It's Always Sunny in Texas: A Complete Buyer's Guide to Solar Energy
Introduction
My name is Derek Powell. I live with my wife and our 3 young children in the DFW metroplex in north Texas. I would describe my financial situation and energy needs as pretty typical of middle class America. I am a first-time homeowner in a relatively new housing development, which is apparently a hot selling ground for Solar installers. Over the last year and a half since buying our home, we've had our door knocked by somebody pitching Solar energy about every few months.
I seldom entertain unsolicited sales pitches, but I'm a 'tech guy' and solar is a concept I'm interested in so I decided to talk to the last guy that came by. After talking to him for 2 hours, I was still unconvinced and wanted to do more research to decide if it was a good purchase for me and my family. This led me to over 15 hours of independent research, including informational interviews, reading online articles, and numerous lengthy discussions with actual installers, and now I've decided to share what I learned in the format of this guide.
Quick disclaimer: I'm not involved professionally with any leg of the solar energy supply chain nor am I employed by any entity to do this research or share it in this guide. I am simply an interested prospective consumer of solar energy that likes to write, and who found himself quite far down the rabbit hole of a topic that ended up being much more nuanced than I anticipated. I needed to organize the information just to make sense of it myself, and as long as I'm doing that much work, why not expand it into something others can use?
So, I present to you my 'Complete buyer's research guide to solar electricity'.
So what is Solar?
We all understand the basic concept: Photovoltaic cells in solar panels capture sunlight and convert it into energy. But why switch to Solar when our homes are already hooked up to the Texas grid? Everybody has their reasons, but there seems to be 3 main motivators driving homeowners to purchase solar panels:
The idea of 'going green' and lowering your individual consumption of fossil fuels and switching to renewable energy.
The idea of 'energy independence', that is, knowing you'll be able to power your home with or without the state electrical grid.
The idea of financial savings, building equity in your system instead of throwing money away at your utility company, or saving long term over a variable electrical rate.
I consider the first two as 'variable motivators', meaning they will have different value to different people. This makes calculating 'return on investment' (ROI) for all persons in all scenarios impossible. I can’t analyze something subjective so I have shelved those subjective aspects and focused all my analysis on the financial aspects. If you are motivated by one of the first two, good on you, and keep that motivation in your mind as you read through my financial analysis below.
Key Players
So, who are the key players in Solar and where do the installers fit in, ie the people knocking on your door to pitch you solar?
First, there's the manufacturers. They manufacture the solar panels and power inverters and sell them into the market. Usually they also provide factory warranties for the equipment.
Next, there's the installers. They buy panels and inverters from the manufacturers and then 'resell' them as part of a solar package to consumers. The installers are responsible for quoting a system specifically based on your home features and your electrical needs. They perform the sale, the system customization, the installation (some may sub-contract this out- avoid those), and ultimately they should be your ongoing point-of-contact for any service issues post-installation. Installers are first and foremost a service provider, since usually the only things they provide that is uniquely theirs are their services.
Then, there's the finance companies, who provide a loan to solar consumers on their ~$20-40K system...for a small (or big!) fee, of course. The installers typically orchestrate the deal between the consumer and the finance company at the time of the sale.
Despite having solar, you will also still have an electricity provider, who will sell you electricity at times when you use more power than you produce. They will also (ideally) buy your excess electricity at times when you produce more power than you use.
Lastly, there's you, the consumer, who buys the system and reaps all the pros and cons from that point.
Gathering Quotes
My research quickly led me to an online platform called EnergySage.com, which provides a service for consumers researching solar and gathering quotes from local installers. It is free to users, near as I could tell. I would highly recommend using this platform for anybody contemplating buying Solar. It helped me tremendously in my research.
On EnergySage, I submitted my project information to get the ball rolling and within a week I had 7 installers who submitted quotes with all the quote details in a standardized format to allow for easy comparison. The platform also allows you to communicate back and forth with installers as anonymously or as directly as you like. Through EnergySage and other personal recommendations I got, I ended up with quotes from 10 different companies. But before we get into the details of those quotes, let’s talk about the structure a bit more.
Cost Breakdown
So, let's dive right into the costs, and then we can explore the nuances of how to approach and consider the variables. When receiving a quote from an installer, their goal is generally to give you a big enough system to offset 100% of your average annual electricity usage (more on this later). Therefore, if your yearly power consumption is higher, you'll need more panels to offset your usage and your system will be more expensive. If your roof gets shading during the day or has poor angles (azimuth, I learned it’s called), you'll need more panels to offset the efficiency loss and still reach the target amount of power production, which also will impact your system price.
Having said all that, the key price metric to focus on is "Price per Watt" as this is going to be the most universal pricing component. 'Price per Watt' is a variable consisting of two key costs:
Cost of equipment. Like anything, there are top-of-the-line equipment options and cheaper and less efficient options. You can flex your overall cost by choosing panels and inverters which are price-appropriate for your needs. Panels and inverters are covered in more detail later in the guide.
