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Why no one has Solar Power

Avatar for Dave Llorens
Published on 01/26/2008 in
Updated 10/17/2018
Solar Conformity

I live in San Francisco… Probably the MOST progressive city in the US for solar power.

California has a very juicy state solar rebate, and on top of that, is proposing the biggest and also one of the first municipal credits for solar power in the US. As an experiment, I sent out 1000 mailers to owner-occupied homes in San Francisco, and this article is about the response to those mailers.

First, let’s review what one would need to make solar work financially:

  • You own the property. (If the tenant pays power, they have little incentive to improve property they don’t own). 100% of the mailers I sent were all owner occupied.
  • You have a good chunk of change or enough equity in the home to finance the project. Although this is unique to San Francisco, this also effectively applies to 100% of the homeowners (if you own a $2mil home, you almost certainly have the equity or cash to pull the trigger)… We’ll call it 98%.
  • Your roof cannot be drastically shaded, especially in the summer, or have an impossible orientation. We’ll call it 70%. There are some shading problems, although almost all the roofs are flat, so not many orientation problems.
  • You have a decent sized power bill above the baseline. (note, this isn’t needed to make it work, but with a tiny bill it make take 20 years to recoup your investment). We’ll call this 80%.
  • You don’t already have it. We’ll call this 99.997%.

This leaves us with about 550 homes who received the mailers where solar is a wise financial investment.

Who called or emailed? 1 person. One nice gentleman named Loren, possibly the nicest guy I’ve met in San Francisco. Turns out his (gorgeous) home sits in between two buildings both twice as high, so it would never work (although we did look at one of the investment properties where he pays the power, and that place is perfect, and IS going to happen. So at least something good came out of this), but that’s not the point. Furthermore, I understand that a 1% response from direct mail is decent. I know that not a lot of people call, so that’s not the point either. Also I probably suck at making direct mailings…. THAT’S NOT THE POINT EITHER! The point is that no one ever believes solar makes sense unless they can see it.

I run across this over and over again. If I ever get a call out of the blue, it’s because someone’s neighbor has it. Always. So that’s my beef! Why do “The Joneses” have to have it first in order for it to be possibly financially viable?! Let’s look at some numbers:

Here’s a residential quote I gave out the other day that assumes that PG&E (our local utility here) rates go up about 10%, which is a fair assessment given that they’ve increased over 40% in the last two years for some rate plans (although for the last 40 years they have about a historic rate increase of 7%):

This gentleman used about 1780 kWh/month and was paying about $6100 a year in power. He had a nice large southern facing roof sloped at 19%. I designed a system of 36 panels of Sun Power’s SPR-225 panels and two 4000W SMA inverters, which would have brought his power costs down to about $1320 a year. That’s $4780.00 in power savings the first year, and that number grows as power costs increase (the sun is the most laid back landlord ever, he never decides to raise your rent). So how do the numbers work?

  • The system costs $72,644. That’s turnkey, everything, no other costs ever required. System is covered for a decade and the panels for 25 years.
  • BUT WAIT! California wil pay $15,252 of that, bringing the cost to $57,392.
  • BUT WAIT! Uncle Sam will give you a $2000 tax credit, good as cash at the end of the year… So now we’re talking about $55,392.00
  • NO, NO, WAIT! In San Francisco they’ll be giving us $4000 to install a system using a local installer, so $51,392.00
  • Now let’s assume he finances that $51,392.00 with home equity at a rate of 7.25% for 25 years, which was actually what he could get from his own loan guy.

$371.46 would be his monthly payments. What’s his monthly power bill? $508. SO THE DUDE SHOW’S AN INSTANTANEOUS $130/mo SAVINGS BY INSTALLING SOLAR.

Now, the situation is not always that perfect. Sometimes the roof tilt and orientation aren’t perfect, the power bill smaller, so here are some more numbers for you:

In addition to the dude’s instant savings., this Appraiser Journal article explains how every dollar saved in energy costs per year adds $15-$20 to the value of your home. So if our guy is saving $4780.00 per year then that’s (and we’ll make it conservative) $15*4780.00 = $71,700.00. So in addition to the fact that he’s instantly saving money, his home just shot up 70K in value. Sound ridiculous and impossible? Of course it does…. and….one second…

Solar Hulk

AAAAAAAHHRRRRRRRRRRRRRRRRGGGGGGGGGHH!!!!!!!!!!!!!!!!!!!

