Installing rooftop solar panels makes money for a homeowner and therefore is an investment in the business of producing electricity. As a business owner you will have a guaranteed customer - your power utility - that by law will buy all the extra electricity you generate. Your “star employee” will be the sun. The sun shows up to work during daylight hours every day and requires no payment for its services. For maximum exposure to the sun in the northern hemisphere your solar panels should be facing South, Southwest or Southeast. The sun will be a little moody on cloudy days but what employee isn’t?
Unlike other businesses, you don’t have to collect revenue, train employees, keep payroll, or fix or replace mechanical parts. Solar panels are solid state (i.e. digital) devices that typically come with a 25 year warranty in addition to a 10 year installation warranty. The revenue collection is automatic using a special electric meter called a “net meter” that automatically runs backwards during the day while you produce electricity and then runs forwards during the evening and night when you buy back the electricity you need then. The net meter running backwards acts as a store credit for an essential service.
Although solar panels are reliable enough to justify a 25 year warranty, the flipside is that it would be good if the solar panel manufacturer remained in business for 25 years to honor your panel warranty in case you got a rare manufactured defect. Many panel manufacturers are now offering performance warranties that guarantee a linear decay in power production of at most 1% per year. It is important to include this power loss in the system design and cost benefit calculations.
Buying solar panels can also be thought of as pre-purchasing years of electricity up front (called the payback time period) and then getting free electricity for the balance of the 25 year warranty time period. Even after the warranty expires you should still get some free electricity for years. For conservative cost benefit calculations however we’ll stick to exactly the 25 year warranty time period.
Mitigate high electric bills. Most utilities charge higher rates for increased use of electricity, called a Tiered rate structure, going up from Tier 1 bracket (the lowest rate). This is very similar to the way income taxes have higher tax rates for higher income brackets. Buying solar panels is analogous to getting a tax deduction that has a higher impact for higher electrical usage. Likewise, a small solar panel system that only wipes out your Tier 3 and higher usage will have a faster payback period than a larger system that replaces Tier 2 and higher and also some of your Tier 1 usage.
Hedge against electric price inflation. Utility companies are asking governments to approve a 4% or higher rate annual inflation to keep up with their higher expenses for fossil fuels and refurbishing aging nuclear power plants. Historically the rate increases have averaged 6%+.
Replace energy from dangerous nuclear, coal and natural gas sources with low emission renewable energy. Tired of the risks of nuclear radiation (e.g. Fukushima, Three Mile Island etc.) from power plants operating past their warranty period and in earthquake zones? Tired of environmental damage from hydraulic fracking, natural gas pipe leaks, energy loss from transmission lines, deep water oil spills and coal fired power plants?
Good place to park your money. Banks are giving near Zero percent interest on savings and speculators are driving the stock market up and down. With payback time periods of around 8 years, solar power has over a 200% return on investment over 25 years. This works out to 8% per year or 3% compounded per year for 25 years. A warrantied investment is as good as we’ll get to a guaranteed investment.
Ownership
Power Purchase Agreements or Lease Agreements
Buy on credit card or line of credit
One of the great things about solar panel installers is that many will come to your home and give you a free estimate for a system that will fit on your roof and replace your Tier 2+ usage. Some will give you the option to buy the system outright or get “no money down” financing via a power purchase agreement (PPA).
If you don’t have the $8K to invest in a small system, a “no money down” PPA may seem like a good option. However please note that a power purchase agreement lasts 15-20 years and has to be passed on to any future owner of your property or you have to pay off all future payments which include future interest. You are also buying the balance of your electricity from your utility company. As a result you are still vested in knowing how much energy your leased solar panels will produce and understanding how the cost benefit calculations were done and the final residual value payment to own the panels.
A better alternative is self-financing if you can get a line of credit or credit card with 9% interest or better, you can beat the value of a PPA and have more flexibility to pay off the balance at any time without paying future borrowing interest.
Power Purchase Agreements have an advantage in that they may facilitate getting American made panels installed on your roof more affordable. As of Nov 15, 2012, SolarWorld, SunPower and Solon have American made panels and also offer PPAs. For these companies, PPAs are a source of stable revenue and American manufacturers can greatly benefit from revenue stability during a recession and competition from duty-free imports from China, Taiwan and Korea.
Another approach to buying a solar panel system is to find deals on solar panels yourself and then get a local installer to price out the balance of the system and their installation fee. The advantage of this approach is that if you are picky about an established track record or the solar panel manufacturer staying in business for 25 years or want American made panels, you will have more options by doing that search yourself. Typically solar panel installers have a good deal on only one panel manufacturer. You can also avoid sales tax by purchasing panels from out of state and in some cases you can get great deals on reduced or free shipping. You can purchase the panels separately from the inverter(s), rails and mounting components. This approach gives you the biggest bang for the buck but requires that you understand some basics of solar panel design. If you want to try this approach see the “Special Deals” section and the “Getting Started” sections of this website.
For our purposes we are assuming your house has a sloped roof and in an urban area of the US and connected to a power utility company. For flat roofs (e.g. commercial buildings), there are more options on the table including solar trackers, thin film PV and concentrated PV. For rural areas wind turbines may be a more cost efficient option.
In comparing say a 240 Watt Solar Panel to a 60 Watt light bulb, one obvious difference is that the solar panel produces energy and the light bulb consumes it. Another difference is that Solar Panels are rated on Direct Current (DC) and the light bulb is rated on Alternating Current (AC) and uses exactly that wattage while it is on.
On the other hand, solar panels produce anywhere from zero watts (e.g. overnight) up to its maximum rated wattage. Solar panels will only produce their rated wattage on a clear sunny day if the ambient temperature at the panels is 70 degrees (e.g. room temperature) and if the panels are perpendicular to the sun while the sun is near its high noon position.
