Solar Panels – 2 Year Lookback

After 2 years in our newly constructed house our electric bills were soaring pretty high averaging $180 per month. My Valuist Wife always blamed it on our double ceiling in our family room. Being an engineer, I wasn’t very convinced. My thought process was that warm air rose to the top and if I were to go with her idea then it would be an issue during the winter months. However our heating was primarily gas based and we shouldn’t be seeing hikes in our electric bills. In the summer months, on the contrary, it would work to our benefit with the cold air settling on the bottom which in effect should minimize the air conditioning. Nevertheless, we decided to investigate solar panel options.

DISCLAIMER – This post contains Affiliate links to products. We may receive compensation when you click on links to those products.

We had few installers come to our house and survey the roof. Based on the survey, our historical annual electric usage and sizing restrictions enforced by the Department of Clean Energy in NJ the solar system was sized at 7.02 KW with an estimated annual generation of 9 kWh. Almost all of them provided us with two options.

Option 1 – Outright purchase of the solar panel system in which case there would be a higher upfront costs but with some benefits estimated below

Purchase Price – $26,886.60

Federal Credit – $8,066.00

Loan Amount – $18,820.60

Estimated Monthly Payment – $186.86

SREC Credits – $160 to $240 per mWh ( 1,000 kWh)

Solar panel owners (purchased or financed) are eligible for a program called Solar Renewable Energy Credits (SREC). Many states allow a homeowner to earn credits for the energy produced from their solar panel system. An SREC is earned for every mWh energy produced and can be traded in the SREC market. The value depends on the supply and demand and varies from state to state. Visit SRECTrade.com to get an idea of SREC value for each state. In NJ the pricing ranged from $160 to $240 per mWh of power generated over the two year period.

Option 2 (a.k.a. PPA)- Lease the panels from a solar panel company who would install the system on their dime and sell us power at a very subsidized rate.

The lease option did not appeal to us when we ran the numbers and so we decided to proceed with outright purchase using a 2.99% APR loan. After a lot of back and forth price negotiations we finalized on Solar City (now Tesla). If there is one thing I learned from this experience that would be that there is always room for negotiations on pricing no matter the size of company.

Was it all worth the effort?

Here below are the numbers over the two year period of Solar panel system ownership

Year 1:

Monthly loan repayment – $2,242.32

SREC Credits income – ($1,737.24)

Grid Operator Connection charges (and overages when we produced less than we used) – $204.90

Net Electric Usage Charges – $709.98

Estimated Yearly Costs without Solar Panel System (from previous years) – $2,160

Savings => Estimated yearly costs without solar – Net Electric usage charges = $1,450.02 (+ve)

Year 2

Monthly loan repayment – $2094.00

SREC Credits income – ($1,875.33)

Grid Operator Connection charges (and overages when we produced less than we used) – $149.25

Net Electric Usage Charges – $367.92

Estimated Yearly Costs without Solar Panel System (from previous years) – $2,160

Savings => Estimated yearly costs without solar – Net Electric usage charges = $1,792.08 (+ve)

That is a savings of roughly $3,200 in two years versus what I would have spent without a Solar panel system. In a nutshell, it worked out well financially.

Some additional factors that could have positively impacted the savings

  1. Immediately after the survey was completed and the paperwork was submitted to the utility provider and NJ Department of Clean Energy, my Valuist Wife and I re-lamped a majority of the light fixtures in the house with LED lights.
  2. Around the same time we swapped our programmable thermostats with Ecobee smart thermostats that significantly reduced HVAC energy usage by learning our heating/cooling behavior.
  3. To tie everything else we also went on a treasure hunt to disconnect any energy hoggers in the house.
  4. The loan agreement was written such that at the end of Year 1, the monthly payment would be re-evaluated assuming you applied the federal credit that you received in your tax returns to the loan. In our case we not only did that but also applied all the SREC payments to it. This brought down our monthly loan installment from $187.00 to $175.00 for Year 2.

This year we decided to payoff our loan using our savings and we hope to have a better net value.

Leave a Reply

Your email address will not be published. Required fields are marked *