I’ve been asked several times about purchasing solar panels for your home and whether they are a good decision. With all the different salesman running around the area trying to get sell you the zero power bills, I thought it was time to look at this. There is really two different ways to view solar panels. You can look at them from an environmental viewpoint, where they would most always win, unless you live in a area already serviced by renewable energy, such as solar, hydro-electric, and thermal. The second way to look at them, and most likely the way most people look at them, is through dollars and cents.
The most compelling pitch the salesmen use is that they can make your power bill zero and you can even bank energy credits. On the surface that sounds great. One low monthly payment to the solar company and your electricity bill goes away. What they don’t tell you is that while there is long term return on solar panels, there is a negative gain in the short term. To figure this out we have to do a little math from a business prospective.
From the sales guy’s pitch
Your power bill: $250 per month
Your solar loan payment: $250 per month
Your monthly electrical savings: $250 per month
Wait, did you see that? They, like all great magicians, distracted you from the loan payment by telling you about the $250 savings on your power bill.
From a business prospective
Your power bill: $250 per month
Solar Package: $50,000
Solar payment: $211 per month for 30 years! 3% interest
Let’s say you go to sell your house in 10 years
You have saved $39 x 120 months: $4,680
Your solar loan balance: $36,482
Loan balance minus savings: $31,802
This is the amount you would be responsible for paying at closing. Either out of your proceedings or your bank account.
In my research, solar panels are kind of like a pool when you go to sell your house. You’re going to get something, but not necessarily anything in addition to the price of your house. People don’t normally look for a house with solar panels as a feature, let alone want to pay extra for them.
For this example we will use $10,000 for the additional you can get for your house by having solar panels. Don’t forget any additional you get for your house will be subject to the 6% commission and other fees.
Loan balance minus profit from the sale of the house: $21,802. This is what you need to come up with at closing. Doesn’t look as good as it does when the sales guy tells you about a zero power bill?
A few other downfalls
- Panel output can decrease as much as 25% when they get dirty. So, if you are not able to get up on the roof to clean them, you will need to hire someone every years to wipe them off.
- If you roof every needs to be replaced, you will have an additional expense of removal and replacement of the panels.
- Panel installation can cause roof leaks, make sure the installer has some sort of guarantee that covers roof leaks and damaged caused by them.
There are though some good reasons
- You’re saving the environment, kinda… (in order for this to be true, the saving in power in use must be greater than the amount of power used to create the panels and install them.
So, the decision is yours. I just wanted to get you around the sales guy’s pitch and look at it in the right way.