Federal rebate on solar install

[Volusiano]

I believe I agree with most all of the above as logical and sensible. I'm less than optimistic of most real estate people understanding any of it much less applying it.

I agree that the real estate agent won't know how to do this. You'd probably have to do the homework on this and crunch all the numbers yourself, then lay it all out to your real estate agent so they understand the rationale behind it to explain to buyers and have documented info to show the buyers.

If anything, the real estate agent just has to remember the key selling points of the add on cost. For example, "Yeah, you'd have to pay $4K more for the solar system on this house. But here's documented information that this extra cost will pay for itself in 4 years in the form of $1K in electricity saving each year, and from then on, you get $1K worth of free electricity every year for the rest of your life in this house. And if you sell the house in 4 years or later, it's going to be a + selling point to have it on the house without any extra cost to your buyer."

[J.P.M.]

Of course trying to price the full original solar cost (even after rebates and incentives) into an existing home without considering any kind of depreciation (due to use and due to lower pricing) is not going to work. The right approach is to price it using the equivalent system's CURRENT/NEW pricing minus all CURRENT/NEW incentives/rebates/tax credits, then depreciate it by the number of years it's already been in use (out of the number of years left for the full system warranty). Then discount it a little more even to incentivize it as a good deal for potential buyer if you want to (or not). Then use the previous owner's documented savings to show how long the system will pay for itself for the new owner with the newly adjusted system price. Only then can a potential buyer decide whether there's value in paying for the extra above the home market price or not, depending on how long they plan to stay in the house themselves.

Another approach is to determine how much value is left before you consider the system is paid for. For example, to keep it simple, let's say that you paid $7K for the system out of pocket after all the incentives and the numbers show that it'll take you 7 years for the system to pay for itself in terms of electricity savings you gain. And let's say you've live in the house for 3 years already, so you have 4 years left before the system pay for itself. Then obviously if you just want to recover at least your principle on the system, and since you spent $7K for the system and have recovered $3K out of it from the electricity saving, then the asking price for the system (on top of the house) is going to be $4K. Basically what you're doing here is ask the potential buyer to split the cost of the system with you, and he's going to benefit from the system for free after 4 years. His incentive is that his payback period is going to be shorter than the original payback period, and HE, not YOU, will get to benefit from the system for free after his shorter payback period.

Now you have 2 different price points to work with from the 2 cases above. One is obviously going to be higher than the other (your top line asking price and bottom line asking price). One is to recognize the fact that the new owner has the option to go out and get a newer, lower-priced system, and factoring that in. The other is from the perspective of the seller just trying to recover his remaining investment on the system, and passing along the (now sooner) reward of a free system to the new owner.

Of course, there may be more factors that may come into play, too. For example, in the case of places where the utility company charges solar owners a monthly service charge for net metering, and you're exempt because you're grandfathered in, then it would play to your advantage. Or in the case where the utility company still pay you a premium for your solar production (in order to meet their REC credits), but maybe they don't do that for new customers anymore (wonder if there's such a case?), then it would also play to your advantage. Of course this would depend on whether the grandfather clause is transferable to the new owner at the same address or not.

I believe I agree with most all of the above as logical and sensible. I'm less than optimistic of most real estate people understanding any of it much less applying it.

[Volusiano]

Of course trying to price the full original solar cost (even after rebates and incentives) into an existing home without considering any kind of depreciation (due to use and due to lower pricing) is not going to work. The right approach is to price it using the equivalent system's CURRENT/NEW pricing minus all CURRENT/NEW incentives/rebates/tax credits, then depreciate it by the number of years it's already been in use (out of the number of years left for the full system warranty). Then discount it a little more even to incentivize it as a good deal for potential buyer if you want to (or not). Then use the previous owner's documented savings to show how long the system will pay for itself for the new owner with the newly adjusted system price. Only then can a potential buyer decide whether there's value in paying for the extra above the home market price or not, depending on how long they plan to stay in the house themselves.