Cost of services. This includes the installation labor, the installer-provided warranties, on-going customer service, and most importantly- the markup/profit margin. This is somewhat flexible depending how much you want to negotiate. Smaller installer companies may especially be willing to flex this to win your business, larger ones may not budge as much.
As I mentioned earlier, I received quotes from 10 solar installers, which I tabulated into Excel, shown below. From the data, we can see that the average price per watt that I was quoted was about $2.50 per Watt. To reach an annual power production that matched my consumption, they quoted me, on average, a ~10.5kW system (which is a measurement of the size).
Quote comparison of solar installers
Measuring system size: Each solar panel is rated for (produces) a certain number of Watts per hour (W/h) in ideal conditions (e.g. 375). Multiply that by the number of panels you are quoted (or buy) to get your 'system size', which is really a measurement of how many total kW's your system can produce per hour in ideal conditions.
Note: Since nobody gets ideal conditions year-round, installers use complex algorithms to calculate the number and quality of panels needed to actually produce an annual amount of kWh equal to your annual consumption. I was not made privy to these calculations.
For my average-quoted system size of 10.5kW, at my average-quoted price per Watt of $2.50, I was looking down the barrel of nearly $27,000 for a solar system. There's extra fees when financing, but we'll get into that later. Let's pretend for now that you plan to pay cash on your system.
I'm paying $0.122/kWh currently for electricity (base cost + delivery + fees). So for $27K, I could buy 215,163 kWh's at that rate which, at my current annual consumption, would take me a little under 15 years to consume. This could reasonably be called my "break even" point.
Having said that, there are many more variables to consider when calculating your 'break even' point, or 'ROI' (return on investment). If you are motivated by going green or gaining 'energy independence', now would be a good time to remind yourself! It's an important part of your overall 'ROI' calculation.
Buckle up, from here on out we get really detailed on the financials.
As for the dealer quotes comparison I previewed above, I’ve made that full sheet available for viewing and/or downloading for your own purposes. I’ve removed the names of the companies involved, but left the other quote details for each one. You can access it here.
Key Financial Factors to Consider
Financing
If you cannot afford to pay for the system in cash (probably describes most of us) then you have a few financing options. The most common choice amongst consumers, and the one the solar installer will push for, is to finance through one of the financial institutions that handle solar loans. Going this route is extremely easy, as the solar installer will coordinate everything for you, similar to financing through an auto dealership's financing department. Most solar installers work with a few financial institutions, and those institutions likely offer different financing options. Each financing option will consist of a yearly APR% and a 'dealer fee'.
Interest: the APR% is just like any other loan, it adds a fixed amount of 'debt' (interest) to your remaining loan each year in the amount of the APR%. Over a 20 or 25 year loan, this can end up costing you quite a bit! This total interest paid is commonly referred to as the 'cost of the loan'. Across the 10 quotes I received, even when paying the tax credit back into the loan amount, the cost of the loans ranged from ~$2,500 to ~$7,000! (More on the tax credit in the next section).
Dealer Fee: because the APR% offered by most of these solar lenders is so low (1-2%) they usually also charge a 'dealer fee', added directly into the loan, to ramp up the profitability of the loan. Typically, the lower the APR offered, the higher the dealer fee is. Across my 10 quotes, my average APR offered was 2% and the average dealer fee was ~$6,300, or ~24% of the average base cost.
While the APR% of the solar lenders is not particularly bad, the dealer fee is. If you have to finance but wish to avoid this dealer fee, you will need to seek financing through alternative means with the goal of getting similar APR terms as the solar lenders offer but without the dealer fee. Keep in mind that alternative financing may take much longer than using solar lenders. That said, here are two options I have lightly explored that may provide a desirable APR with no dealer fee:
Borrow against your home equity and roll it into your mortgage
Borrow against your 401K.
Disclaimer: It is always best to consult with a professional financial advisor who can provide you with options to best fit your financial situation.
Federal Tax Credit
Currently there is a 26% federal tax credit granted to anybody purchasing a solar system through the end of 2022. Starting in 2023, that credit drops to 22%, and it expires entirely starting in 2024 (unless Congress renews it, which is likely). Source
This tax credit is calculated as a percentage of your gross solar system cost (including a dealer fee, if applicable). e.g. A $35,000 system would make you eligible for a $9,100 tax credit.
Disclaimer: A federal tax credit (like for solar) will directly decrease your tax liability for that tax year. If taxes you paid during the year exceed your tax liability, the IRS will refund the difference, up to the full amount of your taxes paid during the year. If your tax liability is already low and the solar credit (combined with other credits you are eligible for) will exceed your liability, you will not be refunded the difference. Tax situations can get tricky, and you should always consult with a professional CPA to understand how this might affect your specific situation.
