Caution against solar panel loan / lease

[Ampster]

You think NEM 2.0 is bad, just wait. I'll bet NEM 3.0 is gonna be a real doozy. Coming soon to a POCO near you in 2020!

I don't understand why anyone going solar today without a battery would go on the SDGE DR-SES rate. The price difference between on-peak and off-peak is almost $0.24. Using TOU-DR the difference is only approx. $0.06.

Yes, NEM 3.0 is going to be tough.
Regarding differentials in pricing between TOU periods I think there are some usage profiles that can benefit from larger differentials. I have often said that one can leverage solar by purchasing an EV. An EV allows you to charge at a less expensive rate. Of course this assumes at least some of your solar generation (inverter production) is at the higher rate. Your mileage may vary.

[Ampster]

Just one more data point. In summer of 2018 I had an appraiser add 50% of the cost of PV solar to the value of my home. It all depends on where you are standing. This was in Sonoma California.

[PugPower]

You think NEM 2.0 is bad, just wait. I'll bet NEM 3.0 is gonna be a real doozy. Coming soon to a POCO near you in 2020!

I don't understand why anyone going solar today without a battery would go on the SDGE DR-SES rate. The price difference between on-peak and off-peak is almost $0.24. Using TOU-DR the difference is only approx. $0.06.

[J.P.M.]

In San Diego county, with one of the highes install numbers in the country, homebuyers and agents have become more savvy about the benefits of residential PV systems. This transition has taken some years, but with the sky high prices of SDGE it's easy for many homeowners and would-be buyers to see the benefits of a residential PV system especially when you factor in net-metering on top of incentives and rebates which reduce the break-even period dramatically. RE agents are becoming more informed about the value of installed PV systems and how to market them as more and more homes with pre-installed solar come onto the market. All that being said, if you made you a bad deal and overpaid for your system or signed into a bad lease, power purchase, or rental agreement, of course it will negatively affect the value of your home when it's time to sell. The reduction of the tax credit, proposed changes to net-metering by utilities, and preemptive black-outs may dramatically affect the future solar market driving up the demand for batteries.

With respect to the changes to net metering and how those changes impact the value of residential PV system production, for SDG & E and I strongly suggest the other two CA IOU POCOS, those changes had the effect of reducing the value of a residential PV produced kWh to somewhere between 22 and 25 % to about 75 to 78 % of the value of the same production under NEM 1.0.

I haven't seen or heard any solar peddlers around here talking about that. Nor do I believe for one hot second that there are any appraisers in San Diego county who would even understand what I just wrote. I suspect by and large that the appraisers and real estate slugs do little more than repeat what they hear and/or what they read in the real estate rags. For confirmation of that, ask a few of them to discuss the effect that NEM 2.0 changes had on the value of the energy produced by residential PV systems and watch their eyes glaze over for a likely Q.E.D.

An example of how NEM reduced the value of system produced electricity:

Using DR-SES tariff rates and times in effect 05/19/2019 using the (old) grandfathered NEM 2.0 rates and times vs. the new (non grandfathered) NEM 2.0 rates and times, and using PVWatts with data for Miramar MCAC for modeled solar generation, every installed STC kW of a 20 deg. tilt 180 deg. azimuth array will produce on a long term average, according to the PVWatts model, about 1,743 kWh/yr per yr. (So a 5 kW system will produce 5 kw*1,743 kWh/yr. per STC kW = 8,715 kWh/yr.).

My spreadsheets show that under the (old) grandfathered rates and times for NEM 2.0 users, the value of the electricity produced is ~ $626.48 or ~ a value of $626.48/1,743kWh = $0.35943/kWh.
Under NEM 2.0 and rates and times for new users, or more accurately, those systems that do not qualify for grandfathering, the value of the same electricity production is ~ $477.91, or a per kWh value of $477.91/1,743 kWh = $0.27419/kWh.

$626.48- $477.91)/$626.48 = 0.237. Other orientations produce slightly different percentages.

A side note: The optimum azimuth shifts from ~ 190 deg. under the old rates/times to ~ 210 deg. under the new rates/times. And specifically, under either old or new, all 270 deg. azimuths are less productive than those having a more southerly azimuth.

All the numbers I generated for all azimuths I ran assume a system offset of < 100% of usage.

With Straight T.O.U. pricing such as the DR-SES tariff uses, system cost effectiveness as measured by a LCOE per PV generated kWh type cost analysis tends to stay fairly constant until system offset approaches 100 %.

If/when system production offset gets beyond 100%, system cost effectiveness as measured by LOCE per generated kWh method drops rather quickly to below the LOCE for POCO purchased power, meaning that during the selected length of the analysis, a user would be money ahead not having a system as large as the one chosen.

Take what you may want of the above. Scrap the rest.

