PPA vs buying

[Tml]

I have been on the fence about getting solar for my house for years now. I live in Orange, California and have SCE as my utility company. My daily average electricity usage is 44 (kWh). SCE said my yearly average was between 1400/1650.

My Tier breakdown is:
1) 304kWh at .13
2) 91kWh at .16
3) 213kWh at .28
4) 769kWh at .32

I really can't understand how my bill on my flex plan is $420 a month when my neighbors are between $120-$220. I do have a pool and we don't exercise turning off lights and tv's like we should, but it is not overly crazy for 3 people. I am always in Tier 4 and most of my usage is at .32cents/kWh. So frustration has got me thinking about solar.

With so much info out about solar, who do you trust? Between buying, leasing and PPA it gets confusing. Sounds like leasing is not very good from what I have read.

For people who know nothing about solar panels, inverters, hardware and other things involved with solar it makes it kind of tough to get companies to give their sales pitch. They would all make it sound good I am sure.

A vivint solar sales guy is working our area lately. I am surprised I can't find more information on them, but I assume their plan sounds good. They offer a PPA for a 20 year commitment (ugg) at .15kWh with a 2.9% escalation. If I could get my usage at .15cents/kWh it appears it would save me a lot of money. They own it and maintain it so I don't have to do anything.

There has to be a catch or trade off with a PPA?
Also, I am sure people would say it is better to buy than get a PPA. I would not have a problem getting an equity loan to do that, but I worry about getting ripped off big time since it is so much money to put up.

I am just figuring if I can get out of Tier 3/4 with no out of pocket cost or having to deal with the system it benefits me. I hate hate hate the 20 year commitment especially with the fact of if we had to get out of it early it would cost a lot. I am not planning on moving and if we ever did I would rent my home.

I would appreciate everyone's comments as to your thoughts on the PPA and why it is/isn't a good idea. I am kind of the "guy" in the neighborhood who is trying to figure this out for the other neighbors who are interested. Thanks for your time!!!

[Ian S]

If you don't have the cash but really want solar, then some sort of solar lease /financing/ppa is the only alternative. If you think you are using too much electricity, you might benefit from an energy audit or even picking up a kill-a-watt meter and investigating yourself. Several folks here have pointed out for example the benefits of a variable speed pool pump in cutting electric use. You really should try conservation efforts first especially before committing to a 20 year PPA. If you can cut your usage significantly, you may be able to get by with a smaller i.e. cheaper solar system should you still want one. BTW, I'd avoid anything like a lease/PPA with an annual escalator. Some solar companies are coming up with more attractive financing methods now so that may be an option. Keep in mind there's still a 30% federal tax credit. It's not refundable but it can be carried forward if not all used in the first year.

Look around at the discussions here - there's many folks from Socal who have gone through the process and can answer questions and recommend installers.

[PVman]

I would agree that a variable pool pump may help with the high energy usage. I have been told that it is better to save money by reducing your inefficiencies than to invest in a large solar PV system. They are probably right. First correct these energy consumption problems then you'll have a better idea what size solar PV to install. Some people install just enough PV to get their usage out of Tier 3 & 4 while other try to zero out their entire electrical demand. Either is a valid option in my book.

[PVman]

Oh, by the way, take a look at the SCE training center in Irwindale. https://www.sce.com/wps/portal/home/business/tools They have some good info, classes, etc. They are a good resource.

[PVman]

One last thing I should mention is that the California state rebate for solar (CSI) is almost out of incentive money for residential PV. They estimate it will be exhausted in a few weeks. By the way, the current rebate amount for residential PV is only $.20 per watt (eg 3kw PV system = $600) so it is not a huge loss if you aren't able to get it.

[Tml]

Good points so far, thank you

I tend to agree that conservation is the first step. It is hard to imagine that I have had 2 kids move out in the last few years and my bill hasn't changed, maybe even has cost more. I remember a few years ago I was worried about my job and went around turning off all the lights that were left on and tv's that were not getting watched for the entire month. It did save me money.

The 20 year commitment is what scares me the most with the PPA or I think I would jump on it. Who knows how much SCE rates will continue to increase (supposed to be another 5.9% this year). Then I assume the PPA rates will rise too?

I will look into some of your suggestions. I would love to know if I am actually using what they say I am. Every one of my neighbors literally says they can't believe my bill and the only thing I can see I have different is a pool. When I called SCE the guy calculated that it does cost me around $135 per month to run the pump.

