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| New solar panels getting installed |
This year we upgraded our PV system from 4kW to 12kW. In 2007, when we installed our first PV system, we paid for it mostly out-of-pocket. There were some state and local incentives, but the federal incentive was capped at $2000. This meant that we were paying tens of thousands of dollar for something that would take decades to payoff if you only look at the electricity that it generates. But people spend money on vacations or new cars that never "pay back" financially. So this was our indulgence. We felt good about doing the right thing, so we considered it money well spent.
Our 2015 upgrade was a very different story. In 2015, we added 8.3kW to the 4kW that we already had. The new system is from SolarCity. This time we didn't buy the system, we signed a power purchase agreement. These are a great idea. Instead of paying thousands of dollar upfront, we just buy the electricity that the panels produce. We paid zero out of pocket and we are getting solar power. Now we pay SolarCity instead of our local utility for these kWhrs.
We are still on the grid and use the utility at night and in the winter. When we generate surplus on those long summer days, our meter runs backward, allowing us to use power that night or even later that year for free. This is Net Metering. Here the net metering year starts on April 1st, so we have all winter to spend any energy that we banked during the summer. Anything that we have not spent by April 1st is donated to our utility's need assistance program.
Above, I said that we pay SolarCity rather than our local utility. That's true, but the deal is a little better than that. The deal that we have with SolarCity is that we pay 9.7¢ per kWh for the 20 year life of the agreement. Currently, the standard rate from our utility is ~13¢ per kWh and it goes up (albeit a small amount) every couple of years. So we are paying less and getting solar. Also, as I discussed here having solar has allowed us to switch a time-of-use program and pay less for the electricity that we buy from the grid. So we are saving money on both the solar energy and the grid energy.
Additionally, since SolarCity owns the panels and the inverter (we just buy the power), if anything goes wrong, they fix it. On our old 2007 system the inverter died twice. It was covered under the 5 year warranty both times and the latest one seems to be holding up. However, if it goes out again, the warranty will no longer cover it and I'll have to buy a new one and pay to have it installed. Whereas if the SolarCity inverted were to die, I am buying less power from them and they are motivated to repair it quickly to recover their revenue stream and it costs me nothing.
I am generally skeptical of things like this. It sounds too good to be true. Well, the savings are not that big, it's only a few cent per kWh. And it is not too hard to believe that by generating and consuming the electricity locally avoids many of the taxes that are associated with a legacy utility company. I counted 16 adjustments to our utility bill for various programs; granted a few were credits, but most were taxes and fees. And SolarCity gets all the state, local, and federal incentives to pay for the upfront costs plus low interest loans. This reminds me of internet phone services like Ooma. They use a different model than traditional utilities and can afford to offer services cheaper.
I looked into SolarCity's business model, because I wanted to figure out if they were likely to be around for the 20 years of this service contract. While there is certainly no guarantee of this, there were two things that reassured me. First, they are a publically traded company and the market is generally bullish on the stock. Certainly there have been plenty of public companies that have pulled shenanigans, misreported, or blatantly lied (anyone remember Enron), but SEC reporting provides some level of transparency. Second, they have an insurance trust at Berkshire Hathaway to provide for the maintenance of the systems if anything should happen to the company. Additionally, the company is growing and rather than just being an installer, they are vertically integrating by getting into the financing and solar panel production aspects of the business too. This will give them more profit from each installation going forward. The nice thing about each of their installations is that it is a 20 year contract, not just a one-time sale.
If you are still reading this, you must be genuinely interested in solar. If you want to talk to SolarCity, you can use my referral and you'll get your first month's electricity free.
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