Update: First Quarter

I'll post some numbers on the panel system's production soon, but it looks good so far. It is producing about 500 kWh per month, which is about what we expected. We are also grateful that we did not go with a system large enough to cover all of our usage needs, because at present, energy prices are very low. We signed a 2-year deal locked in at 7 to 9 cents per kWh depending on usage.

Our assumptions were based on prices much higher than that, but we are still happy with our decision. There's no telling where prices are going to go. Especially in light of the tragedy in Japan. NRG had(s) big plans for nuclear power in Texas, and from a political standpoint, that just became a lot more difficult. Yet, demand continues to increase. Remember the rolling blackouts this last winter? Luckily we do still have an over-abundance of shale gas for the time being. Again, politics and regulation can have an impact there as well.

The panels are producing, we are still paying less than they are costing us, and the customer service at APS continues to be responsive.

Our HOA had some questions about our compliance to their stipulations and the APS team was right there at the ready. We are also trying to make sure the neighbors are happy by exploring the addition of a small fence/blind to cover the additional meter and the inverter.

Check back in soon for real numbers :)

Update: Week 1

After 7 days of generating (2 sunny, 2 rainy and 3 cloudy), we're estimating our system will produce around 7900 kWh's per year. That's a value of $948 annually, or $79 a month. Not bad considering that it's only costing us $64 more per month on our mortgage, and that's before we apply the tax-rebate to principle.

We believe this is a conservative estimate, because we don't believe that 2 days of sun per week is the norm. According to TexasBest.com we should expect it to be sunny, 58% of day hours, on average.

Of course the main function of the panels for us is offsetting the cost of running the A/C, and the panels should be providing more generation on hot, sunny days. It's a natural hedge against blazing summer months. If there's more sun on average, it will produce more power on average.

We installed the panels on the 5th of November, so we'll look at the numbers again on December 5th, and calculate based on a full month's generation. By then we'll likely see our first low energy bill as well.

Stay tuned.

Pictures coming soon, and the KPRC story has been filmed and should air in a week or so.

Step Four: Finding Panels and Getting it Done

If you've been following along, you know this takes a lot of thinking, calculating, comparing, etc. Well, once you recognized the possibility, set your goals, and found that it's possible and economically feasible, the real work begins. You've got some shopping to do. You can get competitive quotes for just about every element of the deal, so make sure to check out all of you options.

Our search for options started with a Google search. We found these sites-

http://www.apowersolutions.com/
http://www.txses.org/solar/
http://www.txspc.com/services-and-pricing.html
http://www.suncityenergy.com/about-us/north-texas-showroom/
http://www.sre3.com/

Fortunately and unfortunately, buying a solar array is more like buying a car than a fast-food burger. The same car might cost you thousands less if you go to the right dealer, whereas a What'a'burger costs the same, no matter which location you buy it from. Not to mention how easy it is to compare costs. You know how much it costs compared to a Whopper, Big Mac, or Hunger Buster. Jeeze, can you tell what I'm thinking about. But I digress... What this means is that it takes a lot of time and effort to get the best deal, but it's worth it. It would be stupid to walk into a car dealership and say, "I really want that one, let's do it."

We decided to get two competitive quotes, and thankfully they came to us. APS and Standard Renewable Energy were the companies we wanted to talk to. Right off the bat, we had a positive impression of APS. They got back with us very promptly, and we had a meeting scheduled within a week. We didn't hear back from SRE for about a month.

While waiting for our appointment, we worked hard to educate ourselves on prices, brands, options and industry standards.

We used these websites to bone up:

http://www.solarhome.org/
http://www.affordable-solar.com/
http://www.google.com/products

Most importantly, we learned that we didn't want to try installing it ourselves! Picking a company that would install and sell became a priority. Both APS and SRE will install.

