Financing Home Solar 101
Going renewable can be daunting but is a necessary step on your net zero journey. The costs, options, and markets - there's so much to figure out. This quick guide is the resource I wish I had two years ago when I was trying to educate myself on renewable electricity. Ultimately, I decided on financing a home solar array. Read on for why, how, and where I go the money. (Check this quick guide on Going Net Zero.)
Going renewable preliminary considerations:
Getting your home electricity powered by renewables is probably the most important step you’ll take to go net zero. But to be clear, buying a home solar array may not be your route. While cost is a very real impediment, you may also have even better and more accessible renewable options available to you. Where you live and your local utility will influence this part of your journey.
Check with your local city, county, and/or utility to see how much of your electricity is already powered by renewables. While only ~20% of the US’s electricity is powered with renewables, that ratio varies substantially state by state.
Utah, the state where I live, has an extremely carbon-intensive electric portfolio, in which only 10% is renewable. The good news is that Salt Lake City, Park City, & Summit County are targeting to be powered with 100% renewable electricity by 2030, which is a first-of-its-kind community partnership in the nation. Granted, a LOT needs to be done to achieve this milestone, and I decided not to hold my breath until 2030. Particularly important, the most recent IPCC report gives us only 3 years to top out on fossil fuels!
Technically, there are various options to power your home renewably like small scale wind or geothermal technologies. Unless you’re out in left field though, buying into a renewable program through your utility or a home solar array are your most accessible options. If you live in multi-unit housing or are renting, you’re going to have to turn up your self-advocacy skills to get what you want from your property-manager, landlord, and/or utility.
Lastly, be extremely scrutinizing while doing your homework. For example, Utah’s primary utility, Rocky Mountain Power, paints a glowing but inaccurate picture of their commitment to renewables. Their Blue Sky program presents like an option to buy into renewably-sourced electricity. In actuality it’s a donation to “renewable projects,” while the utility, has reportedly blocked clean energy progress from its portfolio.
Now, here are the need-to-knows!
Basic going solar information:
-
In 2020, the average annual electricity consumption for a U.S. residential utility customer was 10,715 kilowatt hours (kWh), an average of about 893 kWh per month. (EIA)
-
Based on average electricity usage, you’ll need 20-24 panels to produce 100% of your electricity usage. That equates to a 7-8 kW system. (Energy Sage)
-
The solar industry originated with door-door sales people and can unfortunately still feel pretty squirmy. I relied on my local non-profit environmental watchdog & advocacy groups for contractor recommendations. Always get three bids!
-
Officially, my takeaway from inquiring with impartial industry players is that getting solar is like buying a car; owning or leasing depends on your unique situation. You can either buy the array outright with cash or financing, or sign a power purchasing agreement (PPA) to lease them. (See Energy Sage article below to explore the pros and cons of your options.)
-
Any zero down / zero cost solar situation is a PPA. PPAs can be a great option if you want solar but don’t want to take on the cost or financing. But just like buying a car, you can absolutely screw yourself taking on such a large contract without fully understanding what you’re getting into.
My solar situation:
-
8,354 kWh over 12 months
Yes, that’s a lot lower than the national average! (I have a 2,900 sq ft house) We’ve already spent a couple years updating to energy efficiency appliances and improving energy efficient behaviors. Obviously, it makes sense to cut as much energy usage as possible before buying a solar array.
-
We installed a 5.48 kW system, which is 15 solar panels (365w panels).
That means that we are producing 103% of our annual electrical usage, which is 8,753 kWh/year.
-
First, we needed to re-shingle our roof. We knew the roof needed repair when buying the house and included this cost in our home financing. With pandemic-induced delays in product, though, this put us about a whole year behind in scheduling solar installation. (General roof repair cost is not eligible for the federal tax credit.)
We opted for an oversized inverter so that we can add panels to our system down the road without reconfiguring the whole array. That’s because we anticipate increasing our electrical usage as we swap out natural gas appliances in the future. We also anticipate swapping our cars to electric vehicles and will need more power.
Our house also required some extra electrical reorganizing and rerouting of pipes to accommodate space on the roof.
-
Net metering is a billing mechanism where the utility credits you for the extra electricity your solar system produces and goes into the grid.
With net metering, the meter on your house measures your net electric usage monthly and either charges or credits a cumulative kilowatt-hour (kWh) amount on your electric bill. So when your solar system generates more energy than you use in a month, you get a credit. The credit is applied to the next month’s bill. When you pull more electricity from the grid than you produce, you pay a bill. (See resource below for a full explanation.)
In Utah, Rocky Mountain Power doesn’t offer full retail rate for their net metering credits, which is total BS, IMHO. As of 2022, I receive a credit rate of about 6 cents per kilowatt-hour (kWh), which is roughly half the retail rate. That means that RMP pays me half of what they charge me for the clean energy I sell to them - womp womp.
-
Solar storage is a great solution in a few key situations.
If your state doesn’t offer any net metering, then you are better off storing your unused power than letting it go to waste. Secondly, solar storage is smart if you live in CA or a place where the grid is super fragile and you especially need energy independence.
We decided to wait a year or two to get into a rhythm with our solar production and get a feel for our net metering arrangement. Once we better understand our electrical needs and production we’ll make a call on solar storage. Home batteries are also pretty pricey, and we want to be certain whether it’s a necessary part of our net zero journey.
-
Yes, but our contractor handled all the communications and paperwork with the utility. The whole process was pretty turn key on our end.
-
We worked with Creative Energies.
They have a long track record in Utah and partnered with HEAL Utah to activate a community solarize program. I also chose this contractor because the sales person I directly worked with is heavily involved in solar advocacy with the Utah legislature.
My solar cost:
-
• $18,202 (before incentives)
• -$4,733 federal tax credit (26%)
• -$1,200 state tax credit
• $12,269 total cost (after incentives)
• * $20,786 25-year savings *
-
Like most folks, we don’t have extra cash just sitting around to fork out for a new solar system. We looked at 3 ways to finance:
1) Refinance our house with a cash-out
Around the time I was researching solar, I was also trying to take advantage of historical rock bottom mortgage interest rates at 2.5%. A cash-out was the cheapest possible financing I could find, even though a lot of ducks needed to be lined up to execute a refinance and solar contract at the same time. Unfortunately, a cash-out put our re-finance into a higher bracket interest rate. So I let this option go.
2) Get a loan through Clean Energy Credit Union
This is credit union that helps people afford clean energy products and services in addition to general banking. Their long term solar system loans were straight forward and accessible, offering 5.5%.
3) Get a home equity line of credit
While we really liked the CECU, we decided to wait for our refinance to finish and line up a HELOC. A HELOC is essentially getting a line of credit against your house (like a credit card). That gave us an even better rate at 4.5% and allowed us the financing to take on additional home projects should they arise. Disadvantage - it took a whole month after waiting for our refinance to wrap up.
-
We took the buying-a-car analogy to heart. I’m the person who buys a car and drives it into the ground. Importantly, we plan to stay in our home for 15+ years and can utilize the full pay-back savings of the array.
Additionally, we are motivated by the ability to become self-sufficient on our property in a holistic way - producing energy, harvesting rainwater, growing food, etc. Therefore owning the solar system gives us increased flexibility and freedom in our self-sufficiency ambitions.
In closing, there’s not a one size fits all route to renewable. While it does take a bit of investigation, the diligence you put in to crafting your unique net zero journey is well worth it. You can do this – I believe in you!
Some relevant resources
