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California Solar Incentives, Solar Installers, & Solar Costs

by Zach June 7, 2016

written by Zach

Originally published on Cost of Solar.

California is ground zero for solar energy in the United States. So, it seems logical to start our state-level solar energy deep dives here. In the article below, I’ll provide as thorough a look at California solar incentives + solar installers + solar costs as I’ve seen anywhere. Actually, it is more thorough than anything I’ve seen.

Naturally, if you read through this and know of more California solar energy facts or resources I should look at and include, let me know in the comments!

Solar Incentives

The first thing to know is that there’s a solar investment tax credit (ITC) available across the United States that offers a credit from the federal government of up to 30% of the cost of a solar installation. However, you have to have that much tax liability in a single year in order to take advantage of the full credit. Additionally, the 30% credit runs through 2019, after which, a phaseout of the incentive begins (under current law). Here are some more details from the US Department of Energy:

Solar-electric property

30% for systems placed in service by 12/31/2019
26% for systems placed in service after 12/31/2019 and before 01/01/2021
22% for systems placed in service after 12/31/2020 and before 01/01/2022
There is no maximum credit for systems placed in service after 2008.
Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating property

30% for systems placed in service by 12/31/2019
26% for systems placed in service after 12/31/2019 and before 01/01/2021
22% for systems placed in service after 12/31/2020 and before 01/01/2022
There is no maximum credit for systems placed in service after 2008.
Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating property expenditures to be eligible.
The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
The home served by the system does not have to be the taxpayer’s principal residence.

Across California, certain solar energy systems are exempt from property taxes, so no need to worry about increasing your tax bill.

Probably the second-biggest incentive for California solar consumers is the state’s net metering policy — hence the reason fossil fuel & monopolistic utility companies have been routinely attacking it and trying to remove or change it. The policy exists in the jurisdictions of all of the state’s utilities except LADWP, which has a feed- in tariff program in place and its own net metering policy. Under the state net metering policy, excess electricity a consumer generates with her/his solar power system (or other renewable energy system) is treated as follows:

Credited to customer’s next bill at retail rate. After 12-month cycle, customer may opt to roll over credit indefinitely or to receive payment for credit at a rate equal to the 12-month average spot market price for the hours of 7 am to 5 pm for the year in which the surplus power was generated. (If customer makes no affirmative decision, credit is granted to utility with no compensation for customer.)

While consumers using net metering were exempted from connection charges for years, the rules recently changed, and will coming into effect in July 2017 at the latest. Here are more details from DSIRE:

In January 2016, the California Public Utilities Commission issued a decision on its net metering successor tariff. Customers on the new net metering successor tariff will have to pay an interconnection fee, estimated at $75-$150; pay all non-bypassable charges for all electricity consumed from the grid (~$0.02-0.03/kWh); and go on a time-of-use rate. The net metering successor tariff will take effect for California’s three large investor-owned utilities (IOU) on July 1, 2017, or when 5% of the sum of non-coincident customer peak demand is reached for the IOU, which translates to an installed net-metered capacity of 2,409 MW for Pacific Gas and Electric, 2,240 MW for Southern California Edison, and 617 MW for San Diego Gas and Electric.

Click here to read more about the CPUC’s efforts to create a customer-generator successor tariff or contract.

Virtual net metering is also allowed for multi-family buildings, and an April 2016 CPUC decision added rules for solar-connected storage systems up to 10 kW. Here are some more details on the virtual net metering rules:

AB 2466 of 2008 allows a local government, if certain conditions are met, to distribute bill credits from a renewable energy system across more than one meter. To be eligible for this billing arrangement all electrical accounts involved must receive electricity under a time-of-use tariff, and all accounts must be owned by the same entity.

California also allows virtual net metering for certain utility customers. Originally authorized just for customers participating in the Multifamily Affordable Solar Housing (MASH) program, the CPUC voted in July 2011 in favor of a proposed decision which extends virtual net metering to all multi-tenant properties and to all distributed generation technologies. Virtual net metering allows the bill credits associated with the electricity produced by the system to be distributed across all the tenants’ electricity bills.

