I have had my solar system for almost six years now and I’m often asked if they have been worth it or simply asked if they are great. It turns out that is a very complicated question. I like having solar panels, I feel good about reducing my net electricity use, but I have encountered problems in keeping the system operational and to be honest I look at the costs and the returns. I will hold off judgment until the current problem is repaired, but I assume that I will still feel positively about the system. Let’s judge the system based on the cost and return both then and now.
There are several components to the cost and return of a solar system. The first cost is the cost of the system. The market cost of solar panels and installation has been falling for years, but so have the financial incentives. When I signed the contract to purchase my roof mounted solar system in 2009 (though it was not installed until May 2010) the cost per kilowatt for the Sharp panels I bought was about $6,700 plus permits and installation. These days that cost is about $1,800 and may be even lower. The Piedmont Environmental Council has launched “Solarize Piedmont,” that runs April 5 - June 15, 2016, and has arranged very good pricing on solar systems. Go to pecva.org/solarize, and fill out the sign-up form to get a real estimate of the cost, but I think I could probably have the same system that cost me $58,540 installed for around $19,000 give or take.
That reduction in price goes a long way to make solar a reasonable purchase even with only the Federal and local property tax incentives. Back in 2009 I was able to obtain a state rebate of $12,000 which is no longer available in Virginia. I also used the 30% federal tax credit which was recently extended and is still available. The net cost of the solar system in 2010 after rebates and tax credits was $32,578 today it would be about $13,300 for the same 7.36 kilowatt system.
In addition, today there is a property tax exemption in Prince William County (and most counties in Virginia). The exemption is based on the Energy Efficient Buildings Tax Exemption (Code of VA §58.1-3221.2) which allows any county, city, or town to exempt or partially exempt energy efficient buildings from local property taxes. In Prince William County the amount of the exemption is based on the installed cost of solar array and I believe the county adopted the exemption in 2011 after I installed my system. However, when I was reviewing my property assessment this past winter I thought to apply for the exemption. The County Assessor’s office called me last week to tell me that my application for a solar property tax exemption has been approved and my property assessment will be reduced for five years by the cost of my solar array. Yeah! Based on the county property tax rate for last year that translates to a savings of $656.82 each of the 5 years. Unfortunately, the five year exemption will begin next year. I did not think of applying until after I got my property tax assessment for this year. That little bonus has gone a long way to keep me feeling positive about my solar panels with the current problem.
As you can see below a large portion of my return is from something called a SREC, a solar renewable energy credit. A SREC is a credit for each megawatt hours of electricity that is produced, but used elsewhere. SRECs have value only because some states have solar set asides from their Renewable Portfolio Standards, RPS, which require that a portion of energy produced by a utility be produced by renewable power. There are no RPS solar requirements in Virginia, thus no value to SRECs beyond the $10-$15 that a RPS credit is worth.
When I installed my solar array, my system was eligible to sell SRECs in Pennsylvania and Washington DC. I registered my Virginia based solar photovoltaic array in the both Pennsylvania and Washington DC market in July 2010 and I can sell my SRECs in the Washington DC market. The Pennsylvania market has collapsed. The District of Columbia passed a law in 2011 which prevents out-of-state systems registered after January 31st 2011 from participating in the DC SREC Market. DC is currently the only under-supplied SREC market in the nation, because of the lack of large commercial solar farms and large industrial installations. Washington DC is a city with limited non-governmental buildings and no available private land beyond the reservoirs and Blue Plains waste water treatment plant.
The dollar value of the solar power I generate from my solar panels is worth less than I have sold my SRECs for over the past four plus years. However, there is no guarantee that my SRECs will be worth anything next year and as more solar power is registered in DC and the penalty price of failing to meet the solar carve out falls the value of my SRECs will decrease. My SRECs potentially have some value until 2025.
Based on my analysis my solar panels will have paid for themselves in 7.5 years (a new system will pay back in 10-11 years. With the expected life of a solar system at 25 years that could make the purchasing of a solar system worthwhile depending on your coast of capital. In a year and a half from now, my solar panels will have paid me back and all the power they produce, the property tax exemption for five years and any remaining SREC’s I sell are all free. A good deal overall, even with my system problems and repairs, I guess after all, they are “worth it.”