No Cost Solar Panels on Rentals?
Real Estate Investor · Columbia, MD · Member since 2014 · 172 posts · 94 votes
I am having Solar City come out next week to assess whether my primary home and 2 rentals are good candidates for solar panels. Their schtick is that they pay for the system (so no out of pocket to me), and I pay lower utility bills. They would also pay all repairs, if needed, and cover the insurance cost for theft/vandalism. The panels are also guaranteed for life. If this is in fact true, then I would pay a lower bill each month for my electricity in my own home and my tenants would also in the rentals which is a great selling point when wanting to rent out the places. I also would get warm fuzzies knowing that I'm doing my part to help the environment, which is important to me.
So, my question is: Has anyone worked with Solar City? Do you foresee any problems arising with putting panels on rentals? Is there something that I'm missing here because it sounds like a no-brainer to get them installed?
Thanks for any anticipated advice!
I don't know specifics about solar anything but I would support any venture Elon Musk was part of.
#fanboyforlife
I look forward to other opinions though.
@Account Closed Actually they used to do buy back on power, but because solar is so popular in California, and people were dumping the utility companies, they sued, and are now they are working out a deal with the solar companies for payment for use of the grid. I read that in the future basically the power companies are going to end up being "the grid" while solar will deliver the power. Until then, there's a freeze on net metering which is what it's called when utility company buys excess power. Of course I just missed out!! Darn it.
Oh bummer. It sounded amazing. I had a little condo in Davis at the time, and was thinking the Sacramento PUD sounded awesome.
@Account Closed.
If only the solar energy industry could get the amount of subsidies that the oil industry does.
I think this might be more complicated than what we can answer here. It's admirable that you want to do your part, @Sandra Holt, but I don't think this is the best way.
A major component of these solar companies operations is selling the energy / EPA credits - to companies that pollute (oil refineries, coal fired power plants), and when they buy the credits it allows them to pollute that much more. So instead of your carbon footprint getting just slightly bigger from normal human use, you're giving your polluting "credits" to a professional polluter. The solar company makes money on the front end from you (or the city, or whoever pays, or the tax credits), and on the back end when they sell the energy credits.
So where I think this might get sticky is in the accumulation and sale credits from 1 person or entity. Nothing in this world is unlimited - and I'd venture as far to say there is some kind of limit on how many credits one person or entity can transact.
Also knowing what I know about the industry that is proliferating this product, there's no chance in hell I'd put solar on my roof through SC, or any other solar company that knocks doors.
Solar panels and wind power are nothing but marketing and corporate welfare based on junk science.
Solar panels and wind power are nothing but marketing and corporate welfare based on junk science.
Pixie Dust Energy
Take a look at a "Stand Alone" (No grid connection) solar installation. It's huge and the amount of power you get out of it isn't even close to what you need to power a modern home.
Solar panels and wind power are nothing but marketing and corporate welfare based on junk science.
Pixie Dust Energy
LOL! Pixie Dust! As opposed to coal dust energy. Clean coal, like the stuff at the bottom of the Dan River here in NC....
What about all the poor Chinese miners that are being poisoned half a world away mining raw materials for solar cell production?
I guess they don't count because their eyes are a different shape.
BTW, here is the proper application of solar cells.
Thanks to everyone for all the suggestions, especially from those with experience with solar panels.
I had no idea that solar panels was such a polarizing issue but I appreciate the opinions nevertheless.
If it sounds too good to be true, it probably is.
I didn't particularly like the idea of getting locked into a 20-year contract, the extra liability, the taxpayer subsidy the company receives, and the house becoming an eye soar.
Read the fine print before you decide to lease solar panels. Same applies if you decide to try to purchase a property with leased solar in place. Make sure that the leases are assignable in case you decide to sell your property. If they are, what process will a new buyer have to go through to qualify to take over the lease? I've seen occasions where the lease had to be bought out when the property transfers which ended up killing some deals. No money down solar is very similar to no money down real estate. Yes it's possible however there's more to it then most realize. The solar company leasing the panels almost always benefits the most, otherwise they wouldn't be offering that deal. In most cases you can finance and get the same sort of monthly payments plus you get the SREC benefits, incentives etc...
Example:
LEASING COMPANY
YOU OWN
Financing option questions:
-How do solar program participants justify the cost of installing a solar system?
Program participants rely on a combination of electricity savings, selling SRECs, depreciation, and federal tax credits.
-What is "Net Metering"?
