If you’re considering the installation of solar panels for your home or business, you probably have many questions. We’ve put together a list of solar energy FAQs to help you find the answers you need.
How Solar Works
There are four main components to a home solar energy system: solar panels, inverters, monitoring system, and the new utility net meter.
When the sun is out, your solar panels produce electricity in the form of DC current. Your house runs on AC current, so an inverter or many micro-inverters are used to convert your solar DC current into useable AC current. When your new solar panels are installed, your utility provider will also install a new bi-directional meter. This new meter tracks how much electricity you over-produce and send back to the grid as well as how much electricity you consume from the grid at nighttime. The monitoring system connects to your home’s Wi-Fi and Internet connection to let you and SolarMax know the health of your solar energy system.
How does Net Metering work? In other words, how does my utility company handle my electricity when I have solar panels on my roof?
A home solar system designed by SolarMax will produce enough electricity to offset what you are consuming. During the day your solar panels produce more electricity than you are using. The utility company gives you credit for the excess electricity you produce during the day, which is fed back into the grid. At night you pull electricity back from the grid to power your home, using those credits you banked during the day. This is called “Net Metering.”
Solar panels have a life span of 30 years. The cost of buying, financing or leasing solar panels is much less expensive than paying your utility provider for electricity for the next 30 years.
In general, if you are already able to afford your electric bill then you can afford to go solar. If you have average credit rating or better then you may qualify for a $0 down solar loan or solar lease. Even if you have bad credit there are options like the HERO program where you can use the equity in your home as collateral.
The Cost of Solar Panels
There are four main components to a home solar energy system: solar panels, inverters, monitoring system, and the new utility net meter.
At SolarMax, we aim to offset your entire electrical bill, so we look at how much electricity you used in the last 12 months and then calculate how many solar panels you will need. Some people use very little electricity and will therefore need only a few panels. On the other hand, some people use quite a lot of energy and will need dozens of solar panels on their roof. So the quantity of solar panels depends on how much energy you use.
Therefore the cost of your solar energy system is determined based on how much energy you need it to produce. This cost involves a lot of different variables that affect the type and quantity of solar panels needed to produce what you need. Some of these variable are the pitch and orientation of your roof, shading, local weather conditions, and how much roof space you have.
The type of financing or leasing you choose will also affect the overall cost of your system.
Some people have the money to buy their solar energy system all at once. These people typically look at their solar panel purchase as an investment.
If you were to pay cash for your solar panels, it typically takes about six or seven years to see a return on your investment. In other words after six or seven years, you’ve saved enough money by not paying your utility company for electricity that you now have recouped the cost of your system in electricity savings. From here on out, you are generating free electricity and, for the average solar owner, saving hundreds of dollars a month.
Not everyone has the money to buy their solar system upfront and would prefer to buy their panels with no down payment. Also, many people are just looking for some immediate monthly energy savings and they want protection from constantly rising utility rates.
In this case you could easily benefit from financing the purchase of your solar panels.
In a lot of ways, leasing your solar panels is similar to financing them. You are essentially just paying a lower, fixed monthly payment for your electricity. SolarMax offers solar leases (called a power purchase agreement) as an official Sunrun partner.
The reasons people lease through Sunrun are:
- Sunrun insures your solar system instead of you placing it under your homeowners insurance (i.e. no deductible for a claim).
- If anything breaks, Sunrun fixes it.
- Maintenance (which is virtually unnecessary with solar panels) is also covered.
- Roof is guaranteed by Sunrun for 10 years.
For homeowners who do not want to do a credit check or have an additional loan count against their debt-to-income ratio, then PACE financing may be a good choice. SolarMax is partnered with CaliforniaFIRST to provide PACE financing.
PACE stands for Property Assessed Clean Energy. PACE is different than a traditional loan based on your credit. PACE is structured like a tax assessment on your property. Rather than paying monthly payments to a lender, you pay your installments through your property tax bill.
Some reasons homeowners choose PACE:
- The homeowner is only paying on tax assessment and can write off interest payments (similar to mortgage interest).
- The loan does not show up on a credit report and therefore is not calculated in the homeowner’s debt-to-income ratio.
- No hard pull on your credit report is done, just a soft pull which does not affect your credit score.
- Repayment terms can be anywhere from 5 years to 30 years.
Solar Tax Credit
When you purchase or finance your solar panels (not lease or power purchase agreement), then you may qualify for the Investment Tax Credit. Until the year 2019 the tax credit you receive is 30% of the total cost of the solar system. For instance, if your solar panel system costs $15,000, then you solar tax credit is $4,500.
The solar tax credit will get smaller, and eventually disappear altogether:
- until 2019 = 30%
- 2020 = 26%
- 2021 = 22%
- 2022 = 0%
About the solar tax credit:
- You can claim the solar tax credit within the year your solar system is officially turned on – not the year in which you initially signed an agreement to start your solar project.
- If you don’t use your entire tax credit the first year the balance rolls over to the next year, for up to 5 years.
- The total cost of the solar project is included in the calculation for your tax credit. This includes a new roof if that was necessary to add solar panels, any work done to accommodate building code or city sign-off, upgrading of your main electrical service panel, etc.
To claim your solar tax credit, simply enter the required information into form 5695 when you file your federal tax return. You can tell your tax preparer that you went solar in the past year and they should be able to handle the details. If you prepare your taxes yourself then be sure to include form 5695 in your return. Since everyone has a unique tax filing scenario, you’ll want to talk to your tax professional first to understand how it works specifically for you.
