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FINANCING |
Part of the original impetus to
install solar panels came from my experience of watching proposed
feed-in-tariff legislation get strangled to death by well intentioned
members of the Maine Utility and Energy committee. I testified and then
spent many long afternoons in the committee room observing the deliberations. The original bill was drafted by
the grassroots organization that I am an active member of here in Maine.
The
Midcoast Green Collaborative has been very proactive in raising
awareness of sustainability in our region by organizing an annual
Sustainability Expo.
I had hoped that the bill would pass as drafted and as-such would offer
a significant incentive by requiring the electric utility to purchase
our power at a very attractive rate for at least 30 cents/kW. In
late May, Vermont became the first state to pass exactly such a bill.
Gainesville, Florida also enacted a similar bill that created a boom in
residential solar installations. Maine's bill does not offer any
real incentive at all, but it is a stepping stone toward a realistic
goal.
In the process of preparing my testimony for the committee I began to
realize that even if the bill did not pass there was another option.
Maine has a net metering law in place that credits the customer the full
retail value of the electricity they export to the grid. So if we were to install
a system that generated all of the electricity that we need then our
annual bill would be reduced to the minimum connection fee of around
$8.00/month. In fact it is more prudent to undersize the system so that
we would not be giving away any surplus - the utility does not pay for a
surplus, just credits for the excess generated power generated in any
given month.
I looked up the last 12 months of our electric bills and then
calculated
the anticipated energy production for a system comprising 21
175-Watt panels and from this determined what our electric bill would be
on a monthly basis. As you can see below our average bill will be much
lower.
The way that net metering
works is that we would bank any surplus credit in the summer and use it
in the winter. As we eventually add more panels, the credit will be
greater.
(You can see how my installation is performing compared to the
estimated solar power on the Real Time
Stats page of this blog.)
We began by looking into
re-financing our house to lock in a low rate during the "economic
downturn" (depression) in March 2009. We had an ARM mortgage with a MegaBank
that would go from the fixed to adjustable rate next year (2010) and we figured that it was a
good time to lock in a 20 year fixed mortgage. We also decided to
go to our local bank for the re-fi to keep the money in the local
economy. I watched the economic indicators and published mortgage
rates carefully and then locked in the loan rate at the lowest point in
the cycle in late May.
We originally budgeted $26,000 for 27 panels that would fill the roof,
but decided to reduce our initial overhead and scale the design back to
a more prudent 21 panels. (Panel prices have dropped significantly
since 2009 and in 2102 are nearly 50% lower due to the Chinese jumping
into the market with massive government subsidies and decimating the US
manufacturing capacity by dumping their cheaper products). By asking for an additional $21,000 on
the re-financing we were able to lock
in a very attractive rate that works out better than an equity loan or
line of credit. We also explored the option of a Maine State
Housing
HELP (Home Energy Loan Program) loan. But they limit these
loans to 15 years and $30K so despite the better interest rate, the net monthly payment would be about the same as the cost
rolled into a mortgage. Our loan officer also advised us that the
paperwork for these loans is significant and there are a lot of
restrictions that could preclude my installing the panels myself.
We determined that the added $21K on our loan would cost us about
$180 more per month over 20 years than what we were currently paying.
When we account for the fact that our electric bill will drop from an
average of $100/month (for Clean Power at 18cents/kWh) to about an
average of
$58.00/month, so I estimated that our monthly budget would only
increase by an average of $122 ($89 to $146 depending on the seasonal
solar gain -- see below). This is not an undue burden for us.
After the loan is paid off it's all positive cash flow!
The Federal Residential
Energy Efficient Property Credit (form 5695)
allows us to deduct 30% of the cost of the system from our taxes, so we will avoid paying
around $6000 in taxes.
Maine's Efficiency Maine program has a
Solar Rebate program, Solar PV systems qualify for rebates of
$2.00/watt for the first 1,000 watts, capped at $2,000. Check the
DSIRE database of
state incentives to learn what you can expect in your state.
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March 12, 2010 update
We got our taxes done by our accountant and got a nasty surprise.
I had thought we would get the full $6185 off our taxes (on form 5695 -
Residential Energy Efficient Property Credit) which gives a 30% tax
credit, but all we got was $1772 with a carry forward credit of $4413
that applies for 5 years. This is because we are both self
employed (filing jointly) and have to pay a lot of self-employment tax.
So this may not be an issue for "regular wage earners".
Check with a tax accountant before you plan on
that big tax break!
However we did get the full $2000 Maine Solar rebate. That
program had run out of funds just before we committed to our system, but
then it was re-funded by the Federal Stimulus deal - just in time for me
to be the first to file for the refund!
So here's how our net system cost worked out to date:
| Estimated system cost |
$20,615 |
| 30% Federal Tax break
(2009) |
-$1,772 |
| 30% Federal Tax break
(2010) |
-$3,684 |
| Maine Solar Rebate |
-$2,000 |
| Net system cost |
$11,590 |
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I am still hoping that the State of Maine will adopt a
substantive
Feed-in Tariff law
in the future that would allow us to sell the power we generate
to the utility at a rate that would bring in enough revenue to cover the
cost of the loan. In fact if the law did offer a substantial incentive
we would probably fill both the workshop roof and the east facing roof
of the house with solar panels since we would ideally be making a small
profit from the sale of the power. This is the central premise of the feed-in tariff plan
-- to incentivize renewable energy micro generators by making it affordable
and even profitable.
BPsolar has a
Clean Power Estimator that helps you understand cost/benefit
trade-offs and return on investments etc. Below are the results
from this very helpful tool. Note that the projected return on
investment is about 15 years. Some of the numbers are quite
conservative and they are based on rounded off estimates, I
expect we will do better than the projections. Keep in mind that
our solar generated electricity is immune from rate hikes while the
utility rates will likely go up by at least 5% annually. This
could be a very conservative estimate as oil prices begin to escalate in
the post peak oil world.
Click here to see the
real time performance statistics of my system. Note: the
information below is based on the original 23 panels installed, I have
added panels since then so the numbers actually look a bit better than
the projections now. |
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