Electric Distribution Companies and third party electric suppliers are required to credit customers at retail rate for each excess kilowatt-hour produced and back fed to the grid for later use. Should excess generation accrue at the end of an annual period, the customer is compensated for any remaining credits at the wholesale power rate by the Electric Distribution Company or their third party electric supplier.
-What is a Solar Renewable Energy Certificate (SREC)?
SREC stands for "Solar Renewable Energy Certificate" and is a type of clean energy credit in the form of a tradeable certificate useful for demonstrating compliance in state RPS markets. For example, with New Jersey's rules an SREC is issued once a solar system has generated 1,000 kWh (roughly $150 in electricity). The SREC represents all the clean energy benefits of electricity generated from a solar electric system. SRECs can be sold or traded separately from the power, thus providing solar system owners a source of revenue to help offset the cost of installation.
-What are Federal Tax Credits?
Solar electric systems qualify for a 30% federal tax credit for tax paying entities. 30% of the system cost is paid back through federal tax credits to the system owner. These credits may be used in place of cash payments to the federal government for tax purposes.
-What is Accelerated Depreciation?
Commercial customers enjoy the benefit of depreciating 85% of the gross system cost over a 5 year period called MACRS (Modified Accelerated Cost Recovery System). Special bonus depreciation in the amount of 50% is additionally deductible in the first year for all projects completed in 2013. The depreciation schedule is as follows: Year 1-60%, Year 2-16%, Year 3-9.6%, Year 4-5.76%, Year 5-5.76%, Year 6-2.88%.
-Who buys SRECs?
Solar system owners can choose to sell their SRECs to a broker, aggregator, or Load Serving Entity (LSE), ie the electric suppliers and providers, who must buy SRECs to meet their RPS obligations.
-Will I still be connected to the electric grid?
Yes. Systems must be connected to the electric grid to be eligible for SRECs. Look at the grid as a giant battery. During the day if your system is producing more than you are consuming, your electric meter will spin backwards, earning a credit from the electric company. At times when your system is producing less than your consumption, your meter will spin forward.
-Will my system work if the electric grid is down?
No, Solar is not a backup system. To ensure safety for utility workers, your solar system will shut down during utility interruptions and automatically turn back on when electricity is restored.
-What maintenance is required?
Your solar energy system has no moving parts, so it requires very little maintenance. Most systems, however, require remote monitoring and occasional inspections.
Another thing to remember is leasing solar is no different then leasing a car, house, tv or whatever. It's like credit card debt and could potentially mess up your debt to income ratio, credit, potential purchasing power, refi's, credit line etc.. for future RE investments (depending upon how your corporate struture is set up). Regardless it's another facet of solar leasing to consider.
More leasing vs. purchase info:
MYTH: We will install your system for free.
FACT: Is making 20 years of payments free? If you bought a car for zero down $120 a month for 20 years was your car free?
MYTH: Leasing a solar system makes a great investment.
FACT: This is true. It is a great investment for the leasing company. The reality is you will pay 20+ years for a system you don't own. At the end of the lease you can buy it for the greater of fair market value or 20% of the original value. What do you think value means? Leasing companies don't use cost method as basis because they never sold the system. They use valuation method. Valuation can be 1.5 to 2 times greater than cost. That means your buyout can be 30% to 40%. Read your contract closely. Many popular leases offered by big box stores and others require the system is removed, packaged, and shipped at your expense, if you choose not to buyout or extend the lease. So you will pay for 20 years, own nothing, and pay more at the end. Is that a good investment?
MYTH: No money down.
FACT: A typical solar system has a 30% federal tax credit worth $8,000-$15,000. When you sign that lease the company receives your tax credit and you PAY the tax.
MYTH: It's easier to sell your home with a lease.
FACT: This would be true if you owned your solar system, but it's the furthest thing from the truth when your home buyers discover that they have to take over your remaining lease payments (if assignable and qualified).
The solar industry also boasts that solar panels make residences more appealing to potential buyers and boost a house's value. The U.S. Department of Energy's Lawrence Berkeley National Laboratory released a study in 2011 that found homes with solar systems sell for a premium over homes without solar systems. There's no arguing the value of solar power but there may be many potential sellers that are not clear of the possible ramifications. Furthermore, it's also a good option to purchase the system outright therefore eliminating any potential chance for lost equity. A purchased solar system can only add to the upside potential of your home sale.
MYTH: You will save up to $150 a month instantly.
FACT: Ask them how long instantly lasts. Typically the first year rate is much lower than the next 19 years. Watch for deceiving sales tactics. Remember the major leasing companies have billions behind them. They are seasoned sales veterans.