So far I will get in touch with my electrician friend and ask if he can help me with the meter to see if it is right and I will look into the training center. I go to Irwindale often. I also know an owner of a pool place so I will get some info on the variable pump and I should be able to get that done regardless.

Besides the pool pump what things cost the most to run? Refrigerator (I have 2), washer/dryer (I bought new upright energy efficient ones 3 years ago), A/C (I know this kills me in the summer) my is 30 years old and still works great, but I imagine a new one would help a lot.

[wanabefree]

PPA can work out its all in the math.

I am in the process of getting a new solar system via a PPA arrangement here in SoCal Inland Empire area. There are two major solar companies her in SoCal pushing the PPA Plans. They are Vivint Solar and Solar City. I have seen the PPA Agreements from both and they both have the escalator clauses in them and as far as I can tell no one has been able to get that clause changed or removed. All Vivint Solar Plans I have seen have been at the same $.15 per kwh & the 2.9% escalator for 20 yrs. I know of at least one Solar City Purchaser who was quoted $.16 per kwh so I guess its buyer beware on that part.
I am sure there are some others like Verengo that offer similar plans but I think most of the others are more involved in the traditional Solar Leasing or Purchase plans. I would love to here of a single person who has successfully gotten the escalator clause removed or even changed on a PPA plan. These plans are designed to sell you power as an alternate Power Provider. They have to Both make a profit and save you money or else there out of business. Most folks I have talked to on a PPA are saving between 20 to 40% per month on an annual basis. The thing to remember is you have to purchase all the power the system produces so if you some how later manage to conserve to a point that you are paying for more than you use its not too cost effective. Now you can get a refund for over production via the net metering plan but that is not guaranteed for ever and the power companies are working hard to close that benefit in the future.

So as has already been suggested you need to figure out what amount of power you reasonably expect use in the future and then get a system sized large enough to keep you out of the tier 3 & 4 ranges. This for me is somewhere in the 60 to 80% of average kwh on and annual basis. As an example I used to use about 900 kwh on average per month annually but in the past 2 yrs have made many energy changes such as all cfl & some led bulbs, set up all computers to auto sleep after 30 minutes non use & I use home automation to control all my outdoor lights on timers along with motion sensors. I now am averaging about 750 kwh per month annually that works out to about 9000kwh per year. I am getting a system that is estimated to produce about 8000kwh per year so I hope to stay in the lower tier all of the time. I am not to worried about the 20 year term because I think if I ever decided to sell my home Its not to hard to transfer the plan to the new purchaser or I can buy it at fair market value and just include it in the price of the house. I am not even sure I will be alive 20 yrs from now anyways.

[russ]

Besides the pool pump what things cost the most to run? Refrigerator (I have 2), washer/dryer (I bought new upright energy efficient ones 3 years ago), A/C (I know this kills me in the summer) my is 30 years old and still works great, but I imagine a new one would help a lot.

1) The pool pump may well be an energy hog - what are the specs on the pump and how many hours per day do you run it.

2) The frig probably has a tag on it with power consumption

3) 2 fridges? Why

4) 30 year old A/C will be a super power hog

4) Your house probably leaks like a sieve - sealing around doors, windows, electric boxes (switches & plugs), lights and wherever else air goes will help greatly.

[J.P.M.]

I tend to agree that conservation is the first step. It is hard to imagine that I have had 2 kids move out in the last few years and my bill hasn't changed, maybe even has cost more. I remember a few years ago I was worried about my job and went around turning off all the lights that were left on and tv's that were not getting watched for the entire month. It did save me money.

The 20 year commitment is what scares me the most with the PPA or I think I would jump on it. Who knows how much SCE rates will continue to increase (supposed to be another 5.9% this year). Then I assume the PPA rates will rise too?

I will look into some of your suggestions. I would love to know if I am actually using what they say I am. Every one of my neighbors literally says they can't believe my bill and the only thing I can see I have different is a pool. When I called SCE the guy calculated that it does cost me around $135 per month to run the pump.

So far I will get in touch with my electrician friend and ask if he can help me with the meter to see if it is right and I will look into the training center. I go to Irwindale often. I also know an owner of a pool place so I will get some info on the variable pump and I should be able to get that done regardless.