About Your Free Consultation with SolarMax
The first step in evaluating solar can be to have a friendly energy consultant from SolarMax Technology come out to your home to provide a solar consultation. You will want to have your latest energy bill on hand for your consultant to review with you.
During your in-home analysis SolarMax will cover these topics:
- Your Goals: An assessment of what your energy saving goals are in order to show you the purchase, finance, or lease options that meet your goals.
- Property Analysis: An inspection of your roof, electrical panel, and potential shading issues.
- Energy Consumption: Review of your last 12 months of electrical usage from the back of your most recent utility bill.
- Solar Savings Analysis: The properties of your roof combined with your energy consumption data are calculated to determine your solar system size and the types of panels needed to offset your energy consumption.
- Identify Available Rates: Depending on your savings goals, you are presented with various finance or lease terms that match the monthly payment and the payoff period you prefer.
- System Design: A preliminary design of how the solar panels will be placed on your roof is created for you.
- Proposal: A proposal is finally generated that summarizes all the information that was collected and calculated. Your proposal shows the terms of your solar purchase, finance or lease, and is ready for your review and approval.
The Solar Installation Process
Believe it or not, the actual installation time to put solar on your roof is only about 2 days. However, you can expect the whole process to take about 60 days. Why so long? A solar installation has many steps that involve multiple inspections and permits through your city and utility provider. If you have an HOA, then they are involved as well to get approval for your solar project. These outside entities handle their permits and inspections on their own time table and it can either be fast or slow. SolarMax has been a local California installer for over 10 years. We have established good working relationships with the local city permitting departments, utility inspectors, and many HOAs, so our process is streamlined.
At SolarMax, we have experienced and professional roofers who first install mounts underneath your roof tiles. We install on all types of roof tiles including Spanish-style clay tiles. Long metal racks are then placed horizontally on the mounts. At this point the wiring, micro-inverters and the solar panels are attached to the racks. Wiring is typically routed through your attic space and comes out on the side of your house next to your main electrical service panel to be hooked up to your house and utility meter.
SolarMax offers a 25 year warranty covering workmanship which includes the work done on your roof. This ensures that you don’t have to worry about damage or leaks from the solar panel installation.
How Solar Affects Your Home Value
Yes. Several studies show that purchasing or financing solar panels on your roof increases your home value.
- According to the Berkeley National Laboratory, for each 1kW of solar system size your home value increases by $5,911.
- The National Bureau of Economic Research says that solar adds 3.6% to the sales price of a home, and they state that the increase of your home value is $22,554 on average.
- The Colorado Energy Office did an analysis on how solar impacts a home’s market value and marketability. They found that owned (purchased or financed) solar systems typically increase market value and almost always decrease marketing time. Leased PV systems caused delays or issues with the sales transaction in a number of cases.
If you own your solar panels free-and-clear of any loans then you do nothing different when selling your home. Of course most buyers see a solar system as a huge benefit to purchasing your home with solar so, according to 3rd party research, you can sell your home for a higher price and possibly faster.
If you have financed your solar panel purchase and still have payments to make then you can pay off the system at the time of closing through escrow. Often times a solar loan requires that the loan be paid off when transferring ownership to a new homeowner. Since your home probably has gained additional value from having solar panels on it, that extra selling price will likely more than cover the cost of paying off the existing solar loan.
If you have leased the solar panels on your home, then you have two options with SolarMax. Our leases are through Sunrun and you have the option of paying off the system at the time of closing escrow or you can transfer the lease to the new homeowner. Sunrun guarantees the lease transfer regardless of the new homeowner’s credit. Sunrun guarantees this because in the past home sales didn’t always transfer cleanly, making it harder on the homeowner to sell their home.
At SolarMax you can buy a battery to go along with your solar energy system. Depending on the brand, that battery can be used as a backup power source during blackouts and/or used to store excess energy produced by your panels during the day to be used at night.
No. For safety reasons, power utilities do not allow solar panel energy to keep flowing and feeding the grid during a blackout. To keep your house powered without interruption during a blackout you’ll need a battery backup.
Maybe. Some utilities are converting their customers to Time of Use billing. In Time of Use billing you are charged higher rates for your electricity during times of the day when the demand for electricity is highest. The most expensive time is in the evening. The problem with Time of Use and solar is that when you are producing solar energy during the day, you are being credited a lower amount than when you go to pull back your energy from the grid in the evening at a higher rate. A battery used for energy storage will be charged by your solar panels during the day and then you can consume that energy at night instead of paying the higher electrical costs imposed by your utility.
This scenario sounds like you need energy storage if you are on Time of Use. The only problem is that currently (2019) the cost of an energy storage battery is probably going to be more expensive to buy than the energy savings you get using the battery. But over time utility rates will rise and battery technology will keep improving. We will probably see the price of energy go up and the cost of home batteries go down enough in the next 5 years where using a battery for energy storage might begin to make financial sense.
Owning Solar Panels
Solar panels do not really need maintenance except for cleaning only when necessary. Natural rainfall will clean your panels enough so that you don’t need to clean them yourself. You can get 3-5% better production from freshly cleaned panels, but if you hire a professional to clean your panels the cost of cleaning will probably be more than the savings you’ll realize.
If you live where there is excessive dust, ash or other sediment that can cover your panels, then cleaning them makes sense.
To clean the solar panels on your roof yourself just be sure to only use mild soap and water. Do not scrub them with anything abrasive or use chemical cleaners as this can harm the solar panel’s glass and its protective coating.