Solar installers will usually work the tax credit into the system cost when presenting you numbers like monthly cost, etc because it makes the system seem more appealing when the cost is lower. This has become somewhat of an industry standard, so make sure you understand the cost implications of the system without the tax credit if you think you might spend it on something else or reinvest it elsewhere.
Because any tax refund you get from the IRS is yours to do with as you please, there is really no obligation to pay it towards your system. Just keep in mind that the monthly payments on the solar system are often lowered for the first 18 months based on an assumption that you'll pay the tax credit into the system. If you don't pay the tax credit amount into the system, the monthly payments will likely jump up after 18 months to cover the difference. Make sure to ask your installer to give you the monthly payment with and without the tax credit applied.
Inflation
Electricity rates, like all commodities and services, are certain to inflate over the next 25 years (avg solar loan term). What you pay for electricity today won't be the same in 5 years, 10 or 25, no matter where you live. Getting into a 'fixed-rate' via solar seems like a smart idea, no doubt. It's like 'pre-purchasing' 25 year's worth of electricity at today's prices, but better.
Purchasing 25 year's worth of electricity at my current average annual consumption of 14,500kWh per year and at my current rate today ($0.122/kWh) would cost me $44,225. The average price that I was quoted for a system capable of producing 14,500kWh/year was ~$29,000 (which includes dealer fees and interest paid and nets out the tax credit).
So, even before adding inflation, it looks like I would still save ~$15.2K by buying solar.
Using national averages for inflation on all goods and services, Solar installers claim that electricity rates will increase 2-4% per year. If we add 4%/yr inflation into our example above, that $44.2K for 25 years of electricity suddenly becomes $73.6K, and the net savings becomes $44.6K.
However, since that data is based on inflation rates that are neither specific to Texas nor to electricity rates in general, I personally believe the 4%/yr inflation claim is inaccurate for application here. I researched myself and found that Texas electricity rates have only increased about 30% in the last 20 years, or ~1.5% per year on average. But even if we used this much-more-conservative inflation rate of 1.5% in our example above, that $44.2K for 25 years of electricity still becomes ~$53.2K, and the net savings is still a nice $26.2K.
Solar is starting to seem like a no brainer, right? Well, keep in mind that the system (or 'pre-purchased electricity') stays with the house, even if you move. Buying electricity for someone else to enjoy after you move isn't a very appealing idea for anybody. I'll talk more about added home valuation later.
Buy Back programs and valuation of excess production
Your solar installer will typically design your system to offset 100% of your yearly consumption, but of course neither your consumption nor your production will be constant each month.
During the spring and autumn months, you'll typically produce more power than you use (excess), because nice temperatures outside means your consumption will be lower. During the winter and summer months, you'll typically consume more power than you produce, especially in the winter when daytime hours are shorter.
So what does this mean for our bottom line?
When you generate excess power, you have to either store it in a battery (if not already full) or sell it back to the grid via your electric provider. If you can’t do one of these then you just lose it. I don't cover batteries in this analysis, so let's talk about selling power back to the grid.
(an example of monthly and seasonal variance of production and consumption)
You will first want to research electric providers that offer a 'buy back' program, that is, they will buy your excess generated power at a fixed rate defined in the plan. In Texas, there's several electric providers that offer programs like this, including ones that offer 1:1 buy back, meaning they'll buy it from you at the same price they sell it to you.
So then for all the months you generate excess power, you can sell it back to your electric provider and they will add a credit on your account (no, they will not cut you a refund check). The idea is that you will build credit in months you generate excess and then you will spend that credit in months where you have deficit production and need to buy from them. Ideally, the credits you build would cover 100% of your buying needs. The problem is that this will never be the case, as we explore next.
1:1 buy back programs are sort of misleading. Your electric provider will only buy back electricity at its base cost, but this doesn't include all the extra things you pay for when you buy it from them (primarily delivery charges). Consequently, you'll never sell power for as much as you pay for it.
Delivery charges on my bill are equivalent to about 60% of the cost of the electricity itself (see screenshot). This % is fairly consistent on every bill. As an example, if I bought 1,351 kWh at my current rate, the electricity component would cost me $100 while the delivery charges would cost me $60 more ($160 total). If I generated that much excess and sold it back to my electric provider in a 1:1 buyback program, they would only pay $100 for the electricity.
For a detailed example of how this plays out, see Appendix A: Buy Back Case Study.
Base Charges
This is a small one, but worth mentioning as it's often overlooked. Electric providers, even when you buy nothing from them in a month, still have a 'base charge' to be hooked up to the grid, ranging from $5-20/mo, or $60-240/yr. Make sure to account for this in your financial planning, as it's sort of a "hidden cost" and not likely to be mentioned by your solar installer.