[nwdiver]

I appreciate your points and understand the concept of appraisals. Still, and as anecdotal information only, I've spoken with more than my share of appraisers and I'd honestly say that probably half of them openly admitted they had no idea of how to value PV system. Speaking with them, I believe what they're telling me. The rest seemed to try to hedge their answers. Such experiences don't tend to inspire my confidence in appraisals as they may relate to PV systems.

If I was a savvy buyer and knew I will spend maybe $5K/yr. on electricity over the next 12, and in any case less than that n$10K you use, why would I pay for something I won't use or at least not use that a negotiating tool to garner a lower overall price ?

BTW, one other point: Who says the appraised value is an absolute number that sets an and inviolate number on the value of a property. If it does, that would make negotiating a price meaningless. I thought one big reason for appraisals is to help set an upper l limit for a mortgage.

That goes back to my previous comment on much of this being due to ignorance on the part of realtors and you can broaden that to appraisers. There has been an approved metric for >10 years called PV Value (You'll have to google that so this post isn't flagged as spam...); I refinanced a home ~10 years ago and the appraiser attempted to assign $0 value to my 8.4kW PV system. I was irritated that I was paying someone to do I job I felt they were clearly unqualified to do and we had a heated back and forth. I sent them the PV value spreadsheet and they drudgingly added ~$10k to the appraised value.

Then... a friend sold his home with a 15.4kW ground mount and the buyers bank refused to approve the loan until the seller proved that the PV system WASN'T leased. It was a DIY install so he didn't have a receipt aside from the invoice for the materials and initially that wasn't good enough. The buyers bank was asking him to prove a negative...... apparently they hadn't taken any logic classes and didn't know that you... you can't prove a negative

Appraisals are intended to protect banks mostly and in my experience skirt the line of being a scam. The appraised value always seems to suspiciously fall very close to most offers when selling a home in my experience....

[PugPower]

In San Diego county, with one of the highes install numbers in the country, homebuyers and agents have become more savvy about the benefits of residential PV systems. This transition has taken some years, but with the sky high prices of SDGE it's easy for many homeowners and would-be buyers to see the benefits of a residential PV system especially when you factor in net-metering on top of incentives and rebates which reduce the break-even period dramatically. RE agents are becoming more informed about the value of installed PV systems and how to market them as more and more homes with pre-installed solar come onto the market. All that being said, if you made you a bad deal and overpaid for your system or signed into a bad lease, power purchase, or rental agreement, of course it will negatively affect the value of your home when it's time to sell. The reduction of the tax credit, proposed changes to net-metering by utilities, and preemptive black-outs may dramatically affect the future solar market driving up the demand for batteries.

[J.P.M.]

Yes... there are market based factors that effect how much you can sell your home for. That's how a run down shack worth maybe $10k can go for $1M because it's located in SF. But there is a TANGIBLE value as well. If I have a solid gold sink in my kitchen we can quibble over the market value of a solid gold sink but it's at least worth the value of the gold its made of. Solar PV is similar. There's a tangible non-market value of solar PV. API has determined that to be 12 years of production. If a home is appraised for $300k and the solar PV is calculated to produce $10k worth of electricity over the next 12 years the appraised value is $300k + $10k. It's that simple.

Whether the next buyer is willing to pay the appraised value or if there's a bidding war or... this or that or... or... or... is another matter. The APPRAISED value is the APPRAISED value and solar adds to the APPRAISED value.

I appreciate your points and understand the concept of appraisals. Still, and as anecdotal information only, I've spoken with more than my share of appraisers and I'd honestly say that probably half of them openly admitted they had no idea of how to value PV system. Speaking with them, I believe what they're telling me. The rest seemed to try to hedge their answers. Such experiences don't tend to inspire my confidence in appraisals as they may relate to PV systems.

If I was a savvy buyer and knew I will spend maybe $5K/yr. on electricity over the next 12, and in any case less than that n$10K you use, why would I pay for something I won't use or at least not use that a negotiating tool to garner a lower overall price ?

BTW, one other point: Who says the appraised value is an absolute number that sets an and inviolate number on the value of a property. If it does, that would make negotiating a price meaningless. I thought one big reason for appraisals is to help set an upper l limit for a mortgage.

[nwdiver]

The difference is if the PV system is leased or owned by the homeowner. A leased system is more than likely looked as a liability then an asset.

Sure, I think leases are almost universally seen as a bad idea. If 12 years of lease payments add up to $15k and 12 years of production is $10k then your PV system has 'negative' value. Of course if you leased the system you also didn't pay anything upfront....

[SunEagle]

Yes... there are market based factors that effect how much you can sell your home for. That's how a run down shack worth maybe $10k can go for $1M because it's located in SF. But there is a TANGIBLE value as well. If I have a solid gold sink in my kitchen we can quibble over the market value of a solid gold sink but it's at least worth the value of the gold its made of. Solar PV is similar. There's a tangible non-market value of solar PV. API has determined that to be 12 years of production. If a home is appraised for $300k and the solar PV is calculated to produce $10k worth of electricity over the next 12 years the appraised value is $300k + $10k. It's that simple.

