilt | 10° | 15° |
| Thin Film | 5,148 kW | 5,300 kW |
| Premium | 5,069 kW | 5,214 kW |
| Standard | 4,968 kW | 5,110 kW |
Playing with the various entries can help you maximize your investment for your needs.
How many solar panels can you expect to need?
From the system size (2.97 kW = 2,970 W), and the type of Solar Panel that will be used (i.e. brand, wattage, etc., for example 327 W rated panels), the number of solar panels to be installed will be "Size of the Solar System / Wattage of the Solar Panel", i.e. 2,970 / 327 = 9.1. So you will most likely need 9 solar panels installed.
Price of panels vary greatly, and although the panels' cost has come down to $0.74 per Watt at the lower end, you will likely have to pay an installer and an interconnect (to the utility) which adds cost.
Below is more information on how much you will likely need to spend.
How Much can you Expect to Pay for your System?
Depending on the type of solar panels and on the solar provider, a nominal price range is from $4,000 to $5,000 per kW installed ($4-5 per Watt) before tax credits, and $2,400 to $3,000 per kW installed after tax credits.
Thus, our 2.97 kW system could range from $11,900 to $14,900 before tax credits and from $8,300 to $10,400 after tax credits (with 30% federal tax credits).
Tax credits and rebates differ by state: Check for TAX CREDITS, REBATES and SAVINGS from the Department of Energy for your State.
Due to all the added ("soft") costs that come into play, such as fixed fees for Permits and Interconnection application, inspection, system design, installation labor, marketing and customer acquisition, and solar provider margins, the cost of a system is not directly proportional to size of the system. It is actually proportionally larger for smaller systems, which reduce the effective return on investment.
So keep in mind this means it is generally cheaper to buy a 2.97 kW at once than to buy a 2 kW system, and later add more panels to get the 0.97 kW.
First, you need to know that your house value increases when solar is installed.
Moreover, the added value from solar does not add to the assessed value of the property (until it is sold).
The exact numbers vary from property to property and installation to installation. But recent research shows an average increase in resale value being $5,911 for each kW of solar installed.
For the example of a 2.97 kW system, the added value is approximately $17,500, which corresponds to more than the actual cost of the system before tax credits! So it's worth installing even if you don't think you'll live in your house for the next 20 years.
Of course, similarly to real estate value, the value placed on a solar system is more a subjective value depending on market whims and preferences. However, one can keep track of the total value of the electricity left to be generated in the system's time at the current value of electricity. Moreover, the better production warranty a panel has, the more solid a value can be placed on the system for the remainder of the warranty period and for the life of the system past the warranty period.
It is important to know that SunPower's warranty is transferable when one sells the house. This gives the house more retail value, as that’s real money being transferred.
You’re immune to future electric utility rate increases
Many Utilities are hiking rates, here in NM, PNM’s proposed rate hike for 2017 of about 6% make solar an even better bet!
It also means that your financial benefit continues to increase over time.
How long does it take to pay off my investment?
Let's calculate when the investment for our 2.97 kW system based on 415 kWh monthly usage (~5000 kWh/12 months) is paid off using current electricity costs.
Cost per kWh, example for Santa Fe, NM (National average is $0.125/kWh):
| kWh | June/July/Aug ($/kWh) | Other Months ($/kWh) |
| 0-450 | 0.0906237 | 0.0906237 |
| 450-900 | 0.1373455 | 0.1185101 |
| 900+ | 0.157696 | 0.128352 |
The yearly cost from the Utility (PNM) for a usage of 415 kWh/month is simply 0.0906 x 415 x 12 ~ $450/year
The cost of solar per kW varies from provider to provider (based mostly on the kind of solar panels they sell), but for now, let's call it $4,500 / kW before tax credits - so our cost for a 2.97 kW system will be:
| Before Tax Credits | After 30% Federal Tax Credits |
|
| 1 kW | $4,500 | $3,150 |
| 2.97 kW | $13,370 | $9,350 |
Now, calculating how long (in years) it will take for the investment to be paid off can be tricky, because of rate increases. The average rate increase has been 2.7% per year over the last 6 years, or a total over 6 years of a 17.5% increase! But that rate is not expected to hold over the next few years, it is expected be closer to 1%/year, however with aging infrastructure it could easily shoot up after 5 years.
So, very simply, assuming an electricity rate increases of 0% (very unlikely), 1%, 2% and 3% per year, we have tabulated the time (in years) need to pay for the panels after tax credits (10% NM credit will expire July of 2016), but not accounting for inflation (another 1-2% per year) nor financing:
| Rate Increase | 0% | 1% | 2% | 3% | 4% |
| # years when investing in 2016 (to get 30% Federal Tax Credit) | $9,350 / ($450/year) = 20.75 | 18.5 | 17 | 16 | 15 |
What's the return on my investment?
While some people want to know how many years it takes to pay off their investment, others prefer to find out what the rate of return on their investment will be, especially when comparing that rate to the rate of borrowing the money to pay for the solar system.