Degradation
All solar panels will suffer from degradation over time, starting with a 2% degradation in year 1. Higher-quality panels will then see an additional output decline of 0.25% per year, down to 92% of the original rated output after 25 years. Normal-quality panels will see a higher output decline of 0.54%, down to 85% original rated output after 25 years. Of course, any power that your panels aren’t producing is power you’re buying from the grid $$.
Calculating these factors into our 'Break Even'
So how do these financial factors affect the 14.84 years 'break even' point from our example earlier? The base system price from that example was $26,250, so let's work off that number and work down the variables we discussed, using averages from the 10 installer quotes I received.
Dealer fee
Let’s say we finance our example $26,250 solar system, using one of the solar lenders the solar installer works with, we should expect to pay an additional 24% 'dealer fee' or $6,300 on average, making our total purchase $26250 + $6300 = $32,550. Adding this extra cost into the price changes the 'break even' point from 14.84 → 18.40 years. Yikes.
Federal tax credit
Now that we’ve added the dealer fee into our example, let’s calculate our tax credit. On a $32,550 system purchased before 2023, we’d be eligible to claim at $8,463 tax credit (26%). Let's assume we get this full amount back as a refund on our next tax return. If we took this tax credit and paid it back into our loan, it makes our total purchase $32,550 - $8,463 = $24,087. Recalculating for 'break even' and our value changes from 18.4 -> 13.62 years. OK, looking better!
Loan interest
Now that we've added our dealer fee and subtracted our tax credit, let's finalize our loan and calculate our total interest cost. The average loan I was quoted was 2% APR over 25 years. This will have us paying $6,541.14 total interest over the 25 years with a monthly payment of $102.09. Adding in our total interest now, our new total cost is $30,628.14 and our 'break even' point has increased from 13.62 -> 17.31 years.
The 'cost' of Buy Back programs
Our 'break even' point is not looking good. We're 17.31 years into our '25 year' example and we're just hitting zero on the ledger. That's a long time to wait before you start getting 'free electricity'. Unfortunately, this next part is only going to pile on a bit more. When I covered buy back, I mentioned that electricity companies will only buy back excess energy from you at the base electricity rate. But when you buy from them, they charge that rate + delivery charges + additional minor fees. This accounts for roughly a 60-64% increase on your base electricity rate (using numbers from my electricity bill as the sample). In a practical example case study, I found that this added buy/sell cost differential will only cost you the equivalent of ~3% of your annual kW consumption at the then-going rate. See Appendix A for more details.
This 3% annual electricity cost will scale with inflation and, at a worst-case 4% yearly inflation on energy rates, it will cost $2,100 over 25 years. In a best-case 1.5% yearly inflation rate, it'll still cost $1,500. Let's take a mean ($1,800) and add that into our running total! Our break even point moves slightly from 17.31 -> 18.33 years.
Inflation
Now, here's where we drive our break even point back down. As I discussed before, the estimated inflation that most solar installers claim is 4% per year. A more conservative estimate is 1.5%. Let's calculate both into our example and see how it affects our break even point. In both cases, the cost of not "pre-purchasing" our electricity gets higher each year and our break even point will come faster because of it.
Buying 14,500 kWh each year at an Inflation rate of 4% per year would total us $73,671.61, or an average of $0.203/kWh. Plugging this into our running total would drop our break even point from 18.33 -> 11.02 years. Now we're talking!
Buying 14,500 kWh each year at the more-conservative Inflation rate of 1.5% per year would total us $53,181.49, or an average of $0.147/kWh. Plugging this into our running total would drop our break even point from 18.33 -> 15.21 years. Not as big of a decrease, but probably much more realistic.
Degradation
As discussed before, most panels are rated to drop 0.54% production per year (starting from 98% in year 1) down to 85% total production after 25 years. Higher-end panels are rated to drop 0.25% per year, down to 92% production over 25 years. You're buying from the grid whatever they don't produce, at then-inflated rates, so let's see how that measures up using an average degradation (0.38%/yr or 11.5% degradation after 25 years) and an average inflation rate (2.75%/yr, or $0.172/kWh).
A 14500 kWh rated system suffering an average 0.38% degradation per year will leave you buying ~16K kWh over 25 years which, at the average inflated cost per kWh of $0.172, will cost you $2,765.16. Let's add it in and recalculate our break point. Using these averages, it now sits at 14.11 years.
Minimizing System Cost
So, considering all of the above, what's our road to the lowest cost and quickest 'break even' point (i.e. maximum solar savings). If you think you might not stay in your current house for 15+ years, this is an important numbers crunch. Getting the lowest price will involve combining as many of the below factors as possible. All decrease %'s are calculated off the final standing price of $35,193.30 - our 'adjusted system price' after adding every financial factor discussed above.