Besides the pool pump what things cost the most to run? Refrigerator (I have 2), washer/dryer (I bought new upright energy efficient ones 3 years ago), A/C (I know this kills me in the summer) my is 30 years old and still works great, but I imagine a new one would help a lot.

Tml: Welcome to the neighborhood.

I'd bet biggest users are HVAC, pump, hot water (if elec.) and fridges.

Compared to some your not doing bad. It seems like from what you write, you may already know where the energy is going. All you need do is attack the loads.
- Replace the pool pump and don't run it all the time.
- Get rid of the 2d fridge.
- Turn your thermostat(s) up in summer, down in winter.
- Get the HVAC tuned up or perhaps replaced.
- Get an energy audit.
- Turn off the lights and then get rid of the incandescents.

I know some folks (2) in San Diego who live in a 3200 ft^2 house built in 1981 and live quite comfortably. They use about 6600 kWhrs./yr. but heat with propane. They have a solar H2O heater. Maybe you can't get that low, but putting a significant hole in that 16,000 kWhrs./yr. is certainly possible, especially, as you have demonstrated, you know where to start.

As for replacing some of the rest with solar via leasing or purchasing: There are strong opinions on all sides, most all sincere, well considered and worthy of a look. I'd only suggest that some of them seem a bit parochial (maybe mine too - I'm mostly on the buy side BTW), perhaps to justify their own position, owners and those who lease, both. Some favor solar leasing. Some think it a bad choice. Some favor buying. PPA's seem to be in less favor, perhaps partly because they often have annual increases of about 3% which seems like a ripoff to a lot of us. Buying or leasing, a system sized for max. cost effectiveness over 8/10/12/etc. yrs. using life cycle cost effectiveness/LCOE, etc. will probably still leave you with an electric bill which, depending on assumptions will probably be all or mostly all Tier1 or 2.

Some pros/cons:

Leasing:

Pro:
- Little/nothing down.
- No maint. cost.
- Probably fixed cost for life of the solar lease.
- Probable opp. for 1 time buyout at ~~ 6-10 yrs.
- Perhaps some performance guarantee.

Con:
- Unknown future sit. like home sale where buyer doesn't want the system. Also, buyer must usually pass credit muster w/ lease owner.
- Some bank/financial outfit will own the lease and will farm out maint. to lowest bidder.
- The solar equipment on your property will probably be the cheapest thing the seller can get their hands on. That may not in itself be bad, but may not be the best situation.
- Your stuck with equipment for 20 yrs. in a situation where products and gov't. intervention are evolving and changing quicker than that 20 yrs., some aspects a lot quicker. The lease anchor can slow down your ability to react.
- The performance bar, if it exists at all, is so low you will probably trip over it. It' mostly used as a sales tool. It's B.S.
- The maint. thing may be a scare tactic/red herring. Things do fail, but I don't see many panels being replaced in my neighborhood which has a lot of systems I tend to watch like a hawk. Leasing co. using cheap panels don't seem to need to upgrade to better prod. because of failures.
- You get no tax breaks or, in the future, SRECS if they come to CA.

Buying:

Con:
- Bigger up front or loan/HELOC payment.
- Owner responsible for maint. past warranty.

Pro:
- You can the choose equipment you want.
- You get the tax breaks.
- You own the system. in the event of a home sale, the hassles may well be a lot less. and can reconfigure it as you may want.
- You can change/renovate/remove/whatever you want.
- Depending on the deal you strike and contrary to what lease sellers imply, buying may make more sense financially. The initial big payment is a big hurdle. You gotta crunch some serious #''s.
- Mfg'.s warranties cover a big chunk of what lease sellers claim as a leasing advantage.
- IMO, buying means more freedom to do what you want in the future.

As for increasing the value of a home:

- Leasing probably will not. Some of us think it may even reduce marketability. I sure wouldn't buy something with uncertain strings attached. I'll buy the non solar house next door and put stuff of my choosing on it - thank you very much.
- Owning probably will not. Why would a 5/10/15 etc. yr. old system increase the value of a property when new, more efficient/smaller stuff sized to MY needs - not the sellers is an option and probably more fit for purpose. Kind of like a seller saying:" I'll sweeten the deal and throw in my 2000 Crown Vic which I paid $30K for and only add $10K to the dwelling price. Meanwhile, the seller may be a biker who thinks Cars are all P.O.S., or a tree hugger who wants an EV. Systems are designed to meet loads generated by people, not houses per se. What is suited to the seller may not be what the buyer wants or needs.