Regarding solar + storage, here are the rules:

Energy Storage (IOUs Only)
California allows renewable energy systems coupled with energy storage to qualify for net metering. A chief concern when introducing storage to net metering is the risk that a customer would store grid electricity during times when electricity costs are low and export that same grid electricity during times when electricity costs are high. The CPUC developed rules to address this and other concerns. The CPUC developed different rules for PV systems paired with storage devices 10 kW or less, and PV systems paired with storage devices larger than 10 kW or other forms of renewable energy paired with storage of any size.

PV systems paired with storage devices larger than 10 kW and non-PV renewable energy technologies paired with storage of any size:
The CPUC issued a decision in May 2014 establishing rules for net metering systems paired with storage devices larger than 10 kW. In addition to other requirements, these systems must : 1) install a non-export relay on the storage device(s); 2) install an interval meter for the NEM-eligible generation, meter the load, and meter total energy flows at the point of common coupling; or 3) install an interval meter directly to the NEM-eligible generator(s). While these rules originally applied only to systems paired with storage larger than 10 kW, a subsequent CPUC decision extended these requirements to all non-PV technologies paired with storage of any size.

PV systems paired with storage devices 10 kW or less:
The CPUC issued a decision in April 2016 establishing rules for net metering PV systems paired with storage 10 kW or less. Rather than installing the extra equipment required for storage devices greater than 10 kW, the rules for PV systems paired with smaller storage protects against rate arbitrage by relying on system output estimations. Specifically, utilities are required to establish monthly maximum allowable output limits for net metering facilities using CPUC-approved tools. Any export by the customer’s system which exceeds the monthly limit would not be eligible for net metering credits.

The other big solar incentive in California for years was the California Solar Initiative’s cashback grant for installing solar. However, that program is now closed across the state for residential consumers. It is still open for commercial consumers in the San Diego Gas & Electric district.

That said, there are still numerous other solar incentives available in The Golden State. DSIRE collates the most comprehensive index of solar incentives in the country (or the world) as far as I’m aware. It shows 208 solar incentive programs in California. Of course, most are for specific cities, counties, utility jurisdictions, or special districts. I could quickly paste them all in here, but DSIRE continuously updates the incentives as they change, so I think it’s best to just direct you there to find the incentives that could benefit you.

Solar Installers

First of all, before looking into installers in your area, be sure you are prepared to evaluate installers and solar financing options. You don’t want to go to a solar installer with no background knowledge and info about what you are looking for, just as you don’t want to go to a car dealership in the same way.

Naturally, being the largest solar market in the US (by far), all of the big players in the home solar installation industry operate in California. Here’s the top 10 list (nationally):

SolarCity
Vivint Solar
Sunnova
RGS Energy (Real Goods Solar)
Solar Universe
Bland Solar & Air
Amergy Solar
Smart Energy Solar
KDH Solar
Direct Solar Energy

It’s not clear if KDH Solar & Direct Solar Energy operate in California, but solar installers #1–8 do.

As hinted above, though, not all installers are equal. Last year, SolarCity’s MyPower prices were found to be 34% higher than the California average. (Note: SolarCity later ended its MyPower program and just launched another home solar loan program.) Keys to evaluate are the types of financing options installers offer (and try to push on you): internally provided solar loans vs solar leases/PPAs vs solar loans from other companies. Then you have to evaluate how those options compare to other financing options you could use, weighing upfront costs, interest rates, timeframes (a 30-year loan is sure to cost you a lot more than a 20-year loan), and what’s included.

Aside from contacting individual installers, you can get quotes from a variety of installers via Cost of Solar, Pick My Solar, EnergySage, Google’s Project Sunroof, and probably other such services.

You can also check reviews on Yelp, but I hear that reviews are commonly planted on the site, so I don’t know how reliable they are.

A comprehensive database of solar installers/contractors was created and is maintained by the California Energy Commission, and you can search for one in your area via this tool.

Solar Costs

According to the Q4 2015 US Solar Market Insight report, average solar PV system pricing breaks out as follows:

SEIA notes, “Overall system pricing fell by up to 17% over the course of 2015, depending on the market segment, with the largest declines in the utility fixed-tilt sector. On a quarterly basis, pricing continues to trend downward with some levelling-off in the residential sector in particular due to strong investment in customer acquisition and the stubbornness of other soft costs. In the non- residential and utility sectors, there were annual declines of 10% and 17%, respectively. This reflects continued aggressive cost reductions, both in hardware and soft costs, in national system pricing on an aggregate basis. Moreover, as installers and EPCs expand to regions with lower labor and regulatory compliance costs, these regions will have a larger impact on aggregate pricing. Due to advantages from scale, variations in utility system costs are much smaller than variations in residential and non-residential solar costs.”

