Residential solar energy is a hot topic these days, especially since California recently became the first state, with some exceptions, to require solar panels on new homes. The new law begins January 1, 2020.
With so many firms advertising their solar services and making promises about the benefits of going off the grid, we turned to one of our agents who truly “speaks solar” to clear things up. For Al Rex in our Carlsbad office, it makes good business sense to know about the technology.
“I learned about solar when I was out with my clients, whether buying or selling a house,” Al said. “I wanted to see if there was a value to it. I did my research so I can give good counsel to my clients, enabling them to make the best decision on solar. Before becoming a REALTOR®, I was a CPA with a large company, so things that are financially related intrigue me. Solar was one of them. I helped arrange for solar on my church, with an investor receiving accelerated depreciation on the panels so we could, as a nonprofit, take advantage of the federal 30 percent tax credit. It’s working out quite well.”
The IRS allows the 30 percent Solar Investment Tax Credit for a solar installation. That includes the panels, fittings, and labor, which can mean significant savings for homeowners.
“It’s important to understand that a credit is dollar-for-dollar. It’s not a deduction,” Al said. “The difference is, if you get a $4,000 credit, for example, when April 15 comes around, if you were going to have to pay $10,000 to the IRS, you only have to pay $6,000. Another way to look at it is, if you put in a $30,000 solar system, you’re going to get $9,000 back on your taxes.”
The IRS will give this credit at least through 2019, and may extend it, Al said.
Most solar systems are offered for sale or lease. Al has a definite opinion on which method he prefers.'If you’re thinking about putting solar on your residential property, I recommend that you find a way to buy it.' Click To Tweet
“It’s important, particularly in residential, if you’re going to invest in solar, to buy it and own it. Don’t lease it. Appraisers don’t like leases because they make a home much more difficult to sell. They will give you zero value back if your system is leased. If you own it, they’ll give a value back, although it varies. Some of these leases go out 20 to 25 years and have a defined amount. Some actually increase each year. Even though in almost all cases the savings you recognize in lower electricity costs will outweigh the lease costs, a lot of buyers don’t like having a home that has a long-term lease attached to a purchase, which is why it’s important to own it.
“If you don’t have the money, look into a home equity line of credit to pay for it.”
It’s important to know what type of solar system you’ll be getting, from the power generated by each rooftop panel to the warranties for product and workmanship. Make sure you do your homework, Al said:
“Before you go with just a proposal, get a full contract in your hands. Cross every T and dot every I before you agree to hire a company. Contracts are important because there are a lot of contractors out there who aren’t qualified. Get multiple bids. Research reviews online. Ask for references and call them. See where they get their equipment from. Are the panels made in the U.S. and is that important to you. What kind of warranties are being given by the companies that sell the panels? If the company that installs them goes out of business 10 years down the road, it would be nice to know there’s a strong company behind the panels.”Investing in solar? Get multiple bids. Research reviews online. Ask for references and call them. Click To Tweet
All solar panels are not the same. Some generate more kilowatts per hours than others, which is important to understand when analyzing the total purchase and installation costs of each vendor. It helps you analyze “apples to apples,” Al said. At a minimum, you need to know how many kilowatts per hour each panel, with full sunlight, is guaranteed to generate per hour. Al has learned some other guidelines for prospective buyers:
“The experts recommend you install enough panels to be at least 10 percent over peak need. So if you need 3 kilowatts per hour and you buy panels that generate just a half-kilowatt per hour, you need six panels. If your dealer says put 12 panels on your roof, you probably should put one or two more on because you want to have a few excess panels just to handle your peak needs.
“As I drive around San Diego, I see a lot of homes with 16 to 24 panels, which is about right for a 2,400-square-foot home. But not all homes are the same when it comes to solar needs. It’s not the size of the home, but the energy usage required. A family of three who does not use air conditioning might have fewer energy needs than a family of five who uses it on a regular basis.”
A good installer will look into a utility company’s online portal to study your usage and offer recommendations on how much you use and will need, Al said.
Battery storage systems like the Tesla Powerwall are getting cheaper, so it’s easier for homeowners with solar systems to cut ties to the grid or provide backup in case of power outages. Here’s how they work, according to Al:
“With solar panels on your roof, during the day you’re getting enough kilowatts for your home, and any excess generated is bought by your utility company. But at night, when there’s no sunlight to generate kilowatts, you’re buying it back from the utility. The challenge is, when the utility is buying the excessive kilowatts your panels generate that you don’t use during the day, they pay you X. But when you buy it back from them, you pay Y, which costs a lot more than X. There are ways to make sure you’re on a certain rate plan, of which the utilities have many, to be more favorable to you.
“If you throw the excess kilowatt energy you’re creating into the Powerwall during the day, then you’re building that battery backup for nighttime use. When all of a sudden there’s no longer kilowatts being generated, you’ll go to your Powerwall first, before the grid. If you have a Powerwall or enough Powerwalls, you could pretty much get off the grid. I would think as time goes by they will become more affordable.”
A single Powerwall costs about $8,000 to $10,000, Al said. They are in such high demand, he noted, that they are on back order.
Al has studied online search statistics to see if buyers are requesting solar in their search parameters. He found that about one in 10 homes for sale in San Diego County has solar, but he expects that number to rise as the benefits become more attractive and the technology more affordable.
While the new state law requiring solar on new homes has been applauded by the building industry and climate-control advocacy groups, opinions vary. Here’s what All said about it:
“I think it’s good. Consumers may like it. I also feel solar will become more and more valuable to the typical homeowner as they become more familiar with it. So as more people live in homes with solar, or know friends that have solar and see the value of it, particularly perhaps in July and August when you need to crank up the air conditioning, when you see the guy next door has a $500 electric bill and some other neighbor with solar was $38 the same month, there’s value in that. Right now, when I bring a buyer to a home with solar, if they’re not familiar with it, they say that’s kind of a nice bonus to have, but they don’t really see the pure value of it even if I tell them.
“If a seller already had solar on their home, they’re definitely going to find more value in that house because it already has solar on it. A few years ago, you didn’t see that many Priuses and Teslas on the road. But now people are more comfortable and familiar with them, and you see them all over the place.”
But Al knows the owner of a solar company who has an opposite view, one worth considering before you commit to a solar system:
“The mandate is actually a very bad thing. It requires only a 2- to 3-kilowatt system. This is only a tiny fraction of the power most homes need, and systems that small are horribly expensive on a per-watt basis. It is a lose-lose for everyone. These contracts will likely only go to the big companies who have sweetheart deals with builders, but the companies who install them (some of which are owned by friends of mine) will make nothing on those installs which they’re forced to do because of their relationship with the manufacturer. These customers are very unlikely to get the solar they actually need, since they’ll already have it, and will have already paid way too much for it. It is taking away the largest and most profitable market for our products–new home owners.”
If you’re thinking of going solar, talk to your tax adviser about the financial breaks you might be entitled to. Then find a trusted real estate agent who can help you find a home–solar or not–that will ensure a bright future.