APS's approach seemed to rely on customer education, flexibility, and a real desire to understand our needs as the customers. Jimmy, the APS sales person, was helpful and humble. We never felt like we were asking too many questions. He seemed just as committed to the project as we were and we hadn't even agreed to buy anything. He never applied any pressure, only answers and options. By the time our appointment was through, our initial impression was reinforced. APS had an edge. Jimmy couldn't give us the price we needed to move forward on site, but he promised to make an effort back at the office. He really seemed genuinely committed to helping us get it done. After some time passed, APS worked with us until we found a price that would at least work well enough to try and find other ways to save, like financing. Be we covered that thoroughly in an earlier post.

A couple weeks later, SRE showed up. Their late arrival was already a bit of a bad start. Then they started bad mouthing the competition. It wasn't going well. They did offer some positive points: They are a large and established company, have very experienced installers, promise to be around for a long time, and have completed some very large projects in Houston. Their sales approach was very high pressure, though. I remember continuously telling the sales person that price was my number one priority, because without affordability, I couldn't do anything. I also told him that I had a very favorable impression of APS, despite his opinion of them. I had to point out that he was also about a month late getting to the table. He made offers that would have saved me money, but it just wasn't enough for me to back out on APS. He really leaned on me to get a number that he could take back to his boss. I told him I would need SRE's quote to come in under $4.50 per per Watt for him to have a shot. He kept saying, "So If I can get it done at $4.50 is it a done deal?" I had to remind him time and time again that I valued APS, and that I would give them a chance to react. He persisted to the point of annoyance. "Look," I finally said, "I've been working with APS for nearly a month now, and I'm not going to just bail on them without giving them a shot." He got the picture, and left promising to push the $4.50 up the chain, but adding, "They're not going to like that it's not a deal closer."

He never called back...

Jimmy did. He came to the table at a very reasonable rate that was negotiated with little pressure or wrangling. We inked it with APS, and got the deal rolling.

We already had an interest rate lined up thanks to SACU, who was the best bank to work with. The local banks and national chains couldn't even sniff the deal they gave us. But beyond that, Greg and Eloise, at SACU, were instrumental in helping us make the numbers work and getting it done. It's a lot easier to shop for a loan, and the tools are easy to find on the internet. Having said that, we didn't find SACU through the web, but rather through APS.

So we had a bank and we had a seller/installer. All that was left to do was to keep everyone on the same page.

As you may have seen in the previous post, we ran into some trouble with the HOA, but it worked out. They just wanted to make sure it was a clean, black on black install that didn't have wires or conduit everywhere, and that you couldn't see under from the street.

The approval took longer than expected, and I would encourage you to give that part of the process 15 to 30 days. We had to reschedule closings with SACU and APS twice thanks to the HOA process, but it got done.

All in all it was a stressful, but worthwhile endeavor. One that you shouldn't be intimidated by. I hope this blog, in some way, makes it easier for you if you give it a shot. It is possible for the average family to do this if the conditions are right. We believe the conditions that exist right now, are making it right for a lot of folks. They just don't know it.

Next, we'll share our installation experience and show the finished product. But first, a little tease... Our meter hauling in reverse!

A surprise twist (or two)!

We knew going in that this was going to be a difficult process, but we faced resistance from an unexpected place: the home owners association.

The meeting did not go as well as we'd hoped. We met with three members of the board one evening to request approval. Approvals for easy stuff, like mending fences, painting your house with an approved color and the like, can be granted on the spot. We were hoping to get such an approval. After all, in our case the panels will be mounted flat to the southern side of our roof, and would be no more of an eyesore than a satellite dish. Of course, that's a matter of opinion.

The board was kind and gracious, but had obvious concerns about setting precedents with quick approvals. They asked several times if the system would be visible from the street. Without doubt, folks driving north on our street will see the panels. We disclosed that yes, they would be visible from one side of the home. This appeared to be unacceptable to one board member who made facial expressions that couldn't be missed. We reassured them that the panels would be flat on the roof, black on black, and mounted very close to one another in an orderly and attractive way.