Another approach is to determine how much value is left before you consider the system is paid for. For example, to keep it simple, let's say that you paid $7K for the system out of pocket after all the incentives and the numbers show that it'll take you 7 years for the system to pay for itself in terms of electricity savings you gain. And let's say you've live in the house for 3 years already, so you have 4 years left before the system pays for itself. Then obviously if you just want to recover at least your principle on the system, and since you spent $7K for the system and have recovered $3K out of it from the electricity saving, then the asking price for the system (on top of the house) is going to be $4K. Basically what you're doing here is ask the potential buyer to split the cost of the system with you, and he's going to benefit from the system for free after 4 years. His incentive is that his payback period is going to be shorter than the original payback period, and HE, not you, will get to benefit from the system for free after his shorter payback period.

Now you have 2 different price points to work with from the 2 cases above. One is obviously going to be higher than the other (your top line asking price and bottom line asking price). One is to recognize the fact that the new owner has the option to go out and get a newer, lower-priced system, and factoring that in. The other is from the perspective of the seller just trying to recover his remaining investment on the system, and passing along the (now sooner) reward of a free system to the new owner.

Of course, there may be more factors that may come into play, too. For example, in the case of places where the utility company charges solar owners a monthly service charge for net metering, and you're exempt because you're grandfathered in, then it would play to your advantage. Or in the case where the utility company still pay you a premium for your solar production (in order to meet their REC credits), but maybe they don't do that for new customers anymore (wonder if there's such a case?), then it would also play to your advantage. Of course this would depend on whether the grandfather clause is transferable to the new owner at the same address or not.

[J.P.M.]

Cheap Natural Gas has helped to keep rates steady. We are now going to begin exporting NG so our prices will go up. Lots of pressure to decommission cheap coal-fired plants as they are regulating them into oblivion. Enjoy this cheap energy... it won't last long.



It is up to the agent to EDUCATE the buyer as to what having solar can do for them. $100 savings per month for 20 years is $24,000. Take that $100 saved per month and put it towards mortgage principle and it is worth closer to $50,000 in reducing mortgage obligation over 20 years. Too many order-takers and not enough closers in real estate today. I am a mortgage broker in my day job, so I can say that.

The only reason a solar system wouldn't increase the value of a property is if nobody took the time to put the benefits on paper and do a savings analysis for a potential buyer. A kitchen isn't going to save you $24,000 over 20 years.

As for solar increasing the value of a home: My explanation of benefits would go something like this: Suppose I was looking at a home and the agent told me that the house had solar panels (Sunpower, 6720 D.C watts) that were installed 6 years ago at a cost of $53k before rebates/tax credits w/ documentation, and that is part of the reason the asking price is what it is. Today, the same 6720 Watt system can be purchased for about $30-31K for Sunpower before rebates. The new system is the same size, but more efficient w/same or better warranty and 6 years less deterioration. Question: Why would the old, existing system be a positive selling point ? If I wanted a house w/ solar, I think I'd look for one w/out it, save the uninformed prattle from the real estate slug, and eventually put a new system of my own choosing, properly sized to my needs on it. My experience is that people saying solar increases the value of a home think they know something about real estate, but IMO know little if anything or less about solar or most anything else for that matter.

[Kenstl]

Cheap Natural Gas has helped to keep rates steady. We are now going to begin exporting NG so our prices will go up. Lots of pressure to decommission cheap coal-fired plants as they are regulating them into oblivion. Enjoy this cheap energy... it won't last long.



It is up to the agent to EDUCATE the buyer as to what having solar can do for them. $100 savings per month for 20 years is $24,000. Take that $100 saved per month and put it towards mortgage principle and it is worth closer to $50,000 in reducing mortgage obligation over 20 years. Too many order-takers and not enough closers in real estate today. I am a mortgage broker in my day job, so I can say that.

The only reason a solar system wouldn't increase the value of a property is if nobody took the time to put the benefits on paper and do a savings analysis for a potential buyer. A kitchen isn't going to save you $24,000 over 20 years.

Agree, unfortunately many consumers go for the bling over value. $100 a month savings on electric translates in to increased purchase power of $18,628 on a 30 year mortgage at 5% rate. One would think that over time and as the consumer becomes more educated on cost savings through high energy appliances, solar etc, that these items will be considered a benefit with value vs an added bonus.