Here are some more details on solar PV system pricing:

Average pricing for residential rooftop systems landed at $3.50/Wdc in Q4 2015, with nearly 65% of costs coming from on-site labor, engineering, permitting and other soft costs.

While residential hardware costs have fallen by over 16% in the past year, soft costs have actually risen on an industry average basis by 7%, primarily due to rising customer acquisition costs among national and local players alike.

In the non-residential market soft costs remain a challenge as well. Hardware costs fell 15% year- over-year while soft costs saw a modest decrease of 6%. In Q4 2015 soft costs accounted for approximately 50% of total system pricing. Soft costs can be even higher for projects in areas with strict labor requirements and particularly in tough permitting and interconnection jurisdictions. In order to continue reducing costs, developers and EPCs are looking to squeeze additional power density for commercial sites and amortize fixed costs over more power output – and therefore reduce dollar-per-watt and dollar-per-kWh.

California represents nearly 50% of the US solar market. While it’s not clear what the precise averages for solar costs are in California, the state can’t be too far off the average, on average. 😀

Based on the Pick My Solar research noted above regarding SolarCity, the average price of a SolarCity system is $5.10 per watt, while the company found the average price in the state to be $3.60 per watt. That matches up closely with GTM Research & SEIA’s Q4 average of $3.50 per watt. So, I think it’s safe to say that the California average is somewhere between $3.40 per watt and $3.70 per watt (but remember that soft costs have been coming down, and if the trend has continued in 2016, the overall average could be dropping).

If you have more information on solar costs in California, let us know!

June 7, 2016 1 comment

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Cheapest Solar Panels? Google’s Project Sunroof Partners Compete For Your Signature

by Jake Richardson December 2, 2015

written by Jake Richardson

As we wrote months ago when it launched, Google has a free online service that uses its mapping information and partner offers from solar installers to try to hook you up with the cheapest solar panels on the market — by providing fast estimates of how much a homeowner might save by investing in a solar power system from various solar companies. Dubbed “Project Sunroof,” it also provides information on things like the number of square feet available for solar panels on your roof based on 3D modeling, the number of hours of usable sunlight per year based on weather pattern analysis, net savings over 20 years, an average monthly electric bill, and recommended solar power system size.

Currently, the Google service can provide information in the Boston area, the San Francisco area, Fresno, Napa, Sacramento, and Long Island. Partners for the project were not initially listed in the press releases, blog posts, and media coverage, so we decided to dig in and see who they are. Seeing offers from SunPower, American Solar Direct, Pick My Solar, Sungevity, SunEdison, NRG Home Solar, we can see that these are the highly regarded solar companies Google decided to partner with (in the initial San Francisco area where I live, at least).

Providing this information for free is a great service, because it brings rapid clarity to those who are curious or interested but don’t know how to gather basic information about what kind of solar power system might work with their home and how much they could save by going solar.

For example, do you know the square footage of your roof? Everyone knows how much they pay for their electricity each month, but you also know what size solar power system would cover your electricity usage?

December 2, 2015 1 comment

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SolarCity MyPower Loan — You Need To Understand The Fine Print

by Zach October 31, 2015

written by Zach

A couple of months ago, I wrote an article about SolarCity’s “shockingly high MyPower prices” compared to competitors’ prices. The article was based off of an analysis by Pick My Solar. There’s a Part 2 to the story, though. Unfortunately, it’s no prettier.

Let me reiterate that I’m long SCTY (which is difficult this week), have no intention of buying or selling shares any time soon, do think SolarCity has good intentions and some strong competitive advantages, and think I can even see why it sets up its loans the way it does (particularly, note that it is not in financial heaven and is likely trying to make sure it stays alive for the long term).

