Solar City

[gvl]

Is this going to be a roof-mount? For 17kW DC we are talking about 50+ panels here. Ground mount will be north of $4/watt likely, if so $80k before tax credit may not be too detached from reality.

[Ian S]

I see many doomsday posts about the rising cost of electricity. My personal feeling of being gouged by my PUCO probably was the first thing that got me interested in installing solar in my house. That said, when I did the research myself, I found that the energy rate increases weren't as bad as it felt and NO WHERE NEAR where the solar industry was trying to portrait. Here is an excerpt from a UC Davis study...

EIA’s most recent Annual Energy Outlook (2013) projects relatively modest electricity price increases in the range of 1.9-3.4% per year during the period 2013-2040

link to study

Don't take my word for it, look for yourself so that you are confident in your decision. Rates are actually coming down for SCE right now as they realize solar prevents them from gouging customers who have the means to do something about it. Ultimately, rates will go up, just make educated calculations.

What can also happen is for fixed fees to rise - we're seeing that in Arizona. In that case, those added fees are not offset by your solar production. Demand rate structures such as are being implemented in Arizona can also effectively increase your rates without necessarily being fully offset by your solar production.

[Ian S]

I don't think the net cost is 61K the tax credit as I understand it only reducing your taxable income it's not a rebate in cash.

Am I understanding that correctly, so if one was in say a 25% tax bracket the saving is 25% of 26,000 or $6500 in real dollars

No, it's a tax credit but it's non-refundable meaning that if your taxes are less than the credit you will have some credit to carry forward for a year - or possibly more depending on what if anything Congress does regarding the tax credit. N.B. it's your actual taxes for the year that the credit offsets and is before your withholding and/or estimated payments are applied. A useful wrinkle if you might normally be unable to utilize the full credit but have a traditional IRA: consider converting part of the IRA to a Roth which has many advantages over a regular IRA. The additional taxes due can be offset by the remainder of the tax credit.

Re Solar City purchase pricing: they are almost always higher than other vendors and their equipment is whatever they can get cheapest at the point in time they build your system. For them to put a 2.5% escalator on a loan payment just adds insult to injury IMHO. You can get a far better price and better loan terms elsewhere I'm sure.

[davelittle]

This deal is probably not a lease, but it still just plain sucks. I'd run away from it. Find a reputable solar vendor and buy/finance something for about $3.50-$ 3.75/Watt and pay ~ $42- $44K after tax credit.

Thanks. I appreciate the honesty. Solar City talks up their warranty and guarantees. I'm assuming the other vendors offer similar guarantees? I'll check into it.

[davelittle]

$87K for 17KW system is $5.11/W installed which is probably the most expensive sunpower quote I've seen in a long time, especially for that size of system. My guess is that in order to give you 2.5% 30 year loan, Solar City has to buy down the rate, so you pay more up front. The best solar loan I was told was about 7%. Sunpower's loan is normally 9-10%. If you are going to get a loan, why don't you do a HELOC which is currently at 1% + prime (2.99%) = roughly 4%. Plus all the interest you pay to HELOC is tax deductible in itemized deduction method, and there's no early payoff penalty. I'd also get some quotes locally from other vendors and with other reputable brands (LG, Keocera, Panasonic, Canadian Solar, Solar World etc.) of panels. I've seen plenty of quotes with < $3.5/W for your size of system with LG300/305W which's comparable in build quality and performance to the Sunpower without the $ premium.

Good points. It's not a 2.5% loan they're giving me. The loan payments increase by 2.5%/year over the course of the loan. There's not a stated interest rate, but I can figure that out. I can pay it off anytime with a HELOC and you're right, I'd consider that to be a tax deductible loan.

I'll get quotes from other vendors on their panels and check their guarantees. Thanks a lot for breaking down the installed rate. I'm pretty focused on the monthly savings, but maybe they can be even higher than what Solar City's quoting.

[J.P.M.]

This deal is probably not a lease, but it still just plain sucks. I'd run away from it. Find a reputable solar vendor and buy/finance something for about $3.50-$ 3.75/Watt and pay ~ $42- $44K after tax credit.

[davelittle]

I don't think the net cost is 61K the tax credit as I understand it only reducing your taxable income it's not a rebate in cash.