Whether the next buyer is willing to pay the appraised value or if there's a bidding war or... this or that or... or... or... is another matter. The APPRAISED value is the APPRAISED value and solar adds to the APPRAISED value.

The difference is if the PV system is leased or owned by the homeowner. A leased system is more than likely looked as a liability then an asset.

[nwdiver]

A PV system may or may not add value to a property.
A couple of reasons:
1.) The biggest one might be that a thing (e.g., a home) is only worth as much as someone is willing to pay for it.
2.) The value in savings in electric bills, which seems to be what most dart throws of what if any value a PV system may add to a property's value, is highly dependent on how much electricity a resident uses. An existing system that's oversized with respect to the next owner's electric bill will be worth less than if the next owner is a conservative electricity user. So, for example, a PV system that generates 20,000 kWh/yr. will, and somewhat but perhaps logically, at best, add only half as much value to a potential owner who uses only 10,000 kWh/yr. Sooner or later that factoid will become more common knowledge.
3.) Believe it or not, for several reasons some potential home buyers do not like or want PV systems on their home. They may like the home but not enough to ascribe any value much less added value for an attached PV system. If nothing else, that will lower the size of the pool of available buyers.

I appreciate that reasons 2 & 3 mean little to the average buyer due to buyer's mostly utter ignorance with respect to PV, but that situation may be coming to an end. Besides, savvy buyers will jump on any actual or perceived negative aspect of a home as a negotiating tactic. Not everyone likes PV.

Yes... there are market based factors that effect how much you can sell your home for. That's how a run down shack worth maybe $10k can go for $1M because it's located in SF. But there is a TANGIBLE value as well. If I have a solid gold sink in my kitchen we can quibble over the market value of a solid gold sink but it's at least worth the value of the gold its made of. Solar PV is similar. There's a tangible non-market value of solar PV. API has determined that to be 12 years of production. If a home is appraised for $300k and the solar PV is calculated to produce $10k worth of electricity over the next 12 years the appraised value is $300k + $10k. It's that simple.

Whether the next buyer is willing to pay the appraised value or if there's a bidding war or... this or that or... or... or... is another matter. The APPRAISED value is the APPRAISED value and solar adds to the APPRAISED value.

[J.P.M.]

Solar Panels absolutely do increase the APPRAISED value of your home. There's an approved metric by the API. They add the value of 12 years of production.

A PV system may or may not add value to a property.
A couple of reasons:
1.) The biggest one might be that a thing (e.g., a home) is only worth as much as someone is willing to pay for it.
2.) The value in savings in electric bills, which seems to be what most dart throws of what if any value a PV system may add to a property's value, is highly dependent on how much electricity a resident uses. An existing system that's oversized with respect to the next owner's electric bill will be worth less than if the next owner is a conservative electricity user. So, for example, a PV system that generates 20,000 kWh/yr. will, and somewhat but perhaps logically, at best, add only half as much value to a potential owner who uses only 10,000 kWh/yr. Sooner or later that factoid will become more common knowledge.
3.) Believe it or not, for several reasons some potential home buyers do not like or want PV systems on their home. They may like the home but not enough to ascribe any value much less added value for an attached PV system. If nothing else, that will lower the size of the pool of available buyers.

I appreciate that reasons 2 & 3 mean little to the average buyer due to buyer's mostly utter ignorance with respect to PV, but that situation may be coming to an end. Besides, savvy buyers will jump on any actual or perceived negative aspect of a home as a negotiating tactic. Not everyone likes PV.

[azdave]

Solar Panels absolutely do increase the APPRAISED value of your home.

Not true when I had my home appraised. The appraiser assigned no value to my 1-year old 6.63kW grid-tie system even though they were paid for in full and I could prove that they saved enough in utilities to make an extra house payment each year for the next 19 years. I showed them I had 19 years remaining on a grandfathered contract with the POCO that was transferable at no cost to any new homeowner for the life of the contract. The appraiser and his supervisor both said they could not assign any value to a residential PV system as a matter of company policy.

When neighbors ask me if they should go solar too I tell them if they can't afford to purchase the system outright with cash they should not bother. The payback and entanglements are way too risky if you go solar on a lease or a loan.

[Paul Land]

The one big down side on residential solar is always the same whether you lease, finance or purchase out right. The average home owner stays 5-7 years in that home and moves on.

[RichardCullip]

Thank you for your cautionary tale about leasing solar panels. I'm sorry to read about your sad situation.

[nwdiver]

I've never understood this idea that solar panels are separate from a home. ~70% of the cost of the system is the installation. Economically they become as much a part of the house as the windows or the roof. You weren't able to find a buyer to assume the loan on the panels? The weak point here is educating realtors. A home with PV should be a huge selling point if people weren't so ignorant....

Solar Panels absolutely do increase the APPRAISED value of your home. There's an approved metric by the API. They add the value of 12 years of production.