All I'm saying here about salvage value is that systems probably don't increase the intrinsic value of a property.

Suggest read/study AB 327. It will likely have a big impact on energy policy/pricing in CA in the future - Relevant to most of this thread, particularly with respect to electric rates and net metering in CA.

Think, read, study, learn, ask questions. Question everything everyone says.

Caveat emptor.

[silversaver]

14,000 to 16,500kWh per year for 3 people is pretty luxury living style in OC. Even with a solar lease, you are looking at least $170 per month $0 down with 20 years commitment. Seriously, it is very easy to manage your monthly down to $170 without solar if you try. If you wish to live in the same style, pull out the cash, done deal. Solar will save you money in long run. If you don't have the cash, then lease is your only option.

[rodroc]

Good Ideas

I am also trying to set up a solar power system in my home, but don't have much cash to buy all the equipment. I have started buying a few panels and batteries here and there, but am still far from my goal. I need to produce at least 1000 watts per hours, to charge my battery bank. I had no idea that there is some financing available for these sorts of projects, I will look more into it and see what I can get

Regards
Rod

[Ian S]

Nice job J.P.M.! This is a good start to what might be developed into a stickie for all those wondering whether to buy or lease/ppa. My comments in bold:

Some pros/cons:

Leasing:

Pro:
- Little/nothing down.
- No maint. cost.
- Probably fixed cost for life of lease.
- Probable opp. for 1 time buyout at ~~ 6-10 yrs.
- Perhaps some performance guarantee. Standard in every lease I've seen.
- No hassle with submitting forms for incentives and waiting for payments. Also no waiting for tax credits on future return(s). If your taxable income is too low, you might never get the benefits of the tax credits.
- The lessor gets the accelerated depreciation tax benefit that's not available to the individual buyer. In theory this should allow the lease rate to be more atttractive.
- Lease often includes insurance against damage/theft.
- In the event of problems/maintenance, only deal with one entity, the lessor.

Con:
- Unknown future sit. like home sale where buyer doesn't want the system. Also, buyer must usually pass credit muster w/ lease owner.
- Some bank/financial outfit will own the lease and will farm out maint. to lowest bidder. My prepaid lease with Sunpower utilizes a Sunpower dealer for maintenance.
- The solar equipment on your property will probably be the cheapest thing the seller can get their hands on. That may not in itself be bad, but may not be the best situation. ??
- Your stuck with equipment for 20 yrs. in a situation where products and gov't. intervention are evolving and changing quicker than that 20 yrs., some aspects a lot quicker. The lease anchor can slow down your ability to react. As long as the equipment is working as it should not sure why you'd care. If you buy, you still have a major investment that you can't just toss away.
- The performance bar, if it exists at all, is so low you will probably trip over it. It' mostly used as a sales tool. It's B.S. I think its major usefulness would as an incentive for a timely response to a failure that shuts down much of your production. Without it, you could be waiting for weeks to solve even warranty-related issues.
- The maint. thing may be a scare tactic/red herring. Things do fail, but I don't see many panels being replaced in my neighborhood which has a lot of systems I tend to watch like a hawk. Leasing co. using cheap panels don't seem to need to upgrade to better prod. because of failures. Inverters can and do fail especially within the lifetime of the solar system.
- You get no tax breaks or, in the future, SRECS if they come to CA. Well, you actually do get some of the incentive benefits as they are built into a lower lease cost. As for SRECs, here in Arizona, if you take the POCO's incentive, you give up the SRECs whether you lease or buy.
-Leasing/ppa often comes with an escalator that doesn't depend on future electric rate prices.

Buying:

Con:
- Bigger up front or loan/HELOC payment. Can be a deal killer for someone who doesn't have the cash or home equity. If you have to borrow the money or divert it from a retirement account or high yielding investment, then leasing starts to look more attractive.
- Owner responsible for maint. past warranty. Also responsible for getting warranty satisfaction from finger-pointing vendors.

