Making Money/Saving Money on a PV system?

BilljustBill · June 2010

This question is as much a solar question as it is a Financial question:

With the increasing possibility that our money is going to be worth less through
inflation, more taxes that may be coming, and inventories of goods may be on the decline.... Investing in Solar might be a good thing to have.

In Texas, in spite of large wind farms and sense of alternate energy, the only perks for generating electricity are that Electric Co-Ops have to give Net metering, few power company rebates are to be had, not taxable on local property taxes, and the IRS 30% tax credit until 2016.

With a 25% tax hit (or more after Dec. 31-2010) if taking out money from an eligible IRA, instead of giving it to Uncle Sam, a person could put it into a $10,000-$15,000 Grid tie/and/or Off grid system.

The question comes down to: Base on the 10-15K number, can you save enough of the 25% IRA tax with the 30% tax credit to put it back into a project that saves or makes money? I realize that the income generated from the KWHours is taxable....(can't win can you?)

Have you experienced doing anything like this?

What do you think?
Bill

BB. · June 2010

Re: Making Money/Saving Money on a PV system?

If you can get the tax credits now--it may make sense. Europe is already beginning to back away from the huge wind (and other) subsidies as they are unsustainable (don't save anything on fuel costs/carbon release) and are open to massive fraud.

In California, for example, Grid Tied Solar systems make sense because a law requires the Utilities to subsidize them (buying energy at retail rates from me and reselling them at retail, does not make a lot of sense).

I don't see these programs lasting 20+ more years--and may "go away" in a few years--So I would be very leery of any "investment" that bets on the government continuing these programmed unchanged.

My two cents (I tend to be very conservative with investing--and yet still got badly stung).

-Bill "the other" B.

stephendv · June 2010

Re: Making Money/Saving Money on a PV system?

BB. wrote: »

If you can get the tax credits now--it may make sense. Europe is already beginning to back away from the huge wind (and other) subsidies as they are unsustainable (don't save anything on fuel costs/carbon release) and are open to massive fraud.

Spain is going to cut back massively on renewable subsidies because of their economic issues and Germany is about to reduce the feed in tariff rate in the next few months - which incidentally has caused a shortage of inverters throughout Europe because of the rush to get systems online at the old rate.

On the other hand the UK has just introduced FITs for the first time at very attractive rates: 41p/kWh generated + 5p bonus for every kWh exported, i.e. you get paid the 41p/kWh even if you use the power yourself. Oh, and you can apply for the FITs even if you're off-grid!! The rates are guaranteed for 20 years, with a built in degress for certain technologies.

A slew of generation technologies are included: solar, wind, hydro, anaerobic digestion, biomas and even non-renewable micro combined heat and power(!?). With the low interest rates charged by the bank, installing PV in the UK is a no-brainer right now.

Hoonose · June 2010

Re: Making Money/Saving Money on a PV system?

My solar system is about a 10% tax free return on investment, after rebates and tax credits. Our local electric company put in $2/watt, the state I think $2000 and the Federal tax credit is 1/3 of the overall cost.

If you can do better with the IRA, then you're smarter and luckier than I!

Remember that once your solar system is installed the return is virtually guaranteed for year after year. In fact the return will be higher when your electric rates go up in the future. You also save on taxes for the energy that you don't buy form the power company. And I don't think that you pay any tax on the juice you send to the grid. I think I just get credits for the following month if I generate excess.

Now whether you can legally use your IRA funds to do solar is a question I can't answer.

solar_dave · June 2010

Re: Making Money/Saving Money on a PV system?

Hoonose wrote: »

Now whether you can legally use your IRA funds to do solar is a question I can't answer.

I suspect it is like any self directed IRA, it must not directly benefit you in anyway until you draw it down @ 59 1/2 +. Then you pay the taxes due.

I know in real estate you can buy property with your IRA but it must be a rental and have no direct benefit to anything but the IRA entity. No sister brothers child spouse .....

a0128958 · June 2010

Re: Making Money/Saving Money on a PV system?

I live in a State (TX) that doesn't have as many subsidies as some others (FL, NJ for example). The economics for me are pretty simple because by doing a lease I have a nice simple measure of cost of capital.

In my case, my 8.1 KW (DC) grid-tie-only system is saving me about $20/mo - that's it when including the cost of capital.

My system was installed at $6/W in mid-Feb, typical for the Dallas area. That's $49K.

With the ratepayers paying for rebates for solar installations, and the taxpayers paying for federal govt credits, the cost drops approximately in half, to about $3/W. That's $24K. This was my cost of capital.

In my case I leased so the installing company paid the $24K and charges me a monthly fee. This lease fee is what it costs me to service the capital costs - no different than a monthly payment to payoff a load if I had borrowed the money.

Since mid-Feb. I've generated 3604 solar kWh. Of this I've been able to use 76%, and thus I've avoided purchasing 2729 kWh. At 9.9¢, savings is $270.

In TX there are no mandatory net-meeting laws that require utilities to subsidize solar owners by purchasing exported power at retail. Thus, for the remaining 24% of my solar harvest, I can only sell at 7.5¢. Since mid-Feb this is 851 kWh, and thus I've earned $64 from exports.

Total savings to the electric bill due to solar is $270 + 64 = $334 for 4 months. Translated to 12 months, an entire year, that's about a $1000 annual savings.