The next concern was how far away from the roof they would be. Apparently, the closer the better. Next, "would there be any exposed wiring or conduit" (an appropriate concern for sure). No, there will not be. "How about the pitch of your roof? Is it flat so they are less visible?" No, The roof is rather steep, which makes it perfect for the panels, but more visible. "Could you put the panels in the back?" I would not be able to afford the expense of rigging the panels to face south if we were going to mount them on the east facing part of our roof (in the back). Plus, mounting them in the rear would mean we couldn't mount them flush to the roof.

This went on for some time. One board member, who may have been sympathetic, said, "Well, what about the other home we approved for panels on the side?" This was the bone we needed! If they'd approved panels before, how could they say no to us? The answer came from the more apprehensive member, "Well, that house had a much flatter roof, and it was a two story home."

I really couldn't believe that this wasn't just a formality. Could they really keep me from installing panels? I hoped I wouldn't find out, but it sure seemed like they were certain about their power. Jeff from the company rep chimed in, "Here are some pictures of our previous installations, and as you can see, they are very flat to the roof." He also seemed surprised, and it appeared like he was really trying to jump in a provide some reassurance to the board.

After more questioning from them and re-assurance from us, they began to politely shoo us off. Before standing to leave, I reiterated how important this was to my family, and shared why we we're trying to do this. Two of them seemed to care, but the other had his 'so what' face on.

Jeff talked with me for about 20 minutes outside, telling about some laws in Texas that may prevent HOA's from standing between home owners and solar in the future. We say, the sooner the better.

We were frustrated. After wrangling up a loan, listening to some very smooth sales people, and crunching numbers like crazy to make it work, it really was going to come down to the decision of a Home Owners Board.

Our hackles were up and we were getting ready for a fight. In our previous neighborhood, we'd been to war with our HOA over painting the front door, but that seemed like nothing compared to this. If we'd done what we could to make sure it was a good thing for our home without disturbing the aesthetics of the neighborhood, how could they say no?

Long story short: they didn't say no! It was approved with stipulations. The panels have to be very close to the roof, and baffles must be installed to prevent folks from seeing between the panels and the roof.

With all the insanity we see from those with power these days, it was nice to see some pragmatic thinking.

We had a mini-celebration... The coming Tuesday we were supposed to close. Remember that the refinancing of our second loan is a very important part of making this work from a numbers perspective. On Monday evening, the bank called and said that they couldn't do it. They said they couldn't see the second loan on our title. Turns out, there was a paperwork error when we refinanced our first mortgage. We were stressed again?

Could it be fixed? Was this what was going to deep six everything we'd been through? Nope. VantagePoint did our first refinance. The second we made them aware of the problem, they sprang into action. As of today, they claim everything is now corrected. We're just waiting on the bank's Lawyers and the new title company to give us the OK to schedule another closing.

We'll keep you posted!

A supporting article

This is an old story available on CNNMoney's site, but the information seems to confirm what I've seen in the numbers thus far... Plus it's short and well written...

Click here

Step Three: Will Financing Work?

As we've said before, and you might already know, solar is expensive at first blush! So expensive in fact, that many people don't give it a second thought once they've experienced the sticker shock. They see something that's expensive and just put it at the back of the 'priorities' line...

But unlike so many of the other things you might invest in, solar pays you back. Unlike a car that loses a great deal of it's value when the wheels leave the dealership, your panels begin paying for themselves when the sun first hits them. Big screen TV? Yep, it will be obsolete by Christmas. A Pool? Well, we would love a pool, but that would be adding to our electricity costs. The point is this: It's worth another look if you initially thought it was too expensive. Yes there are other less expensive things you could do to lower your electricity bills, but you might be surprised how affordable solar can actually be if you get creative.

