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home > solar power
Installing a grid intertied
solar electric power system


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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 a Sustainability Expo and writing articles for local papers

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.

Below is my bill from Central Maine Power for March/April 2012 - using 26 panels (about 4.0kW peak AC power):

Note that since all net metering bills are hand processed, they actually highlighted my credit for me!

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.
Chart showing actual kWh vs estimated with costs

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.
Graph of Estimated Solar Power vs Actual Consumption 2008-09
(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 2012 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! 
(after adding more panels our net bill in the spring of 2012 was negative - until we purchased a Chevy Volt electric vehicle.)

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 $7000 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.
Update on tax breaks:
We got our taxes done by our accountant in 2010, 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 works out to date:
Estimated system cost $20,615
30% Federal Tax break (2009) -$1,772
30% Federal Tax break (2010) -$3,684
30% Federal Tax break (2011) -$1,582
30% Federal Tax break (2012) -$287
Maine Solar Rebate -$2,000
Net system cost $11,290*












*Note that our total federal tax break add up to $7038 because we continued to add panels to the system and got credits each year we added panels.

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.

March 2013 Update:
Costs of the equipment have dropped significantly and the break even point is within 12 months - assuming 100% financing at less than 5%.  My original panels cost $3.29/Watt, but the 3 245Watt panels I added in March 2013 cost $1.08/Watt making a new system much more affordable.
This tool from SolarEstimate.org can help you look at costs and return on investments.  Below is my panel purchase history - I always looked for the very best deal I could find within reasonable driving distance (to save on shipping costs). 

You can use this Free Solar Panel Price Survey to research the lowest currently available panel prices.


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