Am I understanding that correctly, so if one was in say a 25% tax bracket the saving is 25% of 26,000 or $6500 in real dollars

Thanks for the response. Pretty sure it's a tax credit, which is a dollar for dollar reduction in tax liability. It's not just a deduction.

[nova]

I don't think the net cost is 61K the tax credit as I understand it only reducing your taxable income it's not a rebate in cash.

Am I understanding that correctly, so if one was in say a 25% tax bracket the saving is 25% of 26,000 or $6500 in real dollars

[insaneoctane]

I see many doomsday posts about the rising cost of electricity. My personal feeling of being gouged by my PUCO probably was the first thing that got me interested in installing solar in my house. That said, when I did the research myself, I found that the energy rate increases weren't as bad as it felt and NO WHERE NEAR where the solar industry was trying to portrait. Here is an excerpt from a UC Davis study...

EIA’s most recent Annual Energy Outlook (2013) projects relatively modest electricity price increases in the range of 1.9-3.4% per year during the period 2013-2040

link to study

Don't take my word for it, look for yourself so that you are confident in your decision. Rates are actually coming down for SCE right now as they realize solar prevents them from gouging customers who have the means to do something about it. Ultimately, rates will go up, just make educated calculations.

[thejq]

$87K for 17KW system is $5.11/W installed which is probably the most expensive sunpower quote I've seen in a long time, especially for that size of system. My guess is that in order to give you 2.5% 30 year loan, Solar City has to buy down the rate, so you pay more up front. The best solar loan I was told was about 7%. Sunpower's loan is normally 9-10%. If you are going to get a loan, why don't you do a HELOC which is currently at 1% + prime (2.99%) = roughly 4%. Plus all the interest you pay to HELOC is tax deductible in itemized deduction method, and there's no early payoff penalty. I'd also get some quotes locally from other vendors and with other reputable brands (LG, Keocera, Panasonic, Canadian Solar, Solar World etc.) of panels. I've seen plenty of quotes with < $3.5/W for your size of system with LG300/305W which's comparable in build quality and performance to the Sunpower without the $ premium.

[davelittle]

Can you give us more details, an escalator of 2.5-3.5 % / year are usually used at lease programs. You can get a better deal from a local company with better quality equipment and 25 years warranty on components.

The way I read their quote is that the Financing Term is 30 years, with a 2.5% fixed annual increase in the payment. The fine print references loan repayment rates, so I don't think it's a lease.

[davelittle]

Remember net metering is only for 20 years.

Judging from that price they quoted - I'm guessing is for a 17kw system, in which case you should be able to get for sound $56K which would be about $49K after federal rebate

What area do you live in?

I'm in La Habra Heights, which is Los Angeles County.

So looks like their cost is substantially higher than what you're saying for some reason ($86,000 versus $56,000).

[davelittle]

I had the guy send me a pdf with all the details, so let me know if you're interested and I'll forward to you by e-mail.

Thanks in advance for any help.

Dave

[davelittle]

Here are the details I got from them. system size is 17.00 kW DC
Estimated annual production is 25,690 kWh

they say system will cost $87,000, and I'll get tax credit of $26,000 with my 2015 return, so the net system cost is $61,000

My payment goes to $375 (from $613) initially (all to them, with none to SCE). After I give them the tax credit of $26,000 next year, the payment to them drops to $268/month.

I can pay off the loan balance to them at any time also, making the payments go to zero.

The annual increase to them is 2.5%, but I imagine that's far less than what Edison's increases over the years will be.

So the way I see it, I'm saving $350/month beginning next year, and that savings gap would only grow, since SCE's bills to me would increase faster than the 2.5% my payment to Solar City goes up.

I don't see a downside to this. They warranty the system and also guarantee how much it will produce. Seems like I'm banking on Solar City staying in business, but I'm guessing they're the highest credit quality in the business. So I'm not sure it matters what kind of inverter or panels they're using.

Can someone tell me what I'm missing?

[solarfrank]

Can you give us more details, an escalator of 2.5-3.5 % / year are usually used at lease programs. You can get a better deal from a local company with better quality equipment and 25 years warranty on components.