2 Key Questions When Choosing Residential Solar

Thinking about using solar electricity at home to reduce the size of your electric bills?

There are two key considerations in finding the right solar power solution for your home. The first concerns the quality of the service and products, along with the terms of the installation, and the second is the decision of whether to own or lease the system.  Most people thinking of residential solar solutions install panels on the roof of their home, and this post assumes a roof installation for purposes of discussing examples.  The principles discussed in this post, however, apply equally to installing solar panels on a slope or elsewhere around your home, whether to heat a pool or provide electric power for use in your home, or both.

First, you want to do enough research to ensure you have reason to trust the people installing the solar electric system, especially on your roof, and you need to understand the type of warranties that accompany the purchase.

  • Speak with at least 2 and preferably 3 different installers and obtain multiple bids before making a decision.
  • Confirm the installer has experience working with roofs similar to yours.
  • Ask for at least two references from others who own roofs similar to yours.
  • Get a comprehensive written warranty covering the installation services as well as all the products that are installed.
    1. Installers should be replacing any tiles they damage.
    2. Warranties against leaks should run at least five years from installation.
    3. Ask about extra fees that may be assessed in connection to the warranty. For example, are there any type of inspection fees to send someone out and assess whether damage is covered by the warranty?  If so, have them disclosed as clearly as possible.

Second, consider whether you want to own or lease the solar system.

Before assuming you cannot afford to buy the system, find out about available subsidies, both federal and state, that will offset or reduce your out-of-pocket costs for the purchase.

In order to calculate the return on your investment properly, you need to understand your electric bills for the last twelve months, in addition to applicable subsidies.  Your installer should be able to help you calculate the return on your solar investment.  If your purchase calculations suggest that it takes more than seven years to recoup your investment, you are not getting a good deal – get better terms or find another installer.

As detailed below, don’t assume your purchase cannot be financed with a low or zero interest loan.  You may not need to make a large lump sum payment and may be able to pay over many years.  Try to arrange the payments you make to be less than your average monthly electric bill. For example, if your average electric bill is $250 per month and you qualify for a no-interest loan for $10,000, you should structure payments for around $200 a month over 50 months (or just over 4 years).

Considerations for owning your solar system:

  • If you want to put as little money down for the installation as possible, and if you have good credit, you may be able to have the system installed at little or no cost; but you will be leasing it and any subsidies will likely pass through to the installer.
  • If you have funds set aside, you can buy the system and pay for installation out of pocket. Your final costs will be reduced by the amount of the subsidies, which you will keep, likely in the form of tax rebates or reductions.
  • If your credit is good, you may be able to obtain a low or no-interest loan, and avoid a large lump sum payment by paying over a period of years; find an installer familiar with such programs. Enerbank USA is but one commercial lender that collaborates with solar installation businesses to offer low and zero interest loans to consumers with good credit who want to finance their installation.

Considerations for leasing your solar system:

  • There may be a few points in the lease terms you can negotiate, such as the increase in the monthly billing (eg, 1 or 2 percent per year), but the vast majority of terms in the lease will likely be non-negotiable and will be adverse to you.
  • Over the course of the lease, expect your monthly electric payments to rise every year.
  • Leases can run 20 to 30 years, and if you sell your home before the lease ends, it will be your responsibility to ensure the buyer of your home agrees to take on the lease.
    1. If you are 10 or 15 years into a 25-year solar lease when you decide to sell your home, the buyer may want a new solar installation and may not be interested in the aged equipment on the roof.
    2. There will likely be additional premiums, penalties and costs you incur in trying to buy the lease out early. They are disclosed in the long, complicated lease you need to carefully review.

The time and cost investment to use solar power for your home are significant, and you will be living with the consequences of your research decisions for years to come.  Proceed with care!