Pro:
- You can the choose equipment you want.
- You get the tax breaks.
- You own the system. in the event of a home sale, the hassles may well be a lot less. and can reconfigure it as you may want.
- You can change/renovate/remove/whatever you want.
- Depending on the deal you strike and contrary to what lease sellers imply, buying may make more sense financially. The initial big payment is a big hurdle. You gotta crunch some serious #''s.
- Mfg'.s warranties cover a big chunk of what lease sellers claim as a leasing advantage.
- IMO, buying means more freedom to do what you want in the future.

As for increasing the value of a home:

- Leasing probably will not. Some of us think it may even reduce marketability. I sure wouldn't buy something with uncertain strings attached. I'll buy the non solar house next door and put stuff of my choosing on it - thank you very much. I don't know. If the seller can show the buyer real savings on the combined electric/lease costs, many buyers would be quite happy especially those who don't want to get into the nitty gritty of putting a new solar system on their home.
- Owning probably will not. Why would a 5/10/15 etc. yr. old system increase the value of a property when new, more efficient/smaller stuff sized to MY needs - not the sellers is an option and probably more fit for purpose. Kind of like a seller saying:" I'll sweeten the deal and throw in my 2000 Crown Vic which I paid $30K for and only add $10K to the dwelling price. Meanwhile, the seller may be a biker who thinks Cars are all P.O.S., or a tree hugger who wants an EV. Systems are designed to meet loads generated by people, not houses per se. What is suited to the seller may not be what the buyer wants or needs. I think as more people become aware of solar's advantages, they may be willing to pay a bit more for an existing system. Plus, as we've seen in Arizona, an existing system that gets grandfathered into a beneficial net metering plan may be a better deal than a brand new one that gets saddled with the POCO's "solar" fees.

All I'm saying here about salvage value is that systems probably don't increase the intrinsic value of a property. Why would it be salvage value? As long as the system is working properly, it is in effect a tax free source of money. Because of that it has to have some intrinsic value beyond salvage I would think.

[J.P.M.]

Nice job J.P.M.! This is a good start to what might be developed into a stickie for all those wondering whether to buy or lease/ppa. My comments in bold:

Ian:
1.) Thank you for the kind words.
2.) I like the idea of a stickie, but You and I would likely need an arbitrator or a cage fighting referee on the subject of lease vs. buy. I think I agree with some of your comments and respect your opinion, but strongly disagree with other comments you made as only telling part of the story. I wouldn't be surprised if you had a similar, reciprocal view. Perhaps a stickie would need more objectivity than either of us could provide.
3.) I noticed you had little to add to the pros of buying.

Respectfully.

[Ian S]

Ian:
1.) Thank you for the kind words.
2.) I like the idea of a stickie, but You and I would likely need an arbitrator or a cage fighting referee on the subject of lease vs. buy. I think I agree with some of your comments and respect your opinion, but strongly disagree with other comments you made as only telling part of the story. I wouldn't be surprised if you had a similar, reciprocal view. Perhaps a stickie would need more objectivity than either of us could provide.
3.) I noticed you had little to add to the pros of buying.

Respectfully.

LOL at cage fighting! I'm too old for that. But I think it would be quite possible to come up with a stickie that would put all the pros and cons out there for newbies to evaluate. Heck, I even added a con to leasing! BTW, I had nothing to add to the buying pros because I think you covered them well. I am curious as to what comments I made that you strongly disagree with. Also, there was the one comment of yours that I put question marks after because I didn't understand your point.

[bando]

Besides the pool pump what things cost the most to run? Refrigerator (I have 2), washer/dryer (I bought new upright energy efficient ones 3 years ago), A/C (I know this kills me in the summer) my is 30 years old and still works great, but I imagine a new one would help a lot.

you should experiment with your pool pump and see. we got the variable speed pump years ago but the pump and pool are still a big factor.

i experimented with the timing and am down to about 4.5 hours of filtering a day, and the pool still looks the same. we used to run it alot more just because we didn't know any better. i have also heard that you can spread it out and not run it straight, like a few hours in AM and few hours in afternoon. no need to run it 8 hours straight, especially at this time of year. in the summer we will have it on a lot more from use and swimming, but in the winter you can turn it way down.

our other big culprit is overhead recessed can lighting. most houses in So Cal have a ton, like ours. in our main common area: kitchen has 9, nook has 2 and family room 6. those are constantly on once the sun sets, it's like one big room. i calculated the savings by going with LEDs of equivalent brightness and it's over $530/year in SAVINGS. will cost about $300-350 to replace them all, but that's approx 8 month payback and the rest is gravy.