Using the example's numbers calculated above for:
- the savings in utility bill of 0.0906 x 415 x 12 ~ $450/year
- the net cost of the 2.97 kW system of $9,350
we get a 1st year cash return of $450 / $9,350 = 4.8%. This is not bad a rate, especially when considering there is no 'Wall Street risk'. This is using today's saving value of $450, which is likely to increase over time, increasing the return on investment.
A rate of return of 4.8% is not even bad if you have to borrow money at the average home improvement rate of 6%: the consumer has to pay a premium of just 1% to have generate clean energy, which will decrease as electricity cost increases.
Cost of electricity varies widely across NM and the US
The cost of electricity is even higher in different parts of the state, as shown below, so the system pays for itself even faster.
Click here to see the complete map for the United States.
Net Metering, Energy Banking & Renewable Energy Certificate (REC)
If you decide to stay connected to the grid (which I recommend for now as the cost of batteries is still high), you remain a utility (PNM) customer. For that reason, before you are allowed to install your system, you have to enter into an interconnection agreement (with PNM, for example).Net Metering or Net Energy Metering
Net Metering allows consumers who generate some or all of their own electricity to use that electricity anytime, instead of when it is generated. The interconnection agreement states the terms of net metering and defines what happens with the electricity generated, whether one is over- or under-producing.
For example, if a residential customer has a PV system on the home's rooftop, it may generate more electricity than the home uses during daylight hours, he/she gets a credit for those hours, and can use those hours at night when they are not producing, 1-to-1 in kWh.
Energy Banking
Thanks to energy banking, if your system were to over-produce, the modest surplus from slight oversize would 'bank', and not get cashed out under PNM's 'small' system rules (below 10 kW). The surplus in kWh will carry over until used, unless the customer moves before using the banked kWh: if the customer closes their PNM account, PNM will cash out any remaining banked kWh at the 'avoided fuel cost' which is basically the wholesale rate of 2 to 3 cents per kWh.If you had a PNM 'large' system (over 10 kW), PNM would pay you the surplus monthly at avoided fuel cost. PNM does not carry net surplus forward with 'large' systems, which is not a good deal for most people. This is why the trickiest systems to size are the all-electric heated houses that have huge use in the winter, but moderate use in the summer.
Renewable Energy Certificates (RECs)
In short, the utility pays you on gross production (every kWh produced), and this is why there is a second meter, which records the total system production regardless of whether your house uses it or whether it flows to the grid as net surplus.
However, like most utilities, PNM has been changing its interconnection agreement over the years.
- For people who got in 10 years ago, that rate was 10¢/kWh. Including tax and other surcharges, it yielded them ~20¢/kWh;
- For people who got in at a REC rate of 4¢/kWh, they recover about 15 cents per kWh;
- For people who got in last year, it was 3¢/kWh;
- For people who got in between the end of 2015 and the end of 2016, the REC Purchase Program from PNM was closed.
- For people who get in now (as of January 1, 2017), it is either 0.25¢/kWh or 0.0025¢/kWh, per PNM's website, which cites two different numbers in two different pages.
So yes, the REC agreements came back, but at a pathetically low rate, especially in comparison to the ~9 cents a kWh that PNM charges their customers. This allows PNM to meet the current federal mandates of 20% renewable by 2020 (which should be higher, by the way, especially here in NM) on the cheap.
But signing up for REC is optional, and not worth it until the rate is something above 2¢/kWh, and one is best holding out for 3/kWh or more. New contracts 'full retail perpetual banking', which means that PNM bills the customer on net monthly consumption, only after the 'bank of kWh" is depleted.
Is Financing Available?
There are many ways to pay for your system:
- Pay cash for all of it, and get the tax credits back in the Spring of 2017 - this is the most advantageous and cheapest way to go, as financing always leads to added (and often hidden) fees.
- Pay only for the 60% portion, and the other 40% will be loaned to you (for a small fee).
- If you can’t pay out of pocket, or can only pay a portion, the company that sells you the solar system will guide you with financing: although solar providers do no offer financing directly, they can point you to a (hopefully local) bank that they have a relationship with to get you qualified quickly and easily.
- If you live in Santa Fe County and your gross household income is less than $104,000 per year, look into a loan from Homewise (983-9473), a low- and moderate-income lender.
- In other counties, check with a credit union or your local bank.
You will find everything you need to know in these resources provided by the State of NM:
Be wary of 'leased' financing
Be generally wary of 'leased' financing, because often, there are hidden clauses in the contract, such as:- escalating monthly payments, making it expensive to end a lease when you sell your home;
- the use of low-end equipment at inflated prices hidden by low initial monthly payments.
'Leased' financing is offered by large companies such as SunCity, SolarCity, Sungevity, Zing, etc.
So if this is what you are considering, to protect yourself, make sure to read and understand everything that's buried in the fine print.