If you can avoid the dealer fee by seeking alternative financing, it'll reduce your overall cost by ~18%
If you can avoid loan interest (pay cash) or minimize loan interest via savvy loan selection, it'll reduce your overall by up to ~19%
Note: if paying cash, it's always good to consider if your cash would save you (or earn you) even more if invested somewhere else. Each person's cash and investment options are different, so consult a financial advisor for any investment advice.
Paying your federal tax credit back into your system or loan can reduce your overall cost by 26% or more (after reduced loan interest).
Note: As with paying cash, since this tax credit return is liquid (spend it as you wish) then it's best to consider your investment options fully, of which the solar system is only one.
Minimize 'buy back' cost by making sure you sign up with an electricity provider that provides a 1:1 buy back program, and obviously the lower electrical rate you can get for that buying/selling, the lower your overall yearly margin will cost (e.g. lower rates offered in a 3-yr contract vs 1-yr).
Cheaper equipment can have a major impact on your overall cost. I discuss equipment in more thorough details later in the guide. Pick the equipment that makes sense for you and your budget.
At the same time that you're trying to buy cheaper equipment, also try for equipment that is rated for less degradation. Having the lower degradation rate of 0.25% (instead of 0.545) can save you more than $1000 over the 25 years.
Try to get a utility rebate, if possible. I'm told that Oncor, Texas' largest utility provider, offers a rebate to residential solar customers who install new solar systems. Rebates are limited each year and run out when the budget is gone. Each year is a new budget. Knowing the details of this program and timing your solar installation to coincide with the earliest you can apply for this rebate will help ensure you are able to get something. I didn't research this much, though, so I don't know the amount of the rebates or how difficult they are to qualify for or to get.
Sample 'Cheapest System'
If I apply all of the above, what would we get? Let’s start with the cheapest system I was quoted, which was $23,232, or $2.20/watt. It used REC320 NP Black ProTrust panels, rated for 0.5% degradation per year, down to 86% after 25 years. Let's pretend I pay cash on it and avoid dealer fees and interest. I pay my tax credit back into the system. I make sure I have a 1:1 buyback program that uses similar electricity rates that we've discussed previously, and that a median 2.75% inflation rate on electricity costs is unavoidable. Let's also throw in a $1000 rebate, either that we get from Oncor or some other method (one installer I spoke with was offering a $1000 'signing bonus' if I bought from him within a few days).
So, if we add all these things together, here's what it looks like. 'Break even' starts at about 8.5 years. Not too shabby.
Home Valuation
But what’s the financial implication of going solar if you end up having to sell your house before the break-even point, say after 5 years into your solar system? Many people who may consider solar probably fall into this category, even if they weren't planning to sell in 5 years when they bought the system!
Whether you paid cash or whether you financed, you will almost certainly not have gotten your money back yet after 5 years, unless you pulled some crazy strings to get your price down. Remember, buying a solar system is like "pre-purchasing" 25 years of electricity, and you've enjoyed only 5 years of that pre-purchase while the other 20 years stays with the house. Even if you value 'going green' or 'energy independence' and even if the system has gotten you through a few power outages during those 5 years, that's still an awful lot of money to walk away from. So, how much can you reasonably expect to sell your system for when selling your house?
Appraisal
Like a pool or other major home features, it is appraised individually and then added to the home appraisal. Step 1 is to find an appraiser who will appraise the system for the highest value. But the tricky part is, since Solar is still relatively "new" and still a relatively niche home feature, most appraisers won't know how to value it and won't value it correctly. In fact, in independent discussion with an appraiser, he confirmed that there's currently no consistent 'formula' in Texas by which solar systems are valued. That means that to get the right value for your solar system, you have to get the right appraiser.
I don't know how difficult or easy that will be when it comes time to sell your house but the more common residential solar becomes, the more educated the market will become on its value. Suffice it to say, though, that to get the best appraisal on your solar system, you're limiting the appraisers you can use. Banks won’t make a home loan for somebody wanting to significantly overpay the appraised value of the home, so if you don’t want to eliminate buyers who finance, getting the right appraiser is a critical first step.
Real Estate Agent
Next step; whether you got an appraiser to give your system satisfactory value or not, you still have to find a buyer, which introduces two more variables. You have to get a real estate agent who knows how to sell houses AND knows how to 'sell' solar, someone who understands the nuances and financials tied to solar that I've covered here and can convince prospective buyers on its value. Same as the appraiser, I'm sure that finding this kind of agent will become easier with time, but will still limit your selection pool of agents.
Buyer
Then, even if you have an appraiser who gave you good value in your appraisal and an agent who knows how to sell solar, you still have to find a buyer who is willing to pay the premium of solar (ie buy your 'pre-purchased' electricity at fair value) thus limiting your buyer pool as well.