If you go through that creative process, you'll find there are many ways to go about paying for it. The option that seems to fit our situation best, is financing. Interest rates are extremely low right now, and we've already been working on refinancing our home anyway. We're not intimidated by the process, and we've found some people we trust. But before we break financing down, let's consider what paying upfront looks like.

If you can manage it, paying upfront would mean you'll have no monthly cost for the kWh's your generating. The panels begin to gradually pay you back at whatever price you would otherwise pay for that electricity multiplied by the amount energy you produce.

Assuming a 5% increase in energy costs every year, you would end up paying yourself back in less than 25 years, which is less than appealing to those of us who will probably move out in 10 or less. After subtracting the 30% federal tax rebate from the cost, a $25,000 system actually costs $17,500, reducing the payback period to 17 years. Still, few of us will stay in our homes for that long.

What makes it work for those of us who plan to stay for 10 or less years is added, non-taxable home value. For example, if we were to stay 10 years, we would produce about $8,500 worth of electricity using conservative estimates. That would cover just shy of half the cost of a 500 kWh system after the rebate. But a system that size would also result in approximately $90.00 of electricity production each month for a buyer. That justifies a $17,500 bump in the asking price of the home, if you consider what their loan amount would be for a monthly mortgage that's $90 more. The buyer gets a $25,000 system for $17,500 built into their mortgage, and an electricity bill that's $90.00 less than it would be elsewhere. Sounds reasonable. As the seller, we would get $8,500 back as energy produced while living there, plus $17,500 additional revenue when we sell. That's $26,000 in return for a $25,000 system, and that doesn't even include the 30% tax rebate, not bad...

So, it would make sense to buy a system without a loan if we could, but what about with a loan? It's a little bit trickier, because you have to consider the cost of the loan.

There seem to be dozens of home loans variations, and I'm not an expert on any of them. What I can tell you how we made sense of all this, then you can decide if it sounds like a fit for your family.

No matter what type of loan(s) you use, what it really boils down to is how much it is going to cost a month, and how much power it is going to produce. Once you know those things you can calculate an estimated price you would be paying per kWh for the base load generated by the system ( cost / kWh produced ).

If you trudged through the last post, you know we set a goal of 500 kWh's of production per month, at no more than $0.18 per kWh, and the closer we are to that number, the less likely we are to go through with it. 500 kWh's would power our necessities, and more importantly, would be affordable.

Know this: If you think buying a car is hard, this is equally challenging. The sales guys are great, but they have to get lower than normal prices approved just like the guys at a car dealership. Luckily in this case, they come to your home. You'll also hear confusing and often conflicting information from different sales folks. Just be ready and informed. And of course you will have to find a lender you can trust, who is willing to give you a rate that makes the numbers work.

After shopping, we chose SACU. They have a loan officer named Greg Brockhouse, who is actually working to explore how lenders can better serve folks trying to go solar. He's been extremely helpful, and because we are one of the first handful of customers trying to go about solar in this way, he's been willing to work with us on rates.

Greg assured us that we could get a loan equal to the equity we have in our home, and luckily, that amount comfortably covers the size system we're hoping to get. With that soft commitment from the bank, we started shopping. We'll cover how we shopped in later posts, but in the meantime, I'll use round numbers to make this as generic and digestible as possible.

After getting a couple of bids, we knew that getting an installed system would be at or below $5 per kW (you can do better, but it helps to have round numbers). This translated to a price of around $25,000 for a 550 kWh per month system. The typical loans available on the market were at around 6.5% for 20 years... Such a deal would result in $185 monthly payments for 550 kWh's. That would be over $0.30 per kWh! It just wouldn't work. Of course, after factoring in the 30% tax rebate, $7,500 comes off the top and would result in a monthly payment of approximately $130 per month. The price per kWh would come down by 10 cents, but that would still be above our threshold of $0.18 per kWh.