[GridGrants]

First off the electric rates have been pretty flat for over the past 10 years with some ups and downs although with Duke Energy now in the mix that might change.

Cheap Natural Gas has helped to keep rates steady. We are now going to begin exporting NG so our prices will go up. Lots of pressure to decommission cheap coal-fired plants as they are regulating them into oblivion. Enjoy this cheap energy... it won't last long.

I also talked to a Realtor that lives in my neighborhood. She hasn't seen see a big difference in the value of a home with solar as compared to a similar home without. For some reason having a solar panel system is not a big draw as to having a new kitchen.

It is up to the agent to EDUCATE the buyer as to what having solar can do for them. $100 savings per month for 20 years is $24,000. Take that $100 saved per month and put it towards mortgage principle and it is worth closer to $50,000 in reducing mortgage obligation over 20 years. Too many order-takers and not enough closers in real estate today. I am a mortgage broker in my day job, so I can say that.

The only reason a solar system wouldn't increase the value of a property is if nobody took the time to put the benefits on paper and do a savings analysis for a potential buyer. A kitchen isn't going to save you $24,000 over 20 years.

[Kenstl]

It looks like you have a pretty good final price of $5761 for the 8.67kw system which comes to about $0.67/watt. Usually a vendor will provide you with an average kWh generation value for your system or you can go to the following website and enter the information they ask for and it will provide you with an estimate of what your system can produce and savings.

http://pvwattsbeta.nrel.gov/

The just divide the amount saved into the amount spent and you get a close payback in years.

great link, thanks. After going through that site, the system generation is estimated at 10,285 kWh or $1,029 worth of electricity at $0.10 kWh. That would put the payback period around 5.6 years. Based on averages, my budget billing theoretically would go from $111 month for electric down to $25 a month. Thanks again.

[SunEagle]

Good point, maybe I am looking at the production and sizing of the system incorrectly. How would you run the numbers based on the system below? House faces south, avg full sun is 4.6 hours a day for area per a reference sheet I was given. My use history is 13,500 kWh per year, rate is $0.10 kw.

PV Modules: ReneSola Virtus II 156 Series Polycrystalline 255 Watt Modules.
Inverters: ReneSola Replus-250A Microinverters.
- 8.67 kW estimated installed power capacity (direct current, standard test conditions)
- 34 modules and 34 microinverters.

Cost:$25,570 for 8.67 kW or $2.95 kWh
Amren
Rebate $2.00 or $17,340 which brings cost to $8,230
30% federal $2,469 (or can this be 30% of the total cost of project?)
Out of pocket $5,761

It looks like you have a pretty good final price of $5761 for the 8.67kw system which comes to about $0.67/watt. Usually a vendor will provide you with an average kWh generation value for your system or you can go to the following website and enter the information they ask for and it will provide you with an estimate of what your system can produce and savings.

http://pvwattsbeta.nrel.gov/

The just divide the amount saved into the amount spent and you get a close payback in years.

[SunEagle]

That would be assuming the system would add ZERO value to your property after 5 years. Two homes side by side. One has a $150/month electric bill. One has a $30/month electric bill. Which is worth more to the buyer? Okay, we know there is SOME extra value... now we need to quantify it. One rule of thumb is each $1/yr in savings adds $20 to the value. In our example the $120/month savings = $1,440/year = $28,800 extra value. This seems a bit high to most people and I found a better way to sway a buyer as to the extra value.

Let's assume a 25 year life to the system. You may get more, but that is a common term for warranties. I think we can agree that the 80% effectiveness of the panels in year 25 will be more than offset by rising energy costs. In other words the 20% decrease in generation will be met with more than a 20% rise in the value of each KWh generated so we will ignore that for now. You want to value this system after 5 years so we have another 20 years of effective life. Let's choose 13X the value of each $1 saved. Now our $1,440/yr becomes a $18,720 value to the system. Plug $18,720 into a mortgage calculator at 240 months (20 years) and 4.5% interest. This $18,720 added to the mortgage increases the payment by $118.43 or less than our $120/month savings. You can show your buyer that if they pay $18,720 more for your home than the price without solar, it will be no worse than a zero-sum game for them. In actuality, with rising energy prices they will come out ahead. Their $118.43/month extra mortgage payment also includes some principle payment so they are coming out ahead instead of paying that money towards a utility bill.