Valuation Summary
Each of these limiters may create challenges when it comes time to sell your house, or they may not. However, the best case seems to be that your system will add value to your home equivalent to the 'unused energy' represented within the system. If you're on a loan for your system, hopefully you'll get enough value to pay off the remaining loan so you don't carry a debt into your next home, or you can convince your buyer to take over the loan (this is a possibility, per solar installers). However, all of the factors above don't give me a lot of confidence that I'd ever get a best-case valuation of my system, certainly not enough confidence to plan on it or work it into my numbers.
Like inflation, solar installers will use dramatic figures pertaining to home valuation and increased selling power. The most recent solar installer I spoke with used these exact numbers in his sales pitch: "houses with solar sell for around $35K more and 6% faster". From all the independent research I've done, the studies referenced seem to sample data heavily from progressive states (California and Colorado) where solar adoption is much higher, and where home values are already much higher than North Texas. If you look long enough, you'll find all kinds of conflicting studies and claims. It all raises a lot of suspicion and the bottom line is that it doesn't feel representative at all of what we should expect in north Texas.
I think there’s a good chance my family and I will move in the next 3-8 years, so after all the research I did and that I've covered here, this aspect of added home valuation was the deal breaker for me. I wanted to think of Solar like the difference between renting your housing vs buying. Instead of 'throwing money away' paying it to electric providers, I wanted to pay it into an asset and build 'equity' such that when I went to sell the house, I could count on recovering some (or all) of that equity. Perhaps that is wishful thinking, but I do think once the market catches up on solar and the general population becomes much better educated on the matter, proper valuation will become the norm and it can really start to be a viable option (financially speaking) for both short-term and long-term owners. However, for right now, I don't think the viability is there yet for short-term solar owners.
Financial Summary
So there you have it. You can toggle some of the variables, based on your situation and your preferences, but when factoring everything together (including things not often advertised like cost of degradation and the 'buy back differential') then we see that you'll be paying for an estimated 8.5 to 18 years before you 'break even' on your financial investment and start to see financial gains. After that point, everything throughout the remaining 25 years and after is, for all intents and purposes, "free power". If you plan to be in your home for ~10+ years and are looking for a financial investment, you will definitely want to consider solar, especially if you are motivated by 'going green' or 'energy independence' since both of those 'variable' motivators will only serve to toggle ROI for you in the positive direction.
But what if you don't plan to be in your home for 10+ years? Could it possibly still make sense? Of course! Everybody's situation is different. Building on the 'home valuation' section above, let's discuss a few more things.
‘Going Green’ knows no cost nor needs an ROI to be validated. For those in this category, at least now they'll know the financial implications as well.
Others may consider it as 'insurance' against the unknown. Twice in 2021, the Texas power grid has failed. Those with solar (especially those with battery backup also) will have hopefully fared much better during the power failures. I know of a family who had $20K worth of tropical landscaping that were lost in this year's winter storms in February. They were prepared to keep the plants and trees warm with heat lighting, but without power they couldn't do this and lost it all. If you have a similar financial asset that would suffer or fail during a power outage, then definitely Solar can still make sense.
However, if access to emergency power is your primary motivator, there are other 'power backup' options available which are much cheaper, such as propane generators which can be wired up to your house circuit breaker and will power your whole home, if you wish. Storage of the generator and propane is long-term viable, ready for that disaster when it comes, and the total solution can cost $5K or less.
So, you decided to buy solar - now what? Final tips
You've read all this and considered the variables, you've looked inwardly at your motivations, you've done your independent research, you've gotten quotes that you like from installers and after all that you've decided you want to buy solar. Good for you! But now you have questions about who to buy from, what equipment to use, and what you should watch out for. Here are some final tips I'd like to share to address those questions:
Selecting your solar panels
One of the biggest costs of your system comes from your solar panel selection. Every $0.10 on your ‘price per Watt’ cost can add or subtract $1000 or more to or from your total price. There are lots of manufacturers for solar panels, and each manufacturer has a whole host of different models to choose from. Here are some of the variables to consider when trying to figure out what panels you want.
Resistance: Many north Texas homeowners can think of more than a few hail storms that have smashed car windows, damaged roofs, and generally wreaked havoc. Having this happen to your new solar system can cost you thousands and be a major headache at best. The durability of a solar panel is basically rated two ways: strength from the top (to withstand things like the impact of hail or the weight of snow) and strength from the bottom (to withstand wind forces). Hail is probably the most likely threat to your panels here in north Texas, between those 3 things, so that's what I researched.
This force to 'withstand' is measured in Pascals (pa) and is tested and rated by the manufacturer and should be readily available on the technical specs for any panel you are considering. As in the screenshot below, it may not have a 'Hail' rating specifically, but this should be generally equivalent to the 'Snow' rating. They both measure top-strength.