Most solar panels up to 260 watts have 60 solar cells arranged in 10 rows of 6 cells each in a portrait orientation. The orientation is relative to someone looking at the panels from street level. A landscape orientation is just turning the panels 90 degrees (analogous to printer page layout). Larger panels have 72 cells and in rare cases 96 cells.
If your panels are facing the road, some people prefer to choose panels with a dark colored grid instead of the more common white/silver grid which comes at a slight reduction in rated wattage.
The direct current from your solar panels has to be converted to AC power via one or more inverters (with a built-in transformer).
The AC power output from these inverters can be represented as a fraction of the rated DC wattage of the panels. This fraction is called the derate factor. For example, a derate factor of 77% means a 260 watt (DC) panel is going to produce at most 200 watts of AC power.
The derate factor includes the energy loss from converting the rated DC to AC but also includes the loss from the panel aging discussed before, the average ambient temperature of rooftop solar panels at your location and energy loss from snow, dirt or other debris on the panels. The latter problem is especially significant in low rainfall areas and if the panels are installed flat on a flat roof.
The dirt and shading problem may affect only certain panels at certain times of the day but will reduce the power of the whole system if a single system inverter is used. Individual panel inverters, called micro-inverters, maximize energy production at each panel and also replace dangerous high voltage DC wires along your roof with much safer AC power lines and provide individual panel monitoring capabilities. Panels have 2 kinds of connectors so it is important to get a micro-inverter that matches the panel connection.
Watts is a measure of power and watt-hours measure energy. For example running a 60 watt light bulb for 4 hours requires 240 watt-hours of energy. This is like the analogy of mph being an instantaneous power of your car and the energy is the number of miles driven (average mph times hours = miles).
Because the cost benefit calculations are based on monthly and annual usage, the watts and watt-hours easily get into the thousands so we instead use kilo-watt (denoted kW) and kilo-watt-hour (denoted kWh).
A solar panel system comprising of 10 – 260 watt (DC) panels will produce at most 2 kW (AC) of power at any given point in time.
The rated maximum kW (AC) of the system is the size and the power of the system.
A same 2 kW system may produce 3600 kWh annually in San Francisco, CA and 4080 kWh annually in Phoenix, AZ.
The price of the system is based on the size/power of the system, not the amount of energy it produces.
Fixed position solar energy production varies according to cloud cover, shading, ambient temperature, horizontal tilt or slope of the roof and the angle the panels are facing, clockwise from due north, called the azimuth. Depending on the tilt and azimuth of your panels and the amount of annual sunlight for your location there is a multiplier that takes the size of your system in kW and obtains the expected annual energy production, kWh. This multiplier is called the Solar Potential.
A widely promoted ideal tilt from horizontal for your solar panels is your latitude minus 15 degrees. A less than ideal tilt will not lose as much power as a greater than ideal tilt will.
In the example above, the solar potential for San Francisco south facing panels tilted at the ideal 23 degrees is 1800 kWh (per 1 kW system). For south facing panels in Phoenix tilted at the ideal 18 degrees, the solar potential is 2040 kWh (per 1 kW system).
The "balance of the system" is a general term referring to all the remaining items needed for attaching the panels to the roof and getting the power to your main junction box.
This definitely will include the rails that the panels attach to, the clamps for these attachments and roof-mounts that hold up the rails 4-6 inches above the roof. The more roof-mounts per rail the better they will hold up to high winds.
The inverter(s), optional transformer and DC disconnect are often considered part of the balance of the system.
Additional items also include grounding lugs/clips/jumpers, #10 or #8 electrical wire, metal conduit to run under the roof eave, warning signage and a 15 or 20 amp circuit breaker.
Some online panel retailers will offer free advice on designing the balance of the system given your description of how many panels will fit on your roof(s), their brand and wattage and the installation orientation (portrait or landscape).
Some online retailers will offer a complete “grid-tied system” which includes matching panels and assumes all the panels will fit on a single roof in the more common portrait orientation.
Various government jurisdictions have financial incentives for PV solar panels. Check out the US Department of Energy Database for State Incentives for Renewables & Efficiency (DSIRE) for details.
The federal tax credit formula is on Form 5695, lines 23 and 24. The formula reads a minimum of 30% of the total cost and $1000 for each kilo-watt of system power. I believe in this case the kW can be the higher DC number but do check with your installer and/or tax specialist.
Get a compass or compass app for your smartphone. For the Android there is an app called “GPS Status”. The iPhone may have a built-in app or you can get the “Digital Compass Free” app. Some apps include a gyroscope if you want to measure the tilt of your roof.
Use your compass within your home to determine which walls are closest to facing South or Southwest or Southeast.
Find a drawing of your home layout including square footage. This is typically included in a home appraisal. You will need to break out the square footage under each roof you have.
Take a look at your roof(s), for example on Zillow, and find out what roof types they are.
Logon to your power utility company’s website. Find out your average monthly electric bill and monthly kWh usage.
At this point you are ready to get a few free bids on solar installation. As long as they get on to your roof you can find out how many panels will fit on your roof(s), what direction they will be facing and your roof slope.
If you have hip roofs , you can alternatively use the Roofspace Estimator tool to guesstimate the number of panels that will fit.
Then create a login on this website to compare bids (including purchase bids or PPA bids) using a standard set of cost-benefit assumptions and generate all the metrics discussed here.
Copyright © 2011-2012 Next Millennium Technology Corp.
Use of this Web site constitutes acceptance of our Terms and Conditions of Use and Privacy Policy.