That would be the end of the road for us, but Greg brainstormed with us and we found another option. When we purchased our home, we used an 80/15/5 deal: 80% was on a low interest rate, 30-year loan, 15% was on a higher rate 20-year lien, and we put 5% down. This prevented us from throwing money down a PMI pit. It was cheaper for us at the time, but mortgage rates have been falling. We'd already refinanced our first loan, but at the time it didn't make sense to refi the second. We asked Greg if refinancing our second loan would offset some of the cost of the solar deal. He had an even better idea: He's going to help us combine the second mortgage with the solar deal, giving us a single second loan at more than 2.5% less than what we were paying on the second loan! This would only work with a family that had a relatively high interest rate on a second loan or first loan that needs refinancing, but we'll take luck when we can get it.

We already have a second mortgage, so nothing is going to change there. With a $25,000 system added to it, it will just be $85 more expensive. We'd just gone from over $0.18 per kWh to $0.154.

This is very close to our real target of $0.145 per kWh, so paper signing and arrangement making has begun. We're hoping to see some additional value through positive externalities like: a cooler attic due to the shade the panels will create on the southern facing roof, more power being generated when we are using more power on hot days, etc. We aren't counting on them, but we thought this price per kWh was reasonable and made the decision to move forward easier...

So financing appears to be a viable option for us. What makes it work is a lender who was willing to talk things through with us and an industry leading interest rate to boot.

Next, we'll discuss choosing a solar sales and installation company, and take a look at some of the resources we've found on line...

Step Two: Setting Goals

Every family is different, with varying values, goals and dreams. Today we want to discuss how we lined up our goals as we began to shop solar.

Our first goal may seem familiar to your family: STAY WITHIN YOUR MEANS.

We're committed to remaining as independent and debt free as possible, but unfortunately, solar is expensive. It requires a lot of up front capital, so we have to accept that as an average family, we may not have the liquid cash to buy a system outright. We must either find a loan that makes sense, or accept that we might just be window shopping until we can really afford it. We understand that other families may go solar for environmental reasons, but the average family has to make decisions based on their budget. Put plainly, if the numbers aren't right it's a no go for solar.

So, what do 'right' numbers look like for us? Well, we want to pay less for electricity, but also want to be protected from climbing rates. Right now, we buy our electricity from someone else at about 11 cents per kWh. We want independence from their ability to change prices on us, while also investing in us rather than lining their pockets. Sound good? We think so too, but to make a good decision financially, we have to understand where the market is, and where it's going.

For those of you who might be unfamiliar with electricity rates, a kWh (kilowatt hour) is kind of like a gallon of gas: i.e. gasoline is 2.35 a gallon. The more you use, the more you pay. So, if we use 2,000 kWh's, we end up paying $220 ( 2,000 x $0.11 per kWh), but if we use 3,000 kWh's, we pay $330. Seems simple, but it's amazing how people forget that their amount due is tied to how much they use, how hot or cold it is, how often the door was left open, etc.

It's also important to understand the impact of a small change in the price per kWh. 11 cents per kWh isn't bad, but what if the price goes up to 18 cents? Instead of paying $220 for 2,000 kWh, you would pay $360. Just 7 cents in price difference could mean an extra $140 on your electricity bill, and 18 cents isn't far fetched!

If you don't know how much you pay per kWh, don't worry. The price per kWh calculation is relatively easy. It's basically the price you pay per month divided by the number of kWh's you used for that month ( price per kWh = amount due / kWh's used ). Note that you can also use this calculation to see how much value you're getting from a particular solar setup ( value per kWh = cost per month / kWh's generated ).

The next thing to understand is where prices are going. It's true, electricity prices have gradually declined since the deregulation of the Texas market, but we believe they're bottoming out. Unless we get buried in coal surpluses or suffocated by natural gas storage, we just don't see how energy prices could go much lower. In fact, we're expecting them to climb significantly. How quickly they climb depends on a lot of different factors: inflation, decreased supply, increased demand, weather, regulation, etc. But if you assume a conservative 5% increase each year, prices could be around $0.18 by 2020. Again, not out of the realm of possibility at all.