That $20 per each $1 in savings doesn't look too far off now! You can do charts that take into account rising electric rates and the principle portion of the payment and make it look pretty good. I'm not saying a buyer will jump up and down and pay you $18K more for your home, but you sure can make a case for that added value if you break down their savings and what it equates to as an equivalent mortgage payment.

First off the electric rates have been pretty flat for over the past 10 years with some ups and downs although with Duke Energy now in the mix that might change.

I also talked to a Realtor that lives in my neighborhood. She hasn't seen see a big difference in the value of a home with solar as compared to a similar home without. For some reason having a solar panel system is not a big draw as to having a new kitchen. I also have a solar hot water heater which has reduced my electric bill but again the value of any solar system is seen differently from person to person.

[GridGrants]

I have plans on moving in about 5 years so finding a system with less than a 5 year payback seems a little out of reach.

That would be assuming the system would add ZERO value to your property after 5 years. Two homes side by side. One has a $150/month electric bill. One has a $30/month electric bill. Which is worth more to the buyer? Okay, we know there is SOME extra value... now we need to quantify it. One rule of thumb is each $1/yr in savings adds $20 to the value. In our example the $120/month savings = $1,440/year = $28,800 extra value. This seems a bit high to most people and I found a better way to sway a buyer as to the extra value.

Let's assume a 25 year life to the system. You may get more, but that is a common term for warranties. I think we can agree that the 80% effectiveness of the panels in year 25 will be more than offset by rising energy costs. In other words the 20% decrease in generation will be met with more than a 20% rise in the value of each KWh generated so we will ignore that for now. You want to value this system after 5 years so we have another 20 years of effective life. Let's choose 13X the value of each $1 saved. Now our $1,440/yr becomes a $18,720 value to the system. Plug $18,720 into a mortgage calculator at 240 months (20 years) and 4.5% interest. This $18,720 added to the mortgage increases the payment by $118.43 or less than our $120/month savings. You can show your buyer that if they pay $18,720 more for your home than the price without solar, it will be no worse than a zero-sum game for them. In actuality, with rising energy prices they will come out ahead. Their $118.43/month extra mortgage payment also includes some principle payment so they are coming out ahead instead of paying that money towards a utility bill.

That $20 per each $1 in savings doesn't look too far off now! You can do charts that take into account rising electric rates and the principle portion of the payment and make it look pretty good. I'm not saying a buyer will jump up and down and pay you $18K more for your home, but you sure can make a case for that added value if you break down their savings and what it equates to as an equivalent mortgage payment.

[Kenstl]

Just be careful and don't confuse "usage" to "generation" when you determine your payback. Unless you have higher tiered electric costs using more does not mean saving more.

I use about 18000 kWh per year but that 6kw system will only generate about 8200 kWh per year. The savings on 8200 kWh at $0.12/kWh is about $984. So if my installed cost after all rebates is about $8500 then it will take 8.63 years to pay back.

Of course I may be able to get the installed cost below $4/watt and the electric rates may go higher than $0.12/kWh which would decrease my payback time but that is an unknown. I have plans on moving in about 5 years so finding a system with less than a 5 year payback seems a little out of reach.

Good point, maybe I am looking at the production and sizing of the system incorrectly. How would you run the numbers based on the system below? House faces south, avg full sun is 4.6 hours a day for area per a reference sheet I was given. My use history is 13,500 kWh per year, rate is $0.10 kw.

PV Modules: ReneSola Virtus II 156 Series Polycrystalline 255 Watt Modules.
Inverters: ReneSola Replus-250A Microinverters.
- 8.67 kW estimated installed power capacity (direct current, standard test conditions)
- 34 modules and 34 microinverters.

Cost:$25,570 for 8.67 kW or $2.95 kWh
Amren
Rebate $2.00 or $17,340 which brings cost to $8,230
30% federal $2,469 (or can this be 30% of the total cost of project?)
Out of pocket $5,761

[SunEagle]

I agree, until there are enough panel installs in regions that then produce validated sale comps, it is tough to tell if one can recover the cost of the solar panel cost if they move prior to the payback period. Without seeing "value" in resale, the consumer has to weigh the recovery time and if they plan on occupying the home long enough to recover the cost.

