The complete guide to buying solar panels for your home
It seems like most people we know in California have gotten a knock on their door from a solar panel company. Here is a complete guide to buying solar panels for your home in which we cover many of the commonly asked questions.
As every scenario is different from one to the next, this information should not be interpreted as advice specific to any one individual.
Question: How much will it cost?
Answer: This is dependent upon a number of factors including your area, the company, your power need (pool or electric vehicle) and accessories (such as backup batteries). Most of the quotes that we see range from $15,000 - $35,000 in the Southern California area.
As when purchasing any high-cost item, you will want to get multiple quotes. Also, much like purchasing a vehicle, there are a few moving parts so you will want to examine the different pieces of the quotes and can possibly compare then to negotiate a discount. Examples of these charges could include the actual panel purchase, cost to expand the panels in the future, battery sales charges, installation costs, etc.
Question: Are there federal or state rebates available?
Answer: Currently, yes.
You should always consult a tax advisor for advice on any tax-related circumstances that are specific to your individual situation. Homeowners can receive federal incentive payments as a credit on their tax returns in the following year. As the time of this article’s publication, the credit is 26% in 2021 & 2022, reduces to 22% in 2023 and is scheduled to expire in 2024. The credit is based on the total cost of installation, and will typically be included in the solar installation quote. However, since the funds will not come until your tax return is received in the following year, you will need to budget or finance the additional costs up front.
A number of states and localities also offer incentives, so it is important to review these savings opportunities with your installation company.
Question: How do you pay for the solar installation?
Answer: Depending upon your financial situation, you can pay cash up front for the project or obtain financing. Companies will typically have recommended lenders or finance partners, but you will want to shop your own loan at the local bank or credit union just as you would when purchasing a new vehicle. Better financing can usually be obtained through a source that is not the seller.
Some solar installers do not charge an up-front fee for the installation and instead retain ownership of the panels and the electricity they generate on your home. They then charge the household a monthly usage fee. In this model it is important to understand what you own, what you do not own, and how different scenarios may impact you such as electricity use, local utility rate hikes, panel repairs, roof damage, etc.
Question: Will adding solar panels add value to my home?
Answer: Every home’s value is dependent on a number of factors. While we are not real estate experts, we do believe that it depends on your area and your individual property. It is an item that can potentially add attractiveness and desirability.
Question: How long will it take for me to recover the installation costs from energy savings?
Answer: Based on your energy usage and the rising cost of electricity, the installers will include a break-even analysis as part of their proposal. This project would map out when you would be expected to recover the installation costs.
MAJOR CAUTION: Some companies use very aggressive assumptions about the future rising cost of energy to make it appear that you will be saving more money than you actually may realize. For example, if they tell you it would take 6 years to see savings, it is probably safter to assume a 7-9 year payoff if electricity prices increase more slowly. Get an independent analysis so that you can be sure you are getting a realistic estimate of the break-even point.
Question: How do I know which solar company to choose?
Answer: This is obviously one of the more difficult decisions as there are many different companies offering various pricing models, warranties and other guarantees. We have seen very successful installations from great companies and also heard stories of solar purchases gone bad by poor installers offering cheaper solutions or service contracts.
As with any expensive purchase, get multiple quotes from several companies. Consider friends who have had good experiences when asking for referrals. Sometimes the best place to start is with a good roofing company because they will have their opinions as to who does the best job with the actual installation. Some roofing companies even do solar installations or have preferred partners that you can leverage as well.
Question: Do the panels or installation come with a warranty?
Answer: Most companies will offer some guarantee on their work and product. We have seen these be anywhere from 10 years to 25 years depending upon the company.
It is important to consider the length of your guarantees against the expected life expectancy of the panels themselves. For example, a 15 to 20 year warranty is likely sufficient; the panels may need to be replaced due to normal wear and tear after that timeframe.
Question: Will I need to replace my electrical panel? Will my home be able to support a back-up battery?
Answer: As part of the solar quote assessment, you will want the professional to assess your home’s current electrical setup to determine if you are wired properly to support the amount of energy you plan to install in your home. It is possible that you will need to make some enhancements to your electric box prior to installation. The professional will also be able to determine if the existing hardware can support a backup battery, if desired.
Question: Should I replace my roof prior to getting solar panels installed?
Answer: You’ll want to make sure your roof is in good shape before putting panels on for a few reasons. First, your roof will need to be strong enough to hold the extra weight. Second, you will want to make sure your roof is sealed properly and in good condition before adding panels so any damage can be repaired prior to installation. Next, you will want to make sure the life expectancy of your roof is at least close to the life expectancy of the solar panels so that the panels do not need to be removed and re-installed at a later date when the roof is replaced.
Question: Will the solar panels be able to charge my electric vehicle?
Answer: This is something to discuss with the installation team / project designer. If you plan to use an electric vehicle, make sure you have sufficient panels or that the panels can be expanded to meet your needs after your purchase.
If you plan to charge the car at night, you will either need to have a battery that can distribute power generated during the day or use your Net Metering credits (as discussed below) from the utility provider.
Question: I have experienced rolling blackouts in the past during times of high energy usage. Will this continue?
