Joel’s Solar Story
So. I placed a down payment on solar last month. I’m committing to the largest purchase I’ve ever made (not counting my house). I’ve sat on the fence on this decision for some time because I don’t have the greatest location to install solar on my house. My roof faces west not south, and I have a lot of shading from a big old sycamore tree in my back yard. But if I was ever going to install solar, it was going to happen this year.
Read on for details on why it is important to act this year, to see basic financials for a typical solar system, and how you can get started.
Several years ago, I calculated how far prices would need to fall for a system to pencil out on my sub-optimal site. We’ve reached that point. An average sized residential solar array can be installed for less than $2.50 per watt. This is 40% less than systems installed as recently as 5 years ago. That’s an incredible drop in prices that also cuts the payback time of a system by 40%. Much of the cost declines have come from the drop in solar panel pricing, but the other materials have dropped some in price as well. Additionally, those of us in northeast Iowa have benefited from having a number of available and well-qualified installers that have gained experience as they’ve installed hundreds of solar systems over the past few years.
Another thing I’ll point out is that in addition to prices dropping, the systems have gotten better. New technology allows solar to be installed in areas of partial shading and microinverters or panel optimizers maximize every bit of sunshine that hits them. Most systems these days also come with panel-level monitoring, allowing owners and installers to track the production of each panel and troubleshoot far more quickly if anything ever goes amiss.
The huge motivation in getting the project done this year is the phase-out of the federal solar tax credits. They are 30% of the total cost of the system if installed in 2019. The federal tax credit drops to 26% in 2020 and to 22% in 2021 before going away altogether for homeowners. (Note that the federal credit remains at 10% for farms and other businesses after 2021).
The Iowa state tax credit is set to equal half of the federal tax credit. This year that’s worth 15% of the cost of the system but it will phase out along with the federal credit. I expect that solar prices will continue to drop some, but we are reaching a leveling-out point where prices are not dropping as fast as they were. It would surprise me if price drops continue at a pace fast enough to exceed the combined benefit declines of the state and federal credits.
Another reason to get your system installed this year is the potential elimination of net-metering benefits. Three years ago, the state’s two investor-owned utilities attempted this, and the Iowa Utilities Board instructed them to offer a modified version of net metering for their customers. The new rules needed to stay in place for 3-5 years.
As we reach the end of this period, it’s likely that Alliant Energy and MidAmerican Energy will try again to eliminate or greatly restrict net-metering benefits for any new customers. In fact, MidAmerican energy has introduced a bill that would effectively kill net-metering for new customers of investor-owned utilities. The Iowa Utilities Board has stated that systems installed under the current net-metering agreement would be protected from any changes and grandfathered in for the life of their solar system (up to 25 years). Getting a system now will allow you to benefit from the current net-metering rate for the rest of your systems useful life. Under a new pricing rate, payback of a solar array may be much longer.
So do it now, 2019 is the year for solar. If you have a shade free roof or an open spot for a ground-mounted system, the financial payback of solar should be well under 10 years.
The example below is for a system that is warrantied for 25 years, as is typical. I recommend that you consider solar even if you have a marginal site or have looked in the past and it didn’t work. Prices have dropped so far from a number of years ago. It probably wouldn’t have made much sense, from an economic perspective, for me to install solar any earlier than this year. I’d really like to wait even longer as prices continue to fall, but the tax credits going away have got me off the fence.
Example figures for a 5 kW solar array (most residential systems are 5-10 kW)
5kW of solar is about 15 solar panels and would take up less than 500 sq ft of roof space.
Estimated cost at $2.50 per watt = $12,500
Federal Tax Credit = $3,750
IA Tax Credit = $1,875
Cost after Tax Credits = $6,875
5kW is expected to produce about 6,500 kWh per year. At a residential retail rate of $0.15 per kWh that’s a savings of $975 per year on your electric bill.
Payback (including both Fed and IA tax credits) = 7.1 years.
*Shading or roof orientation can affect payback.
**NOTE FOR FARMS/BUSINESSES: The economics are even BETTER, in part because the larger systems have a lower per/watt installed price, but also because businesses can take depreciation. Taken together, simple paybacks for farms and businesses are often 5-6 years.
Where to Start
Solar installers are happy to give free estimates that include basic production figures and payback times. Shop Local! We’re fortunate to have a number of high-quality solar installers in the area. Many are Energy District member-sponsors, and you can find them on this webpage. Or, call your electrician and ask them about solar.
If you’d like a look at the payback of a solar system for your home or business from someone not selling you solar panels, give the Energy District a call. I can provide a simple estimate of prices, shading analysis and an estimate on energy produced. I charge $200 for a solar site assessment, plus a travel fee for sites outside of Winneshiek County. A solar assessment from the Energy District will give you excellent background knowledge about solar and a critical look at the estimated energy production, tax incentives, and payback. Give me a call if you’d like to learn more: 563-380-7137 or firstname.lastname@example.org.