Solar Energy Update: Our Rapidly Shrinking Electric Bill!
As the months go by, I am increasingly optimistic our family’s decision to install solar panels earlier this year will ultimately be categorized as a Smart Financial Decision.
For the month of September, our electric bill dropped by 93% relative to 2016! That follows declines of 91% in July and 95% in August!
Those results are as good as could be expected, and given recent rhetoric out of Washington, the timing of our purchase may have been just about perfect. In late September, the U.S. International Trade Commission ruled that inexpensive foreign solar panels have had a negative impact on domestic manufacturers. This decision opened the door for President Trump to consider imposing a tariff on imported solar panels. The Solar Energy Industry Association believes higher tariffs could eliminate over 80,000 U.S. jobs, while another estimate claims tariffs could increase the cost of residential solar energy systems by 15%.
Fortunately for us, our solar panels are already bought and paid for. Once again, our electric consumption fell relative to last year, declining by 16% this September (thanks LED lightbulbs!), but most of the savings on our bill is being generated by those shiny new solar panels on our roof. For a third consecutive month, we earned more from the credits associated with our power generation than we spent on energy.
Similar to July and August, the only charges we ended up being responsible for paying were the daily cost to connect to the power grid, as well as a few relatively small fees. Those items cannot be offset with solar energy credits in our state.
Even more importantly, we again generated surplus credits to apply to future electric bills, most likely during the fall and winter, when we probably won’t be producing as much power. Right now, we have banked over $100 in solar credits to use as shorter days, less direct sunlight, and panels that will occasionally be covered in snow and ice reduce our energy production!
At this point, our home solar energy system is performing in line with our expectations. We still seem well on our way to an annual bill of well below $200 to power our four bedroom home. Our significantly reduced monthly payments to the electric company will be a nice tailwind for us as we continue traveling down our path towards financial independence and early retirement!
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Mr. RobotOctober 5, 2017
Those are really awesome solar results. I would love to have some on our roof but the solar companies advised against it due to limited sun on the places where we could install.
ROMTOctober 5, 2017
We were fortunate that the slope of our roof faces almost due south, and that the roof is high enough and the trees are far enough away that we get very good sunlight for large parts of the day and large parts of the year. We had to take down one tree, but the increase in potential efficiency by taking down that tree was large enough that we avoided having to put three additional panels on the roof. You are right that the feasibility of many residential solar projects is very location specific!
StevearkOctober 5, 2017
It looks like a decent investment but at a 9 year payout that’s still not as good as the historical stock market return. Also your state is not charging solar users their true cost of service, mine doesn’t either. However in some states that is changing which means that the connect charges you currently pay could go up a lot prior to the nine year payout period reducing your rate of return. The other thing is that a guarantee for Chinese solar panels in an industry as unstable as the solar panel one may very well be worthless long before you would need it and should the panels fail you might not have any recourse. Those are all somewhat remote possibilities so I would predict success for your project but as someone familiar with the intricacies of the industry there are some risks that the salesmen never mention. And of course when there is additional risk investors generally demand additional return in exchange.
ROMTOctober 5, 2017
You are right that there are definitely risks and unknowns with any project like this, some of which I have posted about in the past. We have a ten year contract with the utility, so I am comfortable with the terms and conditions we’ll (hopefully) be operating under during the potential payback period. To your point, I do fully expect the terms will be less advantageous for us and other solar users after our initial agreement expires.
I’ve also written in the past about how this was not an obvious decision to me based on the numbers. You’re right that using historical returns is probably the best proxy for how the market will perform in the coming decade, but as you know there are no guarantees. With most of our net worth already in the market, historically rich valuations, and an uncertain global political environment, diversifying into something with a risk profile that is most likely not highly correlated with the global financial markets made sense to me. I certainly understand that others could look at the same information and make a different decision.
Thanks for stopping by and for another thought-provoking comment Steveark!
Dads Dollars DebtsOctober 5, 2017
We bought a house last year with leased solar panels. While it saves us a few $100 bucks a year on energy, I don’t think it is worth leasing the panels. We have already had one issue with the roof (kindly resolved by the company though) and lately have been dealing with communication issues between our panels and the company. We also do not get any of the tax credits buyers receive.
So the point is that leasing is not a great idea. Owning straight out is. Glad you guys bought straight out!
ROMTOctober 6, 2017
As you mentioned, the tax credits are a huge part of the equation. Qualifying for the tax credits was critical to our decision making. Without the tax credits, the numbers just did not make sense to me.
It will be interesting to see what happens in the coming years as the federal solar investment tax credit gets smaller and some states continue to shrink their subsidies of the solar industry. Less expensive and more efficient solar panels could help offset fewer subsidies, but I think the true long-term economics of solar (not necessarily what you see on the proposal from the solar company!) could remain challenging.