How to Save a Lot of Money on a Solar Installation
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Installing a rooftop solar system, whether it's a DIY project or you’re having it installed, is a costly affair. Solar panels, along with the associated inverters, solar panel controllers, electrical panel upgrades, cabling, conduit, etc. can easily run into the tens of thousands of dollars. Fortunately, there are ways to save money - and sometimes a lot of money.
Multiple Bids
If you are getting it installed, the first and most obvious way to save money is to get multiple bids. Here in Las Vegas, there must be thirty companies that sell and install solar systems. We wanted to compare the cost of doing it ourselves versus having it installed, and our preference was for a local company that had been in business at least five years and had good reviews. We checked with the Better Business Bureau and the Nevada Contractor's Board as well as whatever reviews we could find online. Be aware that some of the nationwide companies have great reviews in some locations and poor in others. For example, one multi-state company we looked at had hundreds of great reviews but after looking more closely, all the good ones were for their Phoenix office, and the handful of reviews for the Las Vegas office were mediocre to poor.
We eventually narrowed it down to three companies. All three gave us excellent, professional presentations, but the three bids did vary by more than a thousand dollars.
Don’t Buy More Than You Need
Start by looking at your utility bill - you want to know the average number of kilowatt-hours (kWh) you consumed over the past year. If your electric utility provides a net metering plan (more on this later), you only need to produce enough power to cover your average consumption. If you don’t have net metering, you may need to install a larger system to cover the peak demand periods and a battery system to store energy for nights and cloudy days.
Also consider whether your electrical consumption will be increasing. We plan to convert our gas appliances to electric and switch to an EV in the next year or two, all of which will add to our electrical needs. If you are getting bids from reputable solar providers, they will help calculate how large your system will need to be, taking into account your present as well as your future needs. If this is a DIY project, I’ll have a later blog that will help you determine the right size system.
The upshot of all this? It can be complicated to figure out the right size system, but don’t buy a system that is larger than you need. If you are getting multiple bids, question any that propose a significantly larger or smaller system. The difference may or may not be for a good reason - maybe only one of the solar installers noticed the big tree that will shade part of the array during the afternoon sun. Or maybe one of the bids forgot to take into account the EV charger you are planning to install.
Federal Tax Credit
As I mentioned in an earlier blog, the Federal Government offers a tax credit that can offset up to 30% of the cost of implementing solar energy, but there are some caveats to be aware of. First, this is a tax credit, not a rebate, i.e. a credit that can be applied to the taxes you owe. If your taxable income is low enough that you don’t pay any taxes, a tax credit does you no good. Likewise, if you just installed a $20,000 solar system - netting a $6,000 tax credit, but you only owe $2,000 in taxes, you can only use $2,000 of the tax credit. Fortunately, the unused tax credit can be carried over into future years. (BTW, there are some similar federal tax credits that can’t be carried forward, and it’s a little confusing as to which can and which cannot. I'll talk more about them in a later blog, too.)
One thing to be aware of is the common claim by solar installers that if the roof needs repair prior to installing the solar panels and the repairs are rolled into the cost of the solar installation, it too, qualifies for the 30% tax credit… even if the entire roof is replaced. Two of the three solar companies that we got bids from said something like “I’m not a tax expert, but” followed by assurances that the roof repairs did qualify for the tax credit. In my research, however, roof repairs are not eligible for the tax credit unless the roof needs to be reinforced to support the weight of the solar system.
For more information on the solar tax credit, see the relevant IRS page here. https://www.irs.gov/credits-deductions/residential-clean-energy-credit.
Net Metering
Most electric utility companies allow net metering, which means they credit you for any extra power your home solar array produces. For example, the solar system on your roof may generate more electricity than your home uses during daylight hours. If the home is net-metered, the electric meter will run backwards during the day, providing a credit against the electricity that is consumed at night or other periods when the home's electricity use exceeds the system's output. Customers are only billed for their "net" energy use.
To carry this a step further, most homes use a lot more energy during the summer and winter months when they're using AC and/or heat than they do during the spring and fall months. Fortunately, any extra credits are carried over each month, so ideally, the solar array will be sized so that the extra energy produced in the shoulder months will offset the extra energy consumed in the summer and fall.
Your utility may not credit the power you send back into the grid at the same price as the power they provide you, so bear this in mind when sizing the array. For example, NV Energy, our electric utility company, only credits the power sent back into the grid at 75% of the retail cost, so to break even, the system must produce more energy than the household consumes.
If you do have net metering and a properly sized solar array, you should never have a utility bill again. (Actually, here in Nevada, we would still have the monthly $18 connection fee.)
Increase in Home Value
Research by Zillow indicates that the average home in the U.S. shows a 4% increase in value after adding solar. Since the average home price in southern Nevada is $425,000, this means a homeowner here should see about a $17,000 increase in property value. This increase won’t be realized until the house is sold, of course, but if and when it is sold, that $17,000 would offset a large part, if not all of the cost of the solar installation.
State and Local Incentives
Many states, counties and local utilities also offer tax credits, rebates and other incentives for installing solar and other renewable energy sources. For example, Nevada Energy offers up to a 50% rebate on home battery banks with certain metering plans.
Here is a list of all the state and local incentives. https://www.dsireusa.org/
Another way to save on the cost of the solar installation is to reduce your energy consumption, thereby reducing the size of the solar array you would otherwise need. The amazing thing is that with all the rebates, tax credits and other incentives out there, it costs almost nothing to make your home better insulated and to replace your older, less efficient appliances, furnaces and air conditioners with new, energy efficient ones. I’ll talk about all these in my next blog.
See you next week…