Is it economical to install a solar power system (photovoltaic) for a new home?

Assume you will live in this home for the next 30 years, you're in California where the sunlight is plentiful, energy costs are high, and the government is offering rebates. You run the numbers, and as long as the cost of the system is wrapped into your mortgage, you are saving cash from day one. Ta-da! It's good economics, right?

Not so fast. Economists consider all alternatives, and one of the alternatives is to wait a few years and then add solar power to your home, when the systems are likely to be far more efficient and much less expensive. If you wait, you run the risk of losing any government rebates, and there's an economic penalty for not wrapping the cost into your original mortgage. But waiting still makes sense if the new system is twice as efficient.

If you add those considerations to the uncertainty of living in the same place for 30 years, the possibility of energy costs from the grid coming down (it could happen) and the weekly maintenance of the solar panels (you need to hose them down if it hasn't rained lately), it's hard to justify installing solar power.

My new home will have solar power. It was a city requirement. I plan to brag about it to people who are passionate about the environment and bad at math.
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Aug 11, 2009
ddelruss said:

There is nothing magic about "wrapping" something into your mortgage. ... <blah blah> car loan ...

Oh yeah? Try getting a 30-year car loan. :-)
Aug 11, 2009
Besides, once the basic tie-ins are done, inverters etc., there is very little stopping you from changing the actual panels in the future (might be something to be done regularly for efficiency sake). I doubt if your system has panels that are integral with the structure of the house so it's a couple of dudes and a cherry picker for a day. How much can that cost?
Aug 11, 2009
You're the economics major. Doesn't it boil down to opportunity costs? What else are you going to do with the small delta in your mortgage? (you're the famous cartoonist and book author, why are you even considering a mortgage, you have stock in a bank?).
If you think energy costs will go down and CA will find more $$ for rebates, I've got a nice bridge I can let you lease! Besides, when and if the super efficient photovoltaics come online, what's stopping you from making the same ROI calculation you're hand waving now again?
Aug 11, 2009
Perpetrating solar myths again. Solar is not for everybody, but it is for us. Information below is from our own experience and not what the so called experts claim. Built in the hot Central Valley of California our new wrapped-tight, custom track home with all Energy Star appliances and AC. Had 30,000 dollar CD in an IRA earning zip at 2.5 percent. Invested it in a 5 KW solar electric, hot water and pool heater. Results: A normal 300 dollar average monthly electric bill is now 25 dollars a month producing 90 percent our electric and power needs. If we had borrowed the money at our 5 percent fixed mortgage rate it would still be a good deal.

Utility rates nationwide increased 7 percent over the past twenty years and are expected to accelerate with the ever present energy crisis world wide. Californias baseline rate is 12.41 cents per KW but ratchets up quickly to tier four rates of over 35 cents per KW. Those high tier rates are what utilities raise very often and deceptivley brag about how they have not raised base rates in twenty years.

The system has no moving parts and there is almost zero maintenance cost. The 10 year guaranteed inverter went out after three years and was replaced at no cost by manufacturer paying 100 dollars to a installer. Panels are guaranteed for 20 years by manufacture. The whole system to qualify for rebate must be guaranteed in writing by the solar contractor for five years. Even in high dust areas water is wasted rinsing panels off more than a couple times a summer as there is very little power loss because solar photovoltaic cells react to indirect light not direct light.

Less gas is used on the gas stove using small table and counter electric appliances like fry and roaster pans, toaster and main electric ovens, crockpots, microwaves, barbecues and hot plates. Space heating in winter to some degree is practical with small electric heaters in sleeping rooms and/or electric blankets allowing shutdown of whole house gas furnace at night.

Resale value and marketability of the home is increased significantly with the installed solar system. You almost never see a home with a solar system in foreclosure. The almost identical house next door has no solar, so which one will sell first and for more? National Appraisal Institute practices are now adding value to homes with solar in appraisals because they recognize the cheaper home operating cost. Lenders now take the lower solar home operating cost and future value into account when setting mortgage qualification requirements.