MYTH: A solar lease makes solar more affordable.
FACT: Actually a solar lease is one of the most expensive ways to have solar installed on your roof. Want proof? Simply add up your payments on that zero down solar lease or PPA (if your contract contains a payment escalator clause, add those amounts in too). Next add in the 30% federal tax credit that you'll be giving away to the leasing company. You'll find that you'll be paying up to triple the cost for a solar system when compared to purchasing a system.
MYTH: With a solar lease, there are no concerns about ongoing repair and maintenance cost.
FACT: What maintenance and what repairs? This is just a scare tactic. There is typically no maintenance involved in the ownership of a modern, properly installed solar system. When you purchase your solar system instead of leasing, you and have the ability to monitor your solar system's performance over the Internet, on any smartphone, tablet, or computer, right down to the individual solar panel. If available from your PPA/leasing company it will cost you. Equipment should also be warranted from the manufacturer and you should receive a minimum performance contract included.
MYTH: You will have the option to upgrade down the road.
FACT: Leasing companies must own the system for at least 5 years or suffer federal tax credit recapture. The same tax credit you gave to them day one. After that I'm sure they would be happy, at your expense, to upgrade their new tax credit. Ask for the terms of the upgrade before you sign for 20 years.
MYTH: It's very expensive to purchase a solar system. It makes more sense to lease.
FACT: If this is true why are the major leasing companies experiencing 50% to 80% annual growth? The reality is leasing companies are leasing your roof from you. They pay no zoning use fees, have access rights to your property, and will charge you to remove and replace their system when it's time for a new roof. All for just $20-$40 a month rent. And don't forget you will have a buyout and may pay for removal and shipping.
@Richard DunlopThe electric is always under the tenants' names, not mine, so I never have to pay when the unit is vacant.
Thanks to everyone for their replies. You all have given me a lot to think about. I'll post when the Solar City rep comes out next week to evaluate the properties in case anyone is interested in a follow up.
Check on this with your utility. We thought that the utilities could be kept in the tenants' name like they always had been, but once we got solar on our rental (Dec 2011) we had to put the electricity in our name because of their rules. We charge the tenants their actual electric use each month. They pay us and we pay the utility.
We own our 1.92 kW system, and it's not from Solar City. They don't sell/lease in our area.
We plan to add on another 2 or 3 kW some day when we can afford it.
Solar City is not in my area. But I did put solar panels on my duplex about two years ago. However, the duplex is two separate meters, so the panels are only for the electricity on my side. It is under a type of leasing system and I absolutely love it.
Here is how my contract works. There was no money down and I pay $35/month for the panels. There is a buy out clause that gets smaller with each year I own the panels. After 20 years, they become my property for no additional cost, though the shelf life is estimated at 25 years.
I have the $35/month price locked in for the duration of the 20 year contract, but I am only obligated to keep the contract for 6 years. It is also fully assignable to a new owner, if I decide to sell my house.
I save at least 50% on my electricity bill every month, and more than that during the summer. It is a net metering system.
I would use them on a rental also, but only if I would be paying the electricity anyway. I just think the concept is too new for renters to appreciate the value and pay more rent for it, especially since most renters haven't been home owners.
One of my closest friends works for Solar City and is guiding me toward this process with my rentals and my own home. The electric does not have to be in the owner's name for those who are concerned about liability of utilities. The PITA part of the process is that if you want the electric in the tenant's name, then all your tenants must provide one year worth of electric bills. Also, tenant signatures must be gathered for Solar City to gain permission to access the roof since the tenants are technichally renting the property. That part of the process surprised me. If you plan on putting the electric in your name, then only your signatures are needed but I concur with others - I wouldn't want utilities in my name. Why not save 30% on utilities and go green, plus it is def as good selling point to prospective tenants :)
My buddy gave me one big piece of advice. He said move any roof exhausts or extending pipes to the sides. Aesthetically speaking, nothing looks uglier to him then a pipe sticking up in the middle of a bunch of sleek panels.
Solar panels and wind power are nothing but marketing and corporate welfare based on junk science.
Renewables now create more energy in the US than nuclear power. It's really a shame, too, that it is so unfair. The wind and sun are free energy sources. But coal country can fight back! Here is a link to . The bill will "establishing minimum procurement requirements for electric utilities" and make sure that all those who seek out unfair advantages, like $0 fuel cost with renewables, will be legislated out of existence. The 7 Republican sponsors know how to kill new industry (wind, solar) that unfairly creates higher margin electricity at lower production cost.