Answer: This is highly contingent upon where you live but rolling blackouts in certain areas like Southern California are likely to continue in the future especially with climate change. Some communities within these areas can more susceptible.
Question: If I do purchase a battery, which one should I buy, and will a single battery be enough?
Answer: That depends on the size of your home and your desired needs. Sometimes when a system is installed, clients are sold one smaller battery (for about $10,000) and are told it will power the entire house. However, when the installers arrive, the clients are then asked, "What room (or area of the house) do you want to have battery power?”
Our warning is that to be sure the company / installer really means the whole house if you want the whole house covered, and that sometimes it can take two batteries to do that. The larger batteries (or two batteries) would likely have more capability but can cost $20,000 or more.
Question: If I want to run my air conditioner, but do not want to purchase a whole home battery, what other options do I have?
Answer: If your main concern is air conditioning, purchasing a small window A/C unit or a portable air conditioner for a few hundred dollars is an option. You can put in your bedroom or a dedicated "blackout" room so that you can keep one room extra cool rather than having the generator or battery needing to power the whole house.
Question: I heard that my utility provider is pushing to get rid of NEM (Net Energy Metering) Billing. What does this mean and what can I do to prepare?
Answer: NEM is when your solar panels produce more power than your home needs and it is put back into the “grid”. You receive a billing credit for the energy that is being created (but not used) so that when you need power at night or if you ever run a power deficit, you are not charged for this energy. The energy you contributed would offset the usage.
If the utility companies were to succeed in removing NEM in the future, the problem is mitigated by adding a battery to your solar system. While expensive - $10,000 for a partial home or $20,000 for a whole home (current estimates) – the battery will allow you to store power generated from the day’s sun and then use it at night.
Question: Do I need to install a backup battery at installation, or can it be done later?
Answer: Generally, this feature can be added later if a need arises, or you decide that you want the additional security of having a backup power source.
Question: Are there less expensive options to provide power during an outage or blackouts compared to having a backup battery installed?
Answer: Yes. It is generally more cost-effective to purchase a gasoline-powered or dual source (gasoline/propane) generator for $1,000 or less to power your home or certain rooms/appliances in times of need. The decision on what size and type of generator you want to purchase will depend on your personal needs. Please reference the below tips for purchasing a home generator.
Question: What other items should I consider when purchasing a generator?
Answer: These are all questions / considerations to discuss with a sales associate or consider when making a generator purchase:
Size:
Do you need to power the whole house?
Can you get by with just plugging in the essential appliances (fridge, lights, etc.)?
Do you have an RV that can be powered via the generator to provide a living space during an outage? The 3500 - 4500 watts run your fridge and provide power to a few items in the house (or run an RV). The 10,000-watt level is more for if you need the whole house to have power including A/C or other large power drains (washer/dryer) for extended periods. There is a significant price difference in the model sizes, as you can see.
Power Source: Most generators are gasoline-only or gasoline and propane (dual source). Generally, when running on gasoline, the generator is more powerful. Propane tanks are a less messy option as well. Having a dual source allows you to use whichever method is available and may be a good option if you are purchasing it for times of need when you might not have all fuel options available.
Fuel Stabilizer: If you purchase a gasoline-powered unit, you will want to use fuel stabilizer. This allows the gasoline to sit in the generator for up to several years and retain its ability to burn properly.
Noise: If your neighborhood is sensitive to noise, consider a quieter model to not be the loud house on the block during the blackout. There are louder and quieter models and sometimes the fuel source also contributes to that if you are using gasoline or propane.
Unit Storage: Where does the generator “live”? Generally, it can be stored anywhere you would store a lawn mower such as a garage, shed, or covered patio area. It is probably best to make sure it is not in the direct sun and not in an otherwise extremely hot environment. Reference the specific model’s recommendations prior to purchase.
Generator Cover: These are great for keeping the dust off so it is ready when you need it. The model of cover depends on which generator you purchase. There are also covers that are approved to be in use while the generator is running (they look like little tents), and they are useful if you need to protect the generator from rain while running.
Movement and Placement: How do I get it where it needs to go? Perhaps consider a wheel kit. The generators can be quite heavy (70+lbs). The kit will depend upon the model you purchase but it is generally around $50-$100 and supplies wheels and a handle that turns your generator into a wagon.
Power Cords: The number and type of cords will depend upon the unit’s capabilities and what you need to power. It can get a bit messy with all the cords running around, so I do recommend getting a three-pronged extension cord that allows you to only use one generator hookup but access three plugs in your home. In theory, you can use multiple splitters to create a number of access points for your needs. Alternatively, you may be able to use extension cords and surge protected power strips, but you need to ensure that they are rated properly for the amps and appliances you intend to use them with.
Conclusion on buying solar panels for your home
We hope that you have enjoyed our guide to buying solar panels for your home. As a reminder, we are not solar power experts and none of this can be construed as advice specific to any one individual.
An investment in solar panels may impact your residence’s value, your taxes, and many other aspects of your wealth. To discuss any of these topics, please set up a time to speak with us.
Contributor
Andrew Hoffarth, CFP® is a Lead Advisor with Financial Alternatives. When he’s not enjoying outdoor activities with his family, he excels at finding solutions for complex financial situations, allowing successful families to focus on what is most important to them. Schedule a time to chat with Andrew.