Now looking at the total investment picture, I have to account for $250 so far for lease payments. Thus, my net investment cash flow is $84 for the 4 months, or about $20/mo. I think this is as good as it gets if you always want to be sure to stay cash flow positive for a solar installation experience.

With utility rebates at the moment not available in TX, it's hard to imagine how a (residential) solar installation in TX is very cost effective. My guess is the leasing deals are harder to come by, or, the net installation $/W cost doesn't get nearly down to 3.

Said another way, for TX, it looks like the rationale for proceeding with a (residential) solar installation has to mostly or totally be due to simply wanting to make an investment into the environment. Certainly the cash flow economics alone are marginal at the moment (for TX).

Best regards,

Bill

BilljustBill · June 2010

Re: Making Money/Saving Money on a PV system?

a0128958 wrote: »

I live in a State (TX) that doesn't have as many subsidies as some others (FL, NJ for example). The economics for me are pretty simple because by doing a lease I have a nice simple measure of cost of capital.

In my case, my 8.1 KW (DC) grid-tie-only system is saving me about $20/mo - that's it when including the cost of capital.

My system was installed at $6/W in mid-Feb, typical for the Dallas area. That's $49K.

With the ratepayers paying for rebates for solar installations, and the taxpayers paying for federal govt credits, the cost drops approximately in half, to about $3/W. That's $24K. This was my cost of capital.

In my case I leased so the installing company paid the $24K and charges me a monthly fee. This lease fee is what it costs me to service the capital costs - no different than a monthly payment to payoff a load if I had borrowed the money.

Since mid-Feb. I've generated 3604 solar kWh. Of this I've been able to use 76%, and thus I've avoided purchasing 2729 kWh. At 9.9¢, savings is $270.

In TX there are no mandatory net-meeting laws that require utilities to subsidize solar owners by purchasing exported power at retail. Thus, for the remaining 24% of my solar harvest, I can only sell at 7.5¢. Since mid-Feb this is 851 kWh, and thus I've earned $64 from exports.

Total savings to the electric bill due to solar is $270 + 64 = $334 for 4 months. Translated to 12 months, an entire year, that's about a $1000 annual savings.

Now looking at the total investment picture, I have to account for $250 so far for lease payments. Thus, my net investment cash flow is $84 for the 4 months, or about $20/mo. I think this is as good as it gets if you always want to be sure to stay cash flow positive for a solar installation experience.

With utility rebates at the moment not available in TX, it's hard to imagine how a (residential) solar installation in TX is very cost effective. My guess is the leasing deals are harder to come by, or, the net installation $/W cost doesn't get nearly down to 3.

Said another way, for TX, it looks like the rationale for proceeding with a (residential) solar installation has to mostly or totally be due to simply wanting to make an investment into the environment. Certainly the cash flow economics alone are marginal at the moment (for TX).

Best regards,

Bill

Good insight, Bill. So, Oncor/TXU is out of money? Or, are there too many strings attached? I have a Co-op, a city electric (which as raised their rates almost 40% in the last six months) and I have Oncor lines all running through the easement at the back of the property. In requesting some Oncor info, about 8 months ago, I saw that they have "their" PV installers they use to qualify for their rebates.

Where is a good place to start to look for leasing?

Thanks,
Bill

a0128958 · June 2010

Re: Making Money/Saving Money on a PV system?

Oncor is out of money for now. I believe I've read the money for rebates will be replenished, though. When and how much I don't know. I've also read that the rebate $/W may not be at the same level as it has been - i.e., at a somewhat lower level.

As far as leasing is concerned, I don't know what the leasing picture's like these days in TX, with no utility rebate money available. I.e., I don't know if the numbers work at the moment for the leasing companies. The leasing companies I'm familiar with will expect you to sign away your rights to tax credits, utility rebates, and green certificates (not exact right phrase). With no utility credits available at the moment, it may be more difficult to get a favorable lease deal.

Many of the big online leasing companies don't do business in TX (can't make the economics work). The ones I'm aware of that have in the past or are currently doing lease installations include a SolarCity partnership with TXU, and Infinergy Wind & Solar.

Hope this helps.

Best regards,

Bill

BilljustBill · June 2010

Re: Making Money/Saving Money on a PV system?

solar_dave wrote: »

I suspect it is like any self directed IRA, it must not directly benefit you in anyway until you draw it down @ 59 1/2 +. Then you pay the taxes due.

I know in real estate you can buy property with your IRA but it must be a rental and have no direct benefit to anything but the IRA entity. No sister brothers child spouse .....

Dave,

That's what I'm thinking through, since I've passed the 59-1/2 qualification.

When it is drawn down and the 25% tax is hit, would the 30% energy tax credit at least offset the tax AND give me a way to use all that money to for a solar panel system?

Bill

russ · June 2010

Re: Making Money/Saving Money on a PV system?

@a0128958 - You are effectively leasing your roof top for 20 years for 20 USD per month and will benefit if the cost power jumps.

Good deal? For the leasing company yes - for you? Maybe but I wouldn't do that.

Photowhit · June 2010

Re: Making Money/Saving Money on a PV system?

I think it would be timely to mention that several electric companies have increased their "user" or "line Fees".

I'm not the olny person paying $25 a month for the privilage of buying electric, or selling them my excess...

It also my become more prevalent as Electric companies deal with more small electric producers.

Making Money/Saving Money on a PV system?

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