Getting on to Part 2, the key point is that some of the fine print is not entirely exciting for the consumer (to put it mildly) in the MyPower loan contract. Here’s a quote from Pick My Solar:

“MyPower does indeed provide loan financing, but you get the impression it looks a lot like a Power Purchase Agreement (PPA). Reading through their 34-page contract will not clear this up for you (a concise solar contract should cover everything in 3–5 pages – this contract takes fine-print to the next level). Payments are made to SolarCity based off system production at an ‘equivalent rate per kWh’ that increases 2.9% each year. These variable payments (due to being based off of production) are applied to the loan as any mortgage payment would be. The variable payment structure is set up with the goal of having the system completely paid off after 30 years. However, if the solar system doesn’t hit the ‘Expected Annual Production’, which the monthly payments are based on, it is possible to still owe thousands of dollars at the end of 30 years. The power production guarantee is considerably lower than the ‘Expected Annual Production’, making this an entirely possible scenario. The contract has a clause called ‘Variance of Loan Term’ which discloses this possibility. It explains that in the event there is a remaining balance at the end of the Loan Term, MyPower will provide a refinance option for the outstanding balance.” (emphasis added)

Catch that? Your monthly payments to SolarCity are based on expected output from your solar power system. If the output is lower than expected, you may end up still owing SolarCity money after 30 years. 30 years! In such a situation, SolarCity will offer to refinance the remaining loan. Oh joy!

Typically, one should expect to pay off their solar system within 5–15 years these days. Maybe 20 in bad circumstances. 30+ years? That doesn’t seem like a smart option. And that gets to another concerning part of the MyPower contract….

“The financing has another ingeniously deceptive twist. By charging you a low ‘equivalent rate per kWh’ upfront (and then increase it by 2.9% each year), most of your initial payments will go toward interest. As the rate increases over the years, you start paying off more of the principal. Loan structures are typically setup this way, to pay more interest upfront, but by increasing the payments with an escalator, it completely skews the payback dynamic. The customer ends up paying a much larger amount toward interest and ultimately thousands more than would have been paid with a conventional flat monthly-payment financing option. With this payment structure, the effective APR ends up being almost a full percent more than the 30 year stated rate. (emphasis added)

Anyone who has paid back a big loan should know that initial payments are just covering interest to an absurd degree. When I was paying off my graduate school loans, this was so irritating that I decided after a few years to simply pay the loans off as quickly as possible. I ended up saving probably $10,000–15,000 by doing so. But many are not capable or simply don’t do the math and think about paying back a loan faster. If such a person is in a SolarCity contract, they’ll end off even worse than with many other loans. A ridiculous amount of their payments will be going toward interest.

As both an investor and someone who cares about the common consumer, I’m not happy to see either of these clauses. While they are likely in there to try to ensure SolarCity makes a profit and doesn’t go out of business as the solar industry grows, they seem sneaky and unhelpful for customers, and they seem like there’s a good chance they could backfire in the long run.

SolarCity’s desire to bring solar power to more people via $0 or a small amount of money down and low monthly payments is commendable, but if that requires sketchy fine print and poor repayment terms, I think we start moving backwards. I hope these issues will be addressed soon. And in the meantime, I encourage anybody looking to go solar to look closely at the fine print and compare options.

In the end, this is what Pick My Solar came up with for a 6 kW system in California:

SolarCity MyPower System Cost: $33,150
Lifetime payments (tax credit used): ~$50,550 (30 year loan)
Avg. Cost Per kWh: 17.3 cents (30 years)
Avg. Payments: $140 (30 years)

Typical Installer System Cost: $23,400
Lifetime payments (tax credit used): ~$22,310 (12 year loan)
Avg. Cost Per kWh: 9.3 cents (25 years)
Avg. Payments: $155 (12 years)

That’s a shocking difference, in my book.

Image via Shutterstock

October 31, 2015 9 comments

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SolarCity’s Shockingly High MyPower Prices

by Zach September 6, 2015

written by Zach

There’s no doubt about it — SolarCity is king of the hill in the US rooftop solar market. A lot of people are inclined to “hate on the king,” especially those who might be competing with him. For a long time, we’ve had commenters complain about SolarCity, saying that it fleeces customers and is a total ripoff. While not arguing that these people are wrong, we simply haven’t had any aggregate hard data or reports to confirm this… until now.

First of all, let me get a very important and counterintuitive disclosure out of the way: I’m a SolarCity investor. In other words, you can be sure as heck I’m not writing this piece to bash the company for selfish purposes. Furthermore, I’m also not planning to sell my SolarCity stock anytime soon, since I think it has competitive advantages that could very well keep it in the throne of a fast-growing market. But as an investor and a person who cares a great deal about society as a whole, I wasn’t happy to find out about this story.