So, that provides our first benchmark for numbers that 'look right'. Said plainly, the system must produce electricity for us at, or under, $0.18 per kWh. This goal should keep us from making an emotional decision based on irrational fear, uncertainty or doubt. It's not our target for where we want to be, but rather a number that shows us a bad decision. Anything above $0.18 is out of the question.

Another way we will determine if the number is 'right' will be to divide the monthly cost of the system by the number of kWh's it produces. We'll get into that in more detail later here and in other posts.

Secondly, we've committed to UNDERSTANDING THE ECONOMICS BEHIND SOLAR.

If we're going to make an informed decision, we've got to understand all the pros and cons that impact the finances. Some benefits are hard to quantify, and we'll list those later. First, here are some of the factors we felt we could measure and focus on now:

• As of 9/3/2010, there's still a 30% federal tax credit for solar systems to offset the cost.
• In some places, there are also local rebates and programs. We're not sure about Sugar Land, but we're researching.
• Solar would add value to our home.
• The additional value isn't taxable.
• It would protect us from rising electricity rates.

One of the aspects above, worth further mention and explanation, is added home value. Salespeople will tell you that a study by the National Appraisal Institute concludes that every $1,000 in annual generation capacity produces $20,000 of additional home value. We agree that the system will add value, but we don't know who the 'National Appraisal Institute' is, or how much stock to put into what they say.

What we do know is how WE would calculate the added value as prospective buyers: We would look at the amount of electricity the house would produce per month (representing a reduction in our electricity bill), and compare the savings to the added cost on the monthly mortgage payment. For example, if a solar house produces $100 of electricity a month, the mortgage can go up by 100 bucks, and we would be 100% OK with that. For a $200,000 home, this amounts to $20,000 added on to the home purchase price. It's an oversimplification, but it makes sense to us that intelligent buyers would be able to justify paying more for a solar home...

Here are some of the other benefits that might be harder to quantify up front, but that are worth considering:

• Lower attic temperatures, further reducing energy consumption.
• Excess energy can be sold back to the power company (not likely in our scenario as you'll see in later posts).
• Can be used to power your home when the power is otherwise out (also not likely, and to be discussed later).
• Your home now has something to differentiate itself from other homes on the market.

Our third goal: DON'T OVER OR UNDER BUY.

We only want to consider system sizes that will make sense for our home. A few things come into play here, but it basically boils down to these considerations:

• How much do we use now - We use about 2,000 kWh's per month on average.
• How much can we afford - We're limited to a loan equal to the equity we have in our home.
  
• How much do we need - Our base load (not including A/C use) is around 500 kWh's.
  

We could easily spend $40,000 and still not have enough panels to produce 2,000 kWh per month, so it doesn't make sense for us to try and go exclusively solar. Unfortunately, we're still going to end up lining Electricity Co. pockets.

But in terms of what we need, we definitely have enough equity to get a loan big enough to buy a system that will cover our lights, fans, the dishwasher and fridge, etc. If we're really talking about what we need, it makes sense to produce only enough electricity to cover our 'necessity' stuff. So, we're shooting for a 500 kWh per month system. Sizing your system is worth a post of it's own...

While our goals may differ, I think we've got some laid out that would make sense to many families in similar positions:

1. STAY WITHIN YOUR MEANS - Give yourself a budget and system performance targets.
   
2. UNDERSTAND THE ECONOMICS BEHIND SOLAR - If you're going to have targets, they should be based on facts, not emotion, to avoid a bad decision.
   
3. DON'T OVER OR UNDER BUY - Pick a system that not only matches your budget and meets targets, but that also is sized right for what you want it to do.

Next Topics:

Shopping and Research
Sharing resources and pointing to providers we found.

Will Financing Work?
Will the loan payment be low enough to justify the system? Is it producing enough power to offset the cost of financing?