CA Solar Coop takes the guesswork out of Solar
Going solar is not just a good idea for people looking to green their lifestyle, but is also a high-return minimum-risk investment. And now, the Columbia Association, in partnership with the non-profit Civic Works’ Energy Program, has created a program to simplify the process for residents of Howard County to add Solar Photovoltaic (PV) panels to your roof. By organizing a group of neighbors to collectively go solar together, a solar cooperative is created that allows members to receive a bulk-purchase discount price for high quality PV panels and pre-negotiated installation services, taking a lot of the research and guess-work out of the process. The Civic Works’ Energy Program works on behalf of the coop to select a solar contractor through a competitive Request for Proposal process who would then install solar panels on the roofs of all coop members, so all members receive the same below-market price.
I attended a community meeting on Tuesday February 11 at the Hawthorne Center to learn more about the solar coop program, which is open to all Howard County homeowner to join. With what I learned from the meeting, and as a person who already knows a thing or two about renewable energy and energy efficiency, I can offer some advice and numbers crunching to help you decide if adding solar to your roof makes sense for you.
First a few things to think about as you consider whether to go solar.
Energy Efficiency - Solar is sexy. It looks cool, makes a statement to your neighbors, and it’s fun to track the energy production of your own personal clean energy source in real time using a cool monitoring app. But, it doesn’t make a lot of sense to invest in putting an expensive renewable energy system on your roof if the energy your solar system generates is going to be wasted on heating or cooling a poorly insulated leaky home. In order words, why spend all that money on PV panels if the energy generated from your system is going to be used to create cold or warm air that goes right out the window? If your home has certain rooms or areas that are significantly warmer or colder than other parts of your house, I would suggest that you first do a Home Energy Audit to identify ways to improve the efficiency of your home. It may not be sexy, but improving the insulation of your home is much less expensive than going solar, makes your home more comfortable and can greatly reduce your electricity bills at a fraction of the cost of solar. BGE offers a Home Performance with ENERGY STAR home audit for only $100 that can help identify issues and ways to improve the energy efficiency of your house and then provides incentives and contractors to get the work done!
Roof - If you have an older roof that you think may need to be replaced in the coming years, it typically makes sense to replace the roof first (or even better, in conjunction with) going solar. It could cost thousands to have solar panels removed from an old roof and then added back onto a new roof if you are replacing a roof with solar panels, so it would be a good idea to first have a roofer check out the condition of our roof provide to proceeding with solar. Further, if your roof is shaded by trees or predominantly north-facing, then solar panels are unlikely to make sense for you. South facing roofs are the best as they get the most sun exposure so panels on that part of your roof will generate the most energy.
With those caveats out of the way, let’s get to the numbers.
Upfront Cost: The cost of solar is typically cited in $/W installed. That means that a 7 KW residential solar installation at $2.5/w would cost $17,500 installed (7 * 1000 * 2.5). The price of solar has been dropping steadily over time, and now averages about $3/watt nationwide. However, the documents circulated at the CA meeting say that as part of the CA solar coop, the bulk-purchase price is $2.50 per watt.
Federal Tax Credit: The federal government currently provides a 26% tax credit for residential solar installation. This is a dollar for dollar reduction on your Federal Taxes, so if your PV system cost $17,500 installed, the amount of taxes you pay would be reduced by $4,550. This tax credit had been 30% since 2006, but it just went down to 26% in 2020, will be 22% in 2021, and will be completely eliminated in 2022, so unless Congress changes this law, now is the time to act to take advantage of the Federal tax credit.
Maryland Residential Clean Energy Grant: The state of Maryland provides a $1000/installation grant to every household that installs solar regardless of system size.
Electricity Bill Savings: Solar panels last for at least 20 to 25 years, which is backed up by both a manufacturer warranty and installer guarantee, so you can feel confident panels will generate electricity for a very long time. The electricity that your solar system generates is either directly used in your house or goes back to the electric grid, under a requirement with the utility known as net metering, so every unit of electricity your system generates essentially reduces your electricity bill by the same $/kWh you would otherwise pay for that electricity. This means that if you generate 700 kWh of solar energy in a month and you consume 1,000 kWh; you will only pay for 300 kWh of electricity that month at your normal utility rate. Plus, if you generate more than you consume in any given month, you will receive a credit on your electricity bill for the next month. According to the National Renewable Energy Laboratory's PVWatt Calculator, a 7kW PV system is estimated to generate ~10,000 kWh of electricity annually, and if your utility rate was 11.4 cents per kWh (like mine is), this would reduce your utility bill by $1,140 a year, or an average of $95 per month.
Solar Renewable Energy Credits: This one is a bit complicated, but many states, including Maryland, have implemented a renewable energy portfolio standard that specifies the percentage of energy that the state must generate from renewable sources. This creates a market in which utilities or other entities can actually purchase the right to claim that the clean energy generated from your residential PV counts to the achievement of their target. Each mWh of electricity that your system generates is equal to one Solar Renewable Energy Credit (SREC) that you can actually sell on a marketplace at a fluctuating market rate (and SREC prices do fluctuate!). Currently, the Maryland SREC price is $75/MWh, so a solar installation that generates 10,000 kWh (or 10 mWh) of electricity annually, would create 10 SRECs each year that could be sold for a total $750, though it's important to note SREC pricing is highly volatile. These SRECs accumulate over time, so this creates an additional annual revenue stream for yourself.
Now that I’ve explained the #s, let’s analyze them. As part of the Columbia Solar co-op, a 7 KW system would require a cash outlay of $11,950 ($17,500 installed @ $2.50/watt less $4,550 federal tax credit less $1000 MD state grant), and it would be estimated to save you $1,890 every year ($1,140 in utility bill savings and $750 in SREC sales each year) for a period of 25 years or so. This is equal to a 6.3 year payback, a $17,575 net present value at 4%, and a 15.4% internal rate of return over 25 years. Those are some pretty amazing numbers for such a low-risk investment.
Financing: Most people don’t have $12,000 laying around ready to purchase solar PV system, but it is possible to finance the installation of solar through a loan. Borrowing with a 4% interest rate to finance an investment projected to generate a 15% return is still a smart financial move. The solar contractor selected will likely be able to help connect you to banks or other financing options experienced with these type of loans, but everybody needs to consider their own personal finances before deciding whether taking out new debt makes sense for you!
Power Purchase Agreement: Finally, a Power Purchase Agreement (PPA) is another option to get solar on your roof, though I generally would only recommend this route if you are dead set on getting solar and don’t have or can’t borrow the money to buy it outright. Under a Solar PPA, you essentially grant permission to the solar company to install solar on your roof that they will own and then you agree to purchase all the energy it produces at a specified contract rate over a period of 15 to 20 years, typically a few cents less per kWh than you would otherwise pay the utility. Under this model, you don’t own the solar system and accordingly, don’t get the tax credit, state grant, or SRECs - the solar company does! On the plus side, it costs you nothing upfront to have the system installed and it still saves you some money since you are now purchasing the solar that is generated on your roof at a rate that is less than the utility charges you. So, if the PPA calls for you to purchase the electricity your solar generates at @ 9 cents / kWh instead of 11.4 cents / kWh that the utility charges and you consume 12,000 kWh a year, than you would save approximately $288 a year.
For more information about the coop or to sign up to join, contact the Civic Works Energy Program at email@example.com, 410-929-6139, or visit their website at http://retrofitbaltimore.civicworks.com/.