In my last post, I told you about the basic info in the newSunRun leasing program, available only in Los Angeles and Arizona for now. In this post, I’ll go through the example of an average sized 5KW system.
First I’ll bet you’re asking, “Solar Fred, what’s an average 5KW DC system and what does it mean to me and my house?” It actually may mean nothing for your house. Every house is different and uses a different amount of power.
In this example, it means that a SunRun installer has gone to your example home in Los Angeles and seen 12 months of my LADWP electric bills. So they know an average of what your home uses year round. They’ve checked out your roof and the shading. Then they asked how much of your regular utility bill you’d like to replace with solar power. You’re a big solar advocate and you want to save money too, so you say to make your home 95% solar, 5% coal fired from the LADWP utility.
They run the numbers, and voila, a they recommend a 5KW system with 25 panels and the inverter. And what does this example cost? Let’s see:
- $500 down, upfront gets you the full installation.
- In the first year, your combined solar and utility bill is the same monthly amount as your old one: $80/month. So no savings yet. Where the heck are the savings? They show up over the next 17 years. How?
- Utility rates are rising an average of 5% a year, nationally, and could be higher or lower.
- Meanwhile, SunRun’s rates rise only 2.9% each year for the next 17 years. How much does that save?
- Between year 6 and 7, the system has paid for its initial $500 investment.
- By year 10, you’ve saved $232 for that year alone.
- By the time you add it all up in year 18? You’ve saved a total of $3,935. For financial geeks, your net present value (NPV) is $1,863. Not huge, but savings nevertheless.
- Now, you’re free to end the agreement and have SunRun remove the panels at no cost to you. However…
- It makes more financial sense to buy the system in year 18. SunRun’s quoted residual purchase price is $1/watt ($5000 in this case.). So, why does it make sense to buy the system?
- Because by year 18, electric rates will have gone sky high. Without the panels, it’s estimated that you’ll be paying $2,200 a year for utility electricity. So in two years, you’ll have paid for that $5000 buyout price, plus you’re now only paying only 5% of your power ($152 for the entire year) to LADWP.
- By year 25, your total savings will have added up to $16,570 or $5,785 NPV. Also keep in mind that solar panels usually last longer than 25 years, though at a lower efficiency.
- All maintenance, repairs, and parts are included in these costs, so that saves you time and the price of replacing the inverter.
SolarFred Note#1: The example above may already be out of date. I’ve just learned that LADWP is going from flat rates to tiered rates in July 2009. That will make utility rates more expensive and buying solar have a faster payback. So, I’m not sure that this example takes those rates into account.
SolarFred Note#2: Remember that you will not directly benefit from any Federal, state or local solar subsidies or the value of solar renewable energy credits (SRECS). SunRun says it works a large portion of these numbers into their calculations. That could be a great benefit to people who pay little in income taxes every April 15th.
SolarFred Note#3: Instead of $500 down, you may pay $0 down in some Arizona utilities for systems over 4KW. That would include this 5KW example above. Also, Arizona rates are different from LADWP, so your savings will be different than this LADWP example.
Of course, your system is going to vary by your home’s energy usage and many other factors. This is only an example.
Like any solar leasing or solar PPA program, you’re going to do better financially if you buy the system through a home equity loan. Think about a car lease versus a car loan. Same concept. You’re always better off financially buying, but the payments are going to be higher than the lower lease payment, though long term, you do get a greater return on your investment. So, are you a buyer or a leaser? Overall, the SunRun lease and the SunRun PPA are a good deal if you want:
- Low to no money down.
- Hassle-free maintenance and repairs for 18 years.
- Can’t take full advantage of the 30% tax credit
- Have low home equity or don’t want to dip into your home equity.
- To go solar, save trees, and save some money on your electric bill.
Last modified: June 16, 2009