The system I am considering is $2.95/watt install cost, with a $2/watt rebate from the utility company, and a 30% refund from the Feds. My electric cost is $0.10/kWh so base on my usage of $1,335 a year in electricity, my payback is 4.3 years assuming I projected amount of solar and my electric costs stay static in the area.

Just be careful and don't confuse "usage" to "generation" when you determine your payback. Unless you have higher tiered electric costs using more does not mean saving more.

I use about 18000 kWh per year but that 6kw system will only generate about 8200 kWh per year. The savings on 8200 kWh at $0.12/kWh is about $984. So if my installed cost after all rebates is about $8500 then it will take 8.63 years to pay back.

Of course I may be able to get the installed cost below $4/watt and the electric rates may go higher than $0.12/kWh which would decrease my payback time but that is an unknown. I have plans on moving in about 5 years so finding a system with less than a 5 year payback seems a little out of reach.

[Kenstl]

Based on the PVWatts calculator http://pvwattsbeta.nrel.gov/ my payback on a 6kw system would be over 8 years. That is based on a $4/watt install cost, with a $2/watt rebate from the Utility (if there is any money left in the fund) and the 30% refund from the Feds. The long payback is mostly due to a low electric rate of about $0.12/kWh.

Florida doesn't allow any leasing type arrangements so I would have to pay up front and wait on any refunds. As much as I would like to install there isn't a real good incentive for me if I sell the house in less than 8 years which there is a pretty good chance.

I agree, until there are enough panel installs in regions that then produce validated sale comps, it is tough to tell if one can recover the cost of the solar panel cost if they move prior to the payback period. Without seeing "value" in resale, the consumer has to weigh the recovery time and if they plan on occupying the home long enough to recover the cost.

The system I am considering is $2.95/watt install cost, with a $2/watt rebate from the utility company, and a 30% refund from the Feds. My electric cost is $0.10/kWh so base on my usage of $1,335 a year in electricity, my payback is 4.3 years assuming I projected amount of solar and my electric costs stay static in the area.

[SunEagle]

Yeah, it is interesting to see how costs for theses systems vary widely across the country. I would be interested to hear what the average pay back of installed systems are based on current electric rates and usage, after incentives both local and federal. I would assume they are all in the 4-7 year range, but I do not know. I think many people still think too short of term to justify what really is a long term decision if you are trying to recover your costs. I throw myself in that camp as I still wonder if it makes sense to install a system that has up to a 7 year payback.

Based on the PVWatts calculator http://pvwattsbeta.nrel.gov/ my payback on a 6kw system would be over 8 years. That is based on a $4/watt install cost, with a $2/watt rebate from the Utility (if there is any money left in the fund) and the 30% refund from the Feds. The long payback is mostly due to a low electric rate of about $0.12/kWh.

Florida doesn't allow any leasing type arrangements so I would have to pay up front and wait on any refunds. As much as I would like to install there isn't a real good incentive for me if I sell the house in less than 8 years which there is a pretty good chance.

[Kenstl]

As I said, very generous.

Here in NY it's just over $1/watt rebate (comes from a state agency that all utilities pay into), plus up to $5,000 state income tax credit. In my case, for a similarly-priced system (gross price about $24k), that puts the total discount at somewhat less that what you got. On top of that, the state income tax credit is a rose with a significant thorn: if you itemize deductions, you will end up deducting less state income tax the next year.

And on top of that, my similarly-priced system is just over half as large, in terms of DC watts, as yours. Labor etc is more expensive in NY, but still it seems to me that you got a great deal. (Or I got a crummy one!)

Yeah, it is interesting to see how costs for theses systems vary widely across the country. I would be interested to hear what the average pay back of installed systems are based on current electric rates and usage, after incentives both local and federal. I would assume they are all in the 4-7 year range, but I do not know. I think many people still think too short of term to justify what really is a long term decision if you are trying to recover your costs. I throw myself in that camp as I still wonder if it makes sense to install a system that has up to a 7 year payback.