Sun Block: The High Cost Barrier to Solar Energy

I had fully intended to write a series of posts to chronicle my exploration of solar energy. I wanted to see what was blocking adoption at a consumer level and how those obstacles might affect my own decision. Was it the unclear purchasing process or government red tape? Was it a lack of education about the technology, benefits, and ultimate payoff? Or was it something as simple as the negative aesthetics of panels on your home? But after a couple of weeks of digging, one thing quickly became clear: Solar is just too expensive.

I started my experiment by talking to a neighbor who had recently installed solar panels on his home. He was enthusiastic, full of research, and eager to help. He told me that the first step was to contact a solar installer and gave me the name of the company he had used.

It only took a few days to get an appointment with the installer, Solar Community. The sales rep came out and surveyed my home, took measurements, and gave me some basic information. While I had many questions for him, three emerged as the most important:
What is my upfront out-of-pocket expense?
How much of my annual electricity use can be offset by solar?
How long will it take for the system to pay for itself?

I received a proposal a few days later. The total cost of the system and installation was $23,540, with a net cost of $7,664 after rebates were applied. The solar rebates would be deducted from my bill and collecting them would become the responsibility of the installer. The 30% federal tax credit (on equipment only) was also shown as a deduction from my overall cost. But because I would still have to pay that amount upfront and wait to deduct it from a future tax bill, I discounted its value in my purchase decision.

The proposal also included a diagram of the panel layout on my roof. The ideal orientation for solar panels is south facing, which maximizes the daylight hours they can use. Unfortunately, my house faces due south, meaning the most effective location for panels would be on the front of my home. The diagram mapped out a 5.06 kW system consisting of 22 230-watt panels positioned on every south-facing roof area of my house. While some people might view the visible panels as a green energy badge of honor, I wasn’t thrilled with my new home looking like some kind of west Texas energy farm.

After explaining this concern to the installer, he suggested an alternative. North- or east-facing panels are not an option. But while west facing panels are only about 80% as efficient as those that face south, they can still create a productive system. They also qualify for most all rebates and incentives. We found that a large west-facing roof area on the side of my house could fit 26 panels – four more than would fit on the front. The extra panels made up for the productivity loss, resulting in a 5.98 kW system. And luckily for me, the Pecan Street Project just announced a new, additional rebate for west-facing panels. Even though the larger system was priced higher at $27,783, the extra rebate lowered my initial out of pocket cost to $6,166. Subtract the federal tax credit and my net cost on the system is only $4,316. I’ve decided to move ahead and the plan has been submitted for city approval.

During this process, I received two additional documents: a projected energy offset model, showing the monthly production vs. usage, and a breakeven analysis, which showed the estimated payoff over a 25-year period. These documents promise a payoff of all my costs by year five, with an annual offset of 85% of our electric usage. (Actual documents are linked in the previous text. Some of these numbers appear to be too optimistic; I’ll analyze them further in a future post.)

Armed with this information, I approached my wife about the decision (yes, before I signed the contract). She’s well educated, has a professional background in finance, and very practical. While she humors my energy experiments, I knew she’d ask the hard, common sense questions: How much will we lose if we move before we hit the breakeven point? Would the solar panels help us or hurt us when we went to sell the house? How much can we afford to invest now on a long-term payoff? Should we really spend $4,300 to save $60 a month? Shouldn’t we put the money into our daughters’ college savings fund?

This brings me back to the real story. I’m uniquely fortunate to live in a city that offers substantial solar rebates, in a neighborhood that receives additional incentives, and am participating in a 100-home energy study that gives me even more money for solar. So my cost for installing solar will be about one third to one half of what it would be for any other American homeowner. And yet my out-of-pocket cost will still be over $6,000. In today’s uncertain economy, I don’t know of many people willing or able to devote that much money to a feel-good, long-term energy investment.

It’s clear that the current consumer model for solar just won’t work. It seems that all of the creativity and innovation have gone into creating solar technology. Let’s hope that an equal share quickly goes toward new business models, an improved buying process, and eliminating the other barriers preventing meaningful consumer adoption.

There’s a lot more to explore, and I’ll add more of my findings in my upcoming posts.

Energized is an ongoing series following my education about living a more sustainable life.

As Vice President of frog’s Design Realization group, Collin works closely with our design and engineering teams to bring innovative ideas to market. With over 20 years of experience in both creative and engineering management, Collin brings focus and multi-disciplinary expertise to this critical phase of the delivery process. In 1996, Collin co-founded frog’s digital media group and has worked extensively with frog clientele in the USA, Europe, and India.