The data and its interpretation come from Pick My Solar. Pick My Solar is a unique and objective startup. It takes in data from potential solar customers, then gets bids from various solar installers in the area, and then evaluates the bids based on a variety of factors before recommending a few options to the customer. This is unique since most solar lead companies simply send the customer on to installers and leave it to the customer to evaluate and decide who to go with. Comparing the options provided by competing installers, the Pick My Solar crew began to see a pattern — SolarCity’s prices were well above the pack.

In particular, Pick My Solar highlighted SolarCity’s MyPower solar loan bids. It found that those bids (only in California) came out 34% higher than the California average. The difference was nearly $10,000 for an average system! (No, I wasn’t using the word “shockingly” in a light manner.)

In a July article about the finding, Pick My Solar wrote: “The cost-per-watt on SolarCity’s MyPower contract is always consistent, no matter what the size of the project. They price systems ranging from 2.5kW to 10kW or larger at the same $5.10 per watt (cash or financed). Having no discrepancy in price is an obvious red flag. Overhead, permitting, engineering, and transportation are generally consistent costs, no matter what the project size – which means more dollars are going to profit margins on larger projects.” Yes, it is again shocking that SolarCity’s per watt price doesn’t change with large differences in system size.

Sadly, that’s not the end of the story. SolarCity is also behind the curve when it comes to turning on a solar power system. Pick My Solar found that most solar installation companies in California get the system turned on within 2 to 4 months once the contract is signed. “SolarCity is an outlier here, known to take six months or more to install a system due to backlog and inefficiencies. The MyPower contract confirms this exasperated timeline, stating that the installation will be done within 12 months!”

On the plus side, the 30-year timeframe of the MyPower warranty leads the industry. But Pick My Solar also noted concerns about the unspecified brands it uses for the solar equipment as well as the roof warranty. You can read more here.

Image via Shutterstock

September 6, 2015 2 comments

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Pick My Solar Wins SBA Award

by Steve Hanley May 13, 2015

written by Steve Hanley

Pick My Solar has received a 2015 Outstanding Small Business award by the US Small Business Administration according to a recent press release. The Los Angeles based company helps homeowners get rooftop solar systems by providing information and soliciting bids from local solar contractors.

It also vets each contractor so that low-ball bids from companies with poor performance histories get automatically filtered out. When the bidding process is done, the homeowner is left with 3 or more competing bids from qualified installers who have a reputation for quality workmanship.

“Pick My Solar is a great example of a company harnessing the innovative, entrepreneurial spirit here in the LA region. Not only are they making a positive environmental impact through the services they offer, they’re saving homeowners money and contributing to the increase in home solar installations, which helps create jobs in LA’s green economy,” says Fred H. Walti II, executive director of the Los Angeles Cleantech Incubator.

Pick My Solar was started in 2013 by Max Aram and Chris Blevins. As solar advocates, they set out to help as many homeowners as possible obtain a solar panel system, but soon learned that customer uncertainty regarding the bidding and purchase process was a major deterrent to industry growth.

After examining this problem, they concluded that the solar sales process was too difficult for homeowners to navigate and that all of the various finance options were confusing. Pick My Solar created an online marketplace to simplify the process, drive down costs and provide the consumer advocacy necessary for solar to achieve broad market success.

Today, on the company website, a homeowner can fill in details about the location and characteristics of the home where a solar panel system is desired. A Pick My Solar–trained representative will review the details and call to speak to the homeowner in person. That call will last not more than 10 minutes.

After that, Pick My Solar will place the information on its website and invite solar installers to bid on the job. It will review the bids and pass along the best ones for the homeowner to consider. The bids are valid for 2 weeks but the homeowner is under no obligation to pick any of them. Pick My Solar has already helped more than 10,000 customers with its online bidding process.

The company also runs informational clinics in the Los Angeles area to educate consumers about the advantages and disadvantages of home solar, the technologies available, and various financing options. It operates on the principle that an educated consumer makes the best customer.

No salesman will call after the bidding process is initiated. No commissions are paid. The homeowner gets only knowledgeable advice and support and there is no fee for using the service. The result is that Pick My Solar customers know exactly what they are getting and often pay far less for their system than they would otherwise.

May 13, 2015 0 comment