Installed a solar hot water system that provides 80 to 90 percent of the hot water. Have a solar pool heater with a two speed pool pump that uses 60 percent less power. Took advantage of all system rebates available to help offset initial cost.

At our age we cannot afford to move now with the upside down housing market or wait for the promised new solar technology. We enjoy retirement a little better using what normally is forked over to Mother PG and E every month. With a little planning, savings and sacrafice Americans can do anything.

Aug 11, 2009
If you don't put it in now, two years from now you'll realize it'll be twice as efficient in ANOTHER two years and it'll be more economical to wait even longer.
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Aug 11, 2009
Economically that would work except for that the solar panels used for home installations (Multicrystalline silicon cells) haven't doubled in efficiency on the last 25 years, let alone in the next 10.


You would be interested in the blue efficiency line with squares, either the solid one or the white and blue ones.
Aug 11, 2009
I think I'll live in my current house for another 15 years until the mortgage is paid off, then pull a Scott Adams and build new, with all of the latest energy saving gadgets. I'm planning on finding an area with a few acres, so neighbors and Home Owner Associations won't be an issue, and building a 1 level ranch style house, old age and stairs don't mix. If at all possible, I would like to be on a lake, and then put up a windmill to take advantage of wind, and the large roof area will be great to support solar panels. In 15 years, I'm hoping for huge strides in the advancement of solar and wind technologies, or maybe something new will come along, I've heard good things about vertical windmills.
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Aug 11, 2009
Sorry sabai2024, I hit the wrong thumb! You should certainly be Thumbs Up!!! Yes, send this to your congressman assuming that they are allowed to read since they don't read other bills!
Aug 11, 2009
Not all of the country is a blessed as we are here in San Diego with relatively large amounts of sunshine.
A large segment of society is still not aware of the real problem. This region has gone through years of debate regarding a power line between solar farms to be built in Imperial Valley and San Diego. As of yet, no progress has been made.
Maybe we should be addressing the demand side of the energy usage equation - which could impact more individuals.
Aug 11, 2009
There is nothing magic about "wrapping" something into your mortgage. It is simply a loan at the same rate as your mortgage. If you have bad credit this might be an advantage, but looking around today I see lots of cars available at less than 4% financing - I would be an idiot to "wrap" a car into my mortgage. FInancing for solar panels in the future could similarly be at lower interest rates than ones mortgage.

You might have a slightly lower total monthly payment by including extra costs into a mortgage, but the amount of interest you pay each month is not dependent on whether your loans are consolidated or not. Bringing this up as a point in an argument is simply confusing (to those who are bad at math) and irrelevant to the decisionmaking process (unless there are extenuating !$%*!$%*!$%*! such as bad credit).

Generally, if a purchase is not a good investment if you pay cash up front it is not a good investment if you finance it, either. An exception would be hard goods (like solar panels) if you expect a sharp rise in inflation - that is, it is a way to bet on interest rates. Given the government policies in effect, accumulating debt by purchasing hard goods is a defensible investment strategy.

[First, you can negotiate for a lower car price if you forgo the low 4% loan rate and pay cash. So the 4% rate on a car is equivalent to a higher rate. Second, home equity loans are typically higher rates than first mortgages. -- Scott]
Aug 11, 2009
this is not one of your greatest posts
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Aug 11, 2009
We just had a blackout (the local transformer rusted out) and having solar as an alternative to power the basics would have been great.

We need electricity for lots of things (furnace blower, refrigerator/freezer, some lights, computers for doing work) but I wouldn't need enough solar to completely replace what I want to use, but to power what I need to use would be good enough. And that is a lot less.

So you can hedge your bet by getting just enough solar to power the bare necessities now and then wait for improvements later to go whole house, if that is what you want.

(Only if you have batteries with your solar setup, which few people do, because it wouldn't be economical. -- Scott)
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Aug 11, 2009
In some parts of the country it might be MORE economical than others but overall the cost and inefficiency of solar is not benificial to the owner. The lifespan of deep cycle solar cells is approx. 20 years. Also as the batteries age they are less efficient. Obviously you lose energy when inverting as well.

