Ted Lieser, a 48-year-old real estate developer and conservation-minded outdoorsman, dreamed for years of nailing a rooftop solar energy system to his family’s 2,300-square-foot ranch house in Mill Valley, California. But, at a cost of about $10 per square foot, he never had the $23,000 to pay for a system. Then, two years ago, a San Francisco company named Sunrun installed 16 sleek, black panels on Lieser’s roof nearly free of charge, helping him join the national solar boom. Sunrun owns, runs, and maintains the system; Lieser leases it from the company, paying a fixed rate for electricity – 20 percent lower than what he once paid his local utility.
“I tell people this is not a liberal or conservative issue,” says Lieser. “It’s an economic one. Why wouldn’t you want to save money?”
Plenty of people do. In 2012, 83,000 American homeowners installed solar energy systems, up 55 percent from the previous year. There are three factors driving this explosion: a glut of cheap panels manufactured mainly in China, a 30 percent federal tax break on installation through 2016, and the rise of third-party leasing companies like Sunrun that practically eliminate start-up costs for homeowners like Lieser, who can’t afford installation on their own.
Solar is not for everyone, however. Its cost-effectiveness is dependent on how much sunlight your home gets, the specific tax incentives offered in your city and state, and how much you currently pay for electricity. Rainy spots like Seattle may not get enough sun to make panels financially worth it. Meanwhile, some not-that-sunny places, like New England, New Jersey, and New York, are great for solar systems, because their aging infrastructure (ancient power lines and the workers needed to maintain them) drives up utility costs. Then there’s the bureaucratic red tape: The U.S. is a mess of some 18,000 regulatory jurisdictions that can have you or your contractor standing in line at town hall for hours seeking the right permits.
And if you’re choosing solar to free yourself from the shackles of your utility company, beware – that’s not how it works. Your home remains on the grid, mostly because solar panels can’t produce electricity at night. In a process called “net energy metering,” your system produces a small amount of electricity in the morning, probably enough to run things like your hair dryer or toaster. By midday, the system is at peak output but, generally, you’re not home using it. So it runs your refrigerator and covers the energy suck of plugged-in laptops and cable boxes, and flows the excess back into the grid, making your meter run backward and earning you credits. In the event that you need more energy than you make, you pull it from the grid and pay the market rate.
Third-party companies like Sunrun can make solar installation a lot easier. They handle all the preliminary calculations, design a system to meet your needs, pay the up-front costs, obtain all the local permits, install the panels, and then maintain the entire system for 20 years. Lessees can put down $0, prepay the bill for the life of their system at a discounted rate, or pay any amount in between to defray costs down the line. All you have to do is pay the provider for the electricity produced on your roof, usually about 15 percent less per month than you pay your utility. Lieser’s monthly bill dropped from $180 to $145, a savings of $420 a year. His rate is guaranteed for the life of his contract – not subject to spikes, like the 6 percent increase his local utility plans to levy on his neighbors this year.
“That’s what we’re selling, certainty and energy independence,” says Edward Fenster, co-founder of the six-year-old Sunrun.
Setup is straightforward. Installers bolt mounts to your rafters, taking care not to damage the roof (if they do, they’re on the hook). Then they fasten the panels – glass-covered silicon sheets of photovoltaic cells, which convert sunlight to energy – to the mounts, 3 inches above the shingles for airflow. They group and tilt panels to withstand the typical “wind load” where you live (in places like Florida, they engineer installations to withstand hurricane-force winds of 100 mph), and an electrician then connects the panels to your power meter.
“It was the easiest decision I ever made,” says Lieser of his Sunrun installation. “They came, did their job in two days, no problems.” Or as Fenster puts it: “He doesn’t have to go through the brain damage of learning the whole installation process, or worry about whether in 20 years this is going to be a monument to stupidity on his roof. We overcome those issues for him, because we design the system to meet his needs for 20 years.”
Last year, half of new residential installations were done by third-party providers. The field is so promising that Google poured $280 million into Silicon Valley firm SolarCity, the nation’s largest residential installer, to fund the company’s leases. As of last May, Goldman Sachs had jumped in with another $500 million.
The other half of homeowners installing solar systems are bypassing third-party leasing outfits and paying outright, $27,500 on average. This can make sense if you have the money, but it could take a decade or more for the system to pay for itself. And, if you intend to buy panels and hire installers, you need warranties to cover workmanship and power output.
To encourage homeowners to take the solar leap, the U.S. Department of Energy is looking to bring down “soft costs,” including permitting and inspection, which make up as much as 40 percent of a system’s price tag. They are also urging states to streamline the permitting process, with some success. Vermont now automatically approves rooftop solar energy applications. And the Solarize Massachusetts Program allows for group-buy programs, so installers can acquire permits on hundreds of homes at once.
Despite all this progress, today’s solar systems are not without problems. While the technology is not advancing so quickly that new panels will be outdated in a few years, there have been questions about quality. A recent report pointed to several cases of defective or underperforming panels from China, where manufacturers may be cutting corners to reduce costs. But SolarCity CEO Lyndon Rive hasn’t had complaints. “Our systems have produced more than we predicted every year,” he says.
SolarCity went public last December and proved to be one of the few successful clean-tech IPOs of the year, reinforcing the idea that the time for solar energy is now. “There has never been a technology that creates electricity at the place where you need it,” Rive says. “What needs to change is this 100-year-old infrastructure of delivering electricity hundreds of miles from where it’s made. We see massive growth in consumers wanting control over their energy bill. And we can guarantee a price for 20 years because we don’t have to pay for fuel or transmission. It’s all there on your house.”
Utilities and installers offer online calculators that assess the benefits of buying a solar system where you live. Enter your zip code, and they estimate what size system you’ll need, how much it should cost, and more. Here are some of the best and easiest to use:
This Silicon Valley-based manufacturer and installer, in operation since 1985, offers instant price quotes.
The consumer electronics giant also sells solar systems. Results appear in easy-to-follow charts and bar graphs that illustrate costs and savings.
NYSERDA (New York)
In addition to a solar calculator, the New York State Energy Research and Development Authority site offers a county-by-county list of installers.
Pacific Gas & Electric (California)
PG&E’s solar-analysis tool estimates a system’s daily output, net savings, and even environmental impact.
Buy or Lease?
Over time, you’ll tend to save the most money buying a solar energy system versus leasing it. The benefits of leasing, however, are the ability to obtain a system with no money down, immediate monthly savings, and worry-free maintenance (the leasing company handles repairs).
Whichever approach you choose, the savings aren’t the same in every state. Put a typical 5-kilowatt system, about 21 panels, on an L.A. home, and it generates 700 kilowatt-hours of electricity a month. (A kilowatt-hour is equal to 1,000 watts of power expended for one hour.) That’s enough to run your household day and night. But that system in sun-challenged Minneapolis produces just 500 kilowatt-hours a month.
Below, SolarCity – the country’s largest third-party solar-system installer – compares savings for a 5-kilowatt system in three places in the U.S. It assumes a system cost of $26,000 to $30,000, and this factors in sunlight, federal and local tax incentives, and local utility rates (including an annual 3 percent increase).
Savings Over 20 Years:
Location: Long Island, New York – moderate sun but high utility rates and incentives.
If you buy the system: $29,662
If if you lease and put $0 down: $14,956
Location: Los Angeles – lots of sun and cheaper utilities.
If you buy the system: $12,576
If if you lease and put $0 down: $10,437
Location: Tucson – plentiful sun but few incentives.
If you buy the system: $54,923
If if you lease and put $0 down: $43,773