The bottom line is that higher 'pa' rating = strong. The general standard seems to be around 5400pa. Use this as a 'floor' and anything you can get higher than that is going to make it 'stronger than the average bear'. But even the general standard 5400pa is rated to withstand 1” hail at 40mph speed, which covers most hail storms we experience here.
If you want to explore this topic of hail resistance in more depth, I found this blog to be a very helpful resource, so I’ll give them a plug:
https://www.thesolarnerd.com/blog/can-solar-panels-be-damaged-by-hail/
Beyond shopping for hail resistance, there's a few other tangible differences I noted between panels.
Efficiency rating: One thing you may see and wonder about is an 'efficiency' rating, usually shown between 18-22%. This is a rating of how much of the power can be captured from the sunlight that falls on the panel. I didn't find this to be a relevant metric, though, as the “complex algorithm” that your installer uses to calculate the quoted system’s annual production should already factor this variable into your 'Annual production' estimate.
Color: Solar panels aren't that visually appealing when compared to the general aesthetic your roof has already achieved. That said, there's options when it comes to your solar panels. Some solar panels have bluish PV cells and silver casing. These are the ones you're probably most used to seeing.
However there are also 'black on black' options that are a bit sleeker looking. You may find these cost a bit more, but I think you can find some manufacturers that price them the same. Pick your preference, depending on your roof and house aesthetic.
Size: The PV cells inside a panel can only get so efficient before they have to simply add another row of cells to the panel to increase its total Wattage output. Panels rated at 400W or higher will typically have larger physical dimensions than panels rated at <400W. In the end, the total system output will likely be similar no matter which size panels they use, but it’s like building with different size Lego blocks. Bigger panels will leave bigger 'gaps' in places where a panel won't fit. Just something to keep in mind. The smaller (normal size) panels are standard for residential while the larger panels are standard for solar farms or commercial rooftops.
Homeowners Insurance: While the panels are covered under a manufacturer warranty, non-defect related failures will need to be covered through your home insurance. Get your system added to your homeowners insurance policy. I have no idea what is the cost for that or the hidden costs that might not be covered by the policy.
Selecting your solar inverter(s):
Like panels, there's options to consider when selecting your solar inverter(s), and they also have some key differences. Without getting too technical on the electrical side, the job of the inverter is to convert the D/C power captured by the PV cells into A/C power which your house can use. There are 4 main options for inverters available on today's market:
String inverter(s)
String inverter(s) with Power Optimizers
Hybrid inverters
Microinverters
(credit https://www.solarreviews.com/)
String inverters: this option will tie the panels on your roof into 'strings', or rows. If you had 3 rows of 10 panels each, each of those rows would probably be one 'string'. All the strings would then feed together into 1 inverter box, installed onto the side of your house. This option is the cheapest, but the drawback is that if any of the panels on the string suffer diminished production (say a tree is casting shade on one or more panels) it will reduce the production of every panel to match the lowest producing panel.
If you plan to put all your panels on one face of your roof, and there's no potential shading issues from trees or other houses, then this is likely a good option for you.
String inverters with Power Optimizers: this option is basically the same as the standard string inverter option, except each panel now has a power optimizer on it which allows it to experience reduced production, from shading or whatever, without it affecting the rest of the system and its production. A bit more expensive, and it still leaves the large inverter box required on your house wall.
Hybrid inverters: These inverters function similar to string inverters, but they’re capable of sending DC power to a battery unit while converting the power sent to your house into AC power. I didn’t research these much, but my understanding is they’re good for systems with battery units.
Microinverters: Like power optimizers, this option puts a device on the back of every panel, but microinverters actually convert the power of each panel on the spot before then passing the A/C power forward into the house. This also removes the need for a large inverter box on your wall.
Monitoring service: No matter which inverter option you select, you should be provided with the ability to monitor the output of your system. With a string inverter and even with power optimizers, you'll only be able to measure the total output of your system, but with microinverters you can monitor the output of each individual panel for maximum visibility. I didn't look into it extensively but it seems this monitoring can be conveniently done from your phone, PC, tablet, etc.
Warranties
Warranties are a super important part of any system you're considering, and when choosing the solar installer to do it. It's important to understand the warranties correctly, what they do and don't cover. Most stood out to me is that some installers offered warranties others didn't, or at better terms.
Almost every solar system quote will promote 4 kinds of warranties: panels, inverters, solar production, and labor. The panel and inverter warranties only cover factory defects that affect the performance of the equipment. These are offered by the manufacturers directly and any claims to these are in accordance with the manufacturer's terms. It's unlikely these warranties will come into play.
These warranties are all pretty similar, but it would be good to make sure you clearly understand the terms of the warranties during the shopping experience. They're almost all for 25 or 30 years. The exception to this might be a 10-year warranty on a string inverter. Most kinds are not rated to last 25 years and it's likely it'll fail and need to be replaced during the 25 year span at least once. Getting an extended warranty on your string inverter is worth asking your installer about.
