Thursday, October 29, 2009

Ladders & Solar Financing

Our home is two stories and you need at least a 15' ladder to reach the lowest part of the roof. So far, of the 2 companies that have done a roof survey, both of them have showed up with a 13' adjustable ladder. When the first guy visited, I saw him pull out his little ladder and I figured it wasn't going to be high enough. After a couple minutes of watching him reposition his ladder, I offered my 17' ladder. When the other installer came, I was in the house watching him on our cameras while he tried to figure out how he was going to get up on the roof with another 13' adjustable ladder. Again, I came to the rescue and offered my ladder. These guys seriously need to think about carrying a longer ladder. If I didn't have a long enough ladder, these guys would have really pissed me off. I would have taken time off from work for nothing and would have had to reschedule.

Anyway, all these solar installers are pushing this long term lease thing - the most common is by a company called SunRun. There are a couple different options - but they both have an 18 year term. The idea is they pay the installer for the system after its installed - so they own it. Then, they lease it to you over an 18 year period. At the end of the 18 years you can sign another lease, ask them to remove the system or purchase the system at some yet to be determined amount. You can pay either a lump sum amount or monthly. Its lure is that your initial outlay, if you do the lump sum, will be less than your cash purchase price before the federal tax credit.

So for example (assuming you live in California like me), if you purchased a $22,000 system, you would receive about a $3500 state rebate. Typically, you sign the rebate over to the installer and the out-of-pocket cost would be $18,500. Then a 30% federal tax credit shaves the net cost down to about $12,500.

With SunRun, you would pay a lump sum of about $13,000 for 18 years. Of course, they throw in a few more goodies. They extend the warranty of the system from the 10 year installer warranty to cover the entire 18 years. They provide monitoring for the duration of the lease (some installers offer it for 10 years and others charge for it). If they detect something wrong, they'll send a crew over to fix the problem. They'll also come out and wash the panels once a year. Finally, they'll replace the inverter since they typically have a 10-12 year lifespan. They want you to believe this is an added $6200 worth of goods.

They say monitoring is worth $2000, but since we've already got a home automation system & server running, I can get a Brultech monitor for about $250 and monitor it myself. Maintenance is supposedly a $2700 value, but that's hard to quantify. The system is supposed to be maintenance free, and I suppose I can climb up on our roof and hose the panels down once a year (but will I do that when I'm 50 or older???). Finally, they peg the inverter replacement at about $1500. If these inverters are $1500 in 10-12 years, to me, it assumes that there have been no technological advances in that time span. In all, I would derate the maintenance costs by 50% and say the inverter will cost $500 when it needs replacing. For our situation, this gives SunRun's perks a value of $250 (monitoring) + $1350 (maintenance) + $500 (inverter) = $2100, about 1/3 of what they claim.

If we take those "perks" and add it to the net purchase cost of $12,500, we get $14,600. Compared to SunRun's $13,000 cost, the purchase will cost $1600 more, but I get years 19-30 for "free." With SunRun, after 18 years, I could either fork out some unknown amount for a new lease or to buy the system from them. Either way, it's going to cost more than a purchase. Otherwise, how would they make money?

They really push the upfront cost advantage of SunRun vs. purchasing, and that really gets people interested. Then they throw in their perks/scare tactics, to help push you over the edge, which seems to work because solar systems are not very common (and people still buy extended warranties for tv's and other household items). It seems like an OK way if you don't have the cash for a purchase, but you could probably do a home equity loan and get the tax write off for that.

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