Solar Energy: My Financial Logic is at War With My Conscience

Tesla Solar Panels

Over the past few years, solar energy has interested me to the point where I asked that our house be built to enhance the support for future solar panels on the roof. My personal financial investments have also revolved around renewable energy. And so I've recently looked into having solar panels installed on our home. In my opinion, it's not yet inexpensive from a financial standpoint. 

But from the perspective of climate change and the health of our environment, it's probably invaluable at this point. 

Here's the high level overview and some of my thoughts: 

• One of the first things that people interested in solar look into is the Investment Tax Credit (ITC). Despite the fact that solar hasn't been so widely adopted yet, the credit seems to be already phasing out. The credit comes as a tax benefit and is computed based on the initial cost of the system. You get the full credit in year one. As you can see, residential customers have less than 3 years to get any kind of credit for adopting solar. I hope that there is a renewal of the incentives. 
• 2016 – 2019: The tax credit remains at 30 percent of the cost of the system.
• 2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
• 2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
• 2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.
  
  
• Solar panels have a life of somewhere between 20-25 years. But they have practically no maintenance, other than maybe having to spray them down with water to remove any bird droppings. 
  
  
• The ability to capture enough sunlight depends on the orientation of your house, how much sun you receive, whether or not you have trees or adjacent buildings creating shade, the slope of your roof, and the surface area of roof you have to add panels to. 
  
  
  
  

  

  Southward facing home with 46 solar panels
  

   

  

  Heat map - yellow = most exposure = most efficient; dark orange = least exposure = lease efficient
  

  
  
  
  
• Some solar companies can only build you a system that does not exceed 10% of your power utilization. They use the previous year's energy bill and consumption in kilowatt hours as a guide. 
• I take issue with this because the older your home gets, the less efficient it is. Additionally, if you had problems with energy consumption in the past year, your data may not be as accurate. A system built today may not be appropriate for your usage in 5 / 10 / 15 years. 
  
  
• Unless you live on a farm or out in the middle of no where, you have to remain connected to the energy grid. A battery is really only good for storing energy in case the power goes out. I learned that if there is a power outage, because you are still connected to the utility and the solar power feeds the utility lines automatically, if there is a power outage, the solar system shuts down automatically. So there's not really an option to be living a battery-powered life. In any event, a single battery costs about $9-15k. So tack that on to the cost of your system. And likely, you will need more than 1 battery if your home exceeds a certain size. 
  
  
• The cost of the system itself depends on the amount of energy you will need to create and the amount of space that you have to lay out solar panels to create and store that energy. In general, the bigger the house, the more energy consumed, the more panel you will need. 

In our case, we averaged somewhere in the range of 1500-2000 kilowatt hours of consumption over the past year which ranged in cost from $175 to $225 per month. The solar panels necessary to run our home at this rate would cost us about $36,000 for the panels alone, and that's paying it up front (not a loan) and getting the 26% federal tax credit (which comes when you file your tax return). So the cost of cash out the door on day one is really +/- $48,000 and then you have to wait to get your credit when you file your tax return. If I added a single battery, the cost would be an additional $12,000; two batteries would cost $19,000 (both before tax credit). 

There are other options that the solar companies offer. The one that draws the most attention is the $0 due at signing / no cost today. Essentially what happens is you can finance the cost of your system over 10 or 20 years. The interest they charge is 2.99% for 10 or 4.99% for 20 years. And you, instead, have a monthly payment to make to the solar company rather than the utility. So you end up paying more, obviously. The $36,000 system will cost roughly $44,000 by the time you're done paying it off.

My first issue with this is if I wanted to finance the cost of my solar panels, the better option would be to take out a home equity loan or borrow against my home. With interest rates so low these days, I'd get a better deal that way. 

My second issue with financing is if you choose the longer option at 20 years to avail of a lower monthly payment, by the time you're done paying for the system you've reached nearly the end of the life of the panels. By that time, you'll have to replace panels or worse yet replace the entire system. Have you really saved any money then? Or are you just breaking even? 

Also note: solar panels are not a home improvement. They are considered tangible personal property and not a fixture of the house. That being said, they do not improve the value (financially) of your home. In fact, if you wanted to take the solar panels with you to your next home, in theory, you could. But solar companies still advertise that having a solar system will increase the value of your home. I suppose it could, if the buyer of your home was willing to purchase the panels from you, but they could easily say they love the house but not the panels and have you remove them before you sell. In which case, you've got to shell out the money to have them taken down, and then there's no guarantee that they'll fit on the new home you're moving into. 

My problem now is one that's moral and ecological. While I know that becoming self-sufficient from an energy perspective will help the environment and that installing these panels would be doing our part in "saving" the world, my financial logic is at war with my conscience. I cannot justify the cost mathematically. The cost vs. (financial) benefit is about even. But the (financial) cost vs. (climate change) benefit is heavily in favor of adopting a solar energy system. 

Have any of you gone down this decision path? If so, please feel free to share your insights. And if I've gotten anything wrong up there, please help me understand so that I can correct my thinking. Many thanks!