The labor warranty is offered by the installer and should typically cover things like the installation (having the installation redone or fixed if the system doesn't work as expected due to improper installation) or damage caused to the roof as a result of the installation. It should also cover the racking that is used to affix the panels to the roof, though the racking may also be covered in a separate ‘racking’ warranty. Most labor warranties are also for 25 years, so if you get a quote from somebody for less than that, challenge them and maybe shop another solar installer. They may try to convince you that if there was anything faulty with the installation, it would show up in the first 5 or 10 years or so, and maybe they're right...but why risk it when other installer companies warranty for 25 years?
A lot of these solar installer companies haven't been around more than 5-10 years tops, so it may seem presumptuous of them to offer a 25-year warranty but according to them, their labor warranties are backed by larger companies that will honor the warranty even if the installer goes out of business. Make sure this is the case with your chosen installer.
One of the most important warranties, in terms of likelihood to come into play, will be the production warranty that covers the solar production of the panels and system. There's two parts to this, and one is way more important than the other.
The first part is the panel manufacturer's production warranty, serviced by the installer, which guarantees that the panels will produce their rated amount when in ideal conditions (lab conditions, basically) minus 2% in year 1 and minus yearly degradation after that. This warranty is also typically 25 years. It's the "when in ideal conditions" part that makes this warranty pretty limited. You're basically limited to coverage of lost production for panel defects only.
The second part is the installer's production warranty: I don't know if all installers offer this, since only two out of 10 that I got quotes from mentioned anything about it. This kind of production warranty would guarantee the estimated annual production of the installer's quoted system, or at least some portion of it, and would cover lost production as a result of seasonal weather patterns or natural events.
Of the two installers I talked to which offered this, their terms were dramatically different, so make sure you discuss this in detail with your prospective installers. One installer said they'd only guarantee 85% of their quoted system's estimated annual production, giving themselves 'margin of error', but still giving you protection in the event of major production losses. The other installer said they'd guarantee 100% of their quoted system's estimated annual production (less degradation) AND that they would cover 100% of lost production in the event of the panels being out of service for a time due to another covered warranty claim (like taking them down to repair roof damage covered under the labor warranty).
This second one certainly gave me peace of mind knowing I could count on my system to produce a guaranteed amount each year. I'd highly recommend you find an installer who gives you this kind of warranty, and even better if that warranty is also backed by a larger company so you know it'll be serviced for the full 25 years.
If you learn about other kinds of warranties offered by installers, I'd love to hear your feedback!
Conclusion
Before we wrap up this buyer's research guide, I just need to add a few more disclaimers. All research presented was specifically approached with my “north Texas, middle-class, average energy needs” situation in mind. If you are based in another state or in a very different residential market, you may have different variables not covered in this guide, or with different rates than I used in examples here. Please make any necessary adjustments when applying my research to your situation.
There is no 'right answer' for all consumers, because we're all different. This guide reflects my research only, and a few of my opinions, and should only be used as a resource in your decision making, as a compliment to your own research and consideration of your unique situation.
That said, I'm glad to have made this journey with you and hope that you have benefited from the learning process. It is a guide I hope to keep relevant to current market conditions and to keep updated with pieces I may have missed. If you find your situation is similar to what I've described throughout this guide, but your experience with Solar Electricity was dramatically different, I'd love to hear your feedback! I'm fascinated on this topic and would love to make my guide as beneficial as possible to the most amount of situations as possible.
Thanks, and Shine on.
Derek Powell
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APPENDIX A - BUY BACK CASE STUDY:
Using my average annual consumption of 14.5K kWh, I've plotted a table below that samples data given to me by solar installers in their quotes. It is similar to the data shown in the bar chart I provided in the Buy-back section of the Financial Factors. It assumes my annual consumption stays constant, as well as my annual solar production. It also assumes my example solar system is designed to offset 100% of my current energy consumption, or also 14.5K kWh. Note: How the individual months tally up doesn't really matter, as long as the annual numbers match.
The Production and Consumption columns show seasonal variability (in kWh) and are typical of seasonal solar production and residential consumption. The Deficit column gives the delta of the two (in kWh), and the Cost column calculates the net cost of that excess or deficit production, based on estimated Selling and Buying rates, using numbers from my electricity bill.
While I'm buying power at nearly 60% more than I sell it for, the overall back and forth in the Deficit column means I'm never getting too far in the red, and at the end of the year I've only paid $51.35 in "buy back differential". This cost translates to about 3% of what I would have paid if I bought the whole annual kWh directly from the provider or, in other words, means I'm paying for about 3% of my annual consumption myself, even though my system may be producing 100% offset.
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