As it stands with current prices it is more economical to connect to the grid if it is readily available and possibly backfeed the grid to save more money with a small solar system. The cost to have a whole house system is only viable when hydro is not readily available.

Hopefully as panels get better and prices come down it will be economical to puchase a whole house system.
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Aug 11, 2009

I recently emailed you an interesting link via the Contact Us link on your blog. I wasn't expecting a real reply from you personally, but the reply I did receive is so awful I feel the need to share it here, in the hopes that you are more likely to see it.

"Dear Customer,

Thank you for contacting us. [generic filler]

Sincerely, Jonathon"

Please note that the bottom of this email has my form submission. This includes my name. The least this reply could do is address me by the name I already provided, instead of as "Customer".

Secondly, this reply implies that it was written by a real person. If so, that person could have referred to the specific contents on my message, instead of using a scripted response. If this is not an option, his scripted response should at least acknowledge that my message may not actually be read by him, or anyone.

This is one case where receiving no reply would be better than the reply I did receive.

Yours in annoyance,

[If it makes you feel any better, the system forwards all of those e-mails to me and I do read them personally, responding when appropriate. -- Scott]
Aug 11, 2009
Dear Mister Adams,

When you do the math and add couple of "what if's" you probably end up doing nothing which is probably a good idea most of the time. Who still knows what to do now that scientists have indicated that the Toyata Prius is worse for the environment than a Hummer? A few weeks ago I saw a presentation of one of the most brilliant inventors (he single handedly created the CD) an he predicted that in a few years time we will be able to generate and store enough energy to do without any outside electricity. You could even make a profit by selling the suplus to your neigbours. So it goes on and you could even make a profit. You know that the government won't allow it but the idea is nice.
Aug 11, 2009

The technology is getting better...
Aug 11, 2009
oh, sweet lord, that last line was amazing. please send this article to your local congressmen.
Aug 11, 2009
I looked into both solar and wind, thinking about how nice it would be to be off the grid and not have to feed the local power company. It's just not economically feasible. Most recommended systems only replace 25% or so of your power needs, 100% would cost half as much as your house.

Other drawbacks:
1) It only replaces the electric part of your bill, not gas for heating, so you're still tied to Xcel.
2) You need to have at least an acre for a non-commercial wind turbine and most HOAs don't allow them. Plus, they kill birds.
3) Either wrapping it into your mortgage or buying on credit later, you're paying years of interest, greatly increasing the cost and making it even less economically feasible.
4) Even a do-it-yourself solar water heater system is around $2000, not including the tankless hot water heater.
5) The return on investment is decades, not years, and most people don't live in their houses long enough to recoup the cost.

The best bet is to wait until the technology improves and makes it a more efficient, i.e. cheaper, source of energy. Until then, natural gas, clean coal, and nuclear are the way to go.
Aug 11, 2009
Maybe I'm revealing myself as a "socialist" here, but if everyone waits, citing your logic, demand will wane, and the technology won't innovate as fast and the prices won't come down as much.

Your plan only works if you are part of a relatively small minority who backs off while other homeowners fuel demand, leading to the innovation and cost reduction you're expecting. If everyone opts to go your way, R & D will be minimal because of the perceived lower profit margin.
Aug 11, 2009
First, that was indeed a very funny last line.

Scott Adams: "But waiting still makes sense if the new system is twice as efficient".

I'm not sure I agree with this thinking. I mean, technically it is accurate, but at what point does the technology stop becoming efficient to offer the lowest cost? Even if a person waited 10 years on a 30 year mortgage to install the solar panels, it is likely that by the 20th year the panels would be more technologically advanced, as well as cost efficient towards the overall expense of the mortgage.

It's like buying a new cell phone. Sure, I could use my old Motorola Razr and text/e-mail on my numeric keypad, but wouldn't it be more feasible to purchase the new technology that allows me a qwerty keyboard so I can work smarter and faster, thus saving my business money in the long term despite the initial financial plunge for the new device?
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