While most people who consider solar power look to either lease their setup or purchase it outright, Michael Feder has found a third way, using economic theory to determine a course that lets him turn his roof into a miniature power plant! Describing going solar as his patriotic duty, Michael was able to not only go solar himself, but bring other members of his community in Nevada along, too. Together, they’ll be paying 30% less than the cost of energy produced by their local power company, Nevada Power.
At the time we spoke with Michael, his story was unique among the people we’d selected for solar power interviews. It wasn’t because he was in Nevada, a state with plenty of sun and therefore a popular place to install panels. Nor was it because his installation was actually going up while we were e-mailing each other, as several of the people we were speaking with were mid-process as well.
Michael is different because instead of buying his panels or leasing them in the traditional sense, he’s effectively allowing Solar City, a company backed by Elon Musk (of Paypal, Space X, and Tesla fame) to use his roof as a miniature power plant, in exchange for getting a discounted rate on the power generated above his home.
“When I saw what Solar City was doing, I knew it was the way I wanted to go,” he said during our phone conversation. A man with an MBA and a solid grasp of economics, Michael explained to us in detail why he felt Solar System’s setup (an agreement to allow them to install and maintain panels on your roof for twenty years, with a buyout option after five years, and a reduced cost for purchasing the energy) was the best way to go.
Though some may disagree with his reasoning, Michael’s basic concern comes down to getting value for your investment. He mentioned several times the idea that when you buy outright, you are taking on a risk that the technology will improve, leaving you with a very expensive 8-track player on top of your home. “What if in a few years, there’s a new system that’s five times as efficient? Now you’ve bought something that’s out of date, with no protection at all.”
That’s only part of his argument against buying your system, which some of his neighbors have done,
though most who got panels in his small Nevada housing unit joined Michael in a “solar party,” enabling them to get an extra discount on the cost of their power. He also discussed net present value calculation, terminology used frequently when making capital outlays at businesses.
We aren’t economists, but our understanding of Michael’s logic is the following, paraphrased from our
discussion. Any errors are on this end. For someone with a flat roof like Michael, installation cost is somewhere between $38,000 and $40,000. Most people will look at that number, and see it as a fixed
cost, so that when their power savings has equaled the installation cost, they’ve broken even. It can be anywhere from a few years to a little over a decade, depending on their power usage, whether they can sell back to the grid, and so on.
But money spent right now could also be put into savings, which creates value no matter what. If you
invest wisely, that could add thousands of “lost dollars” to the total outlay. A repayment of eight or nine years in static dollars might actually be more like fourteen once these additional calculations are factored in.
When combined with the possibility of having outdated tech on his roof, Michael wanted another
option. For him, the decision to go the Solar City route described above was “a no-brainer.” Once the
inspectors give his brand-new system the okay, “I’ll be net positive from the moment they throw the
Of course, some do not like the idea of signing a twenty year agreement. Michael understands this fear of commitment, but thinks the risks are minimal. “If I decide to sell my home, the agreement is
transferable. Who’s going to say no to a home that comes built-in with cheaper power at a locked-in
rate?” In addition, with the option to buy after five years at a third party arbiter’s assessed value (which, if there are much more efficient panels by then, will be very depreciated), those who feel more comfortable without the agreement hanging over their heads can do so at a later date.
Though going solar was important to Michael, he did not do so without taking many things into consideration. His flat roof, for example, created some challenges. “They have to build scaffolding for the panels,” he explained. “Some people’s rigs are very tall, and they look like stadium seating” To get around this, Michael and the Solar City technicians selected larger panels, enabling him to use a setup that’s only about one foot high. “It’s very low profile and doesn’t interfere with our rooftop decks at all.” The entire array is only three rows high, and is not the only thing that Solar City considered for him. When mounting the inverters in the garage, the installers placed them as high as possible, giving Michael room for storage.
Michael had lots of good things to say about Solar City. The only “issue” was that the installation took a bit longer than planned, but the team even came back on a Sunday morning to ensure that the system was working, after installation the prior day took them past sundown. This didn’t shock Michael, because of the involvement of Musk. “Here’s a guy [Musk] who keeps moving on from impossible problem to impossible problem.” Michael happily listed the things Musk has solved in his eyes, from the issue of micro transactions (Paypal), private space technology (Space X), electric cars (Tesla) and now a new paradigm for solar energy in Solar City.
Using Solar City may not be for everyone, but it’s certainly helped Michael achieve his continuing quest to have a lighter footprint on the Earth and to do his part to reduce America’s dependence on fossil fuels from foreign countries. In the process, he was able to join with others in his community to go solar, which increased their savings and impact. It’s even having a ripple effect, as residents of a nearby community investigate working with Solar City.
There are plenty of financial benefits for Michael, but we think he put it best as we wrapped up our
conversation: “I’d still do it, even if was break even. Solar power is the right thing to do, and I wish everyone who was in a solar power generating area could have their own setups right now. Imagine how much of a change that would be in terms of how we deal with energy!”
Last modified: November 5, 2014