It’s freakin NOT! It’s REAL. And one day, after enough roofs have it, and people finally think “hey, maybe it’s a good deal,” and they call me… by that time, the Californial Solar Initiative credits are gone. The federal tax credit is gone (yah, that’s right, it got voted out of the energy bill), and the municipal credit is gone (I think it only has 3Mil in funding, at least for now)… and you’ll be left out in the cold.

Let’s do a commercial one, shall we? The numbers are commercial are even more of an obvious score than residential.

Here’s a guy who owns a Laundromat and has a “Small Commercial” PG&E rate schedule. (if you’re wondering about whether or not you get the residential or commercial benefits, the rule of thumb is that it typically follows the meter/rate schedule). He was paying about $185 per month in power to run his Laundromat.

I proposed a system of 28 SPR-225 panels and a 7000 Watt SMA inverter. This would have saved him $1870 in energy costs the first year.

  • Gross System Cost: $60,835
  • California Solar Initiative Rebate: -$10,560
  • Tax on rebate $2,957.00 (in a commercial situation, you have the rebate assigned to the customer and not the installer, in order to create a higher basis cost for the system, in order to attain high tax savings. The customer must pay tax on the rebate but it’s usually worth it.)
  • 30% Federal Tax Credit -$18,251.00 (no cap here folks, not with commercial)
  • Advanced (5 year) Depreciation Schedule -$17,770.00
  • San Francisco Municipal Credit -$8,550.00 ($1500 per kW up to $10K)

This brings the net system cost to $8662.00 That’s recouped in 4 years. And let’s not forget about the property value increase of 15-20 times his yearly energy savings, or $1,870.00*15 = $28,050.00 (a number that rises with the tide of power costs).

Now it costs a good chunk of change to pull the trigger, but he’s more than got it. After that you’ve paid it off in 4 years, and you’re getting an $2000+ a year in dividends, not to mention the extra 10’s of 1000’s of dollars you get when you sell the building.

So these both sound pretty lucrative, right? Guess which of the two bought the system… or any system from any installer? …neither of them. I mean, this is definitely MY FAULT as I never pressure anyone to buy anything and I want them to come to their own conclusions and be happy with what they will own, but maybe I need to stop doing that and start using some dirty sales tactics like “alternative choice questions” or “the yes ladder,” because logic and numbers don’t work for beans.

Last modified: October 17, 2018

12 thoughts on “Why no one has Solar Power

  1. Avatar for Larry Larry says:

    I read this article about two years ago and bookmarked it for future reference. The author’s experiences are very similar to my own. I tried to sell solar and wind in the Texas panhandle where we have plenty of both, and for several years I lived in a house that was powered over 99% with solar (proof that it can work). Although I’ve been the #1 best salesman for a lot of products, I couldn’t sell even one PV panel.

    I suspect that most of the problem is that the general public simply does not know enough about electricity to form a rational idea of how solar power works. People do not understand voltage, amps, and watts, and the lack of understanding makes it difficult to sell a product whose sole purpose is to produce voltage, amps, and watts.

    If at a future date the public schools were to teach basic electrical theory to all students, perhaps then we might find a public sufficiently knowledgeable of electricity to realize the value of solar power.

  2. Avatar for solar power cost solar power cost says:

    I agree with the grass is always “greener” on the other side aspect of your article. People really want to see PV technology on other residences before they’ll consider it.

    This is why we’ll be seeing a large increase every year from the previous as more people install PV systems, neighbors will be seeing these and start asking questions.

    This is especially true with Solar Shingles.

  3. Avatar for tony tony says:

    LOL,

    I am doingthe same excact thing here in Denver – I decided to change careers and sell solar power to commercial property owners.

    It takes a very long time for the property owner to make up thier mind. It is very frustrating.

    BTW – In our direct mail advertising (which I think is good) we are getting a 1% response rate.

  4. Avatar for Spec Spec says:

    Well . . . California does NOT have a real juicy rebate right now. It is a mere $1.90 per watt for where I live. That will pay for around 1/4 of the installation I was looking at . . . and that is a self-install. (Around $7000 rebate for a system that may cost around $27,000 total. :-/

  5. Avatar for grd grd says:

    So the city, state, and federal tax payers kick-in over $21,000 so a super “nice” and (and super rich) man can have cheap power for his rental property? Nice deal for Loren. Too bad the tax payers don’t get to decide how to spend our own money!

  6. Avatar for Catherine Neil Catherine Neil says:

    Your prices per watt are almost $2/watt more than we charge and we make a good living selling Sunpower.Think about how you can reduce your overhead or get the job done faster.

    1. Avatar for David Llorens David Llorens says:

      It’s more expensive to do solar in San Francisco than Pennsylvania. Labor and building codes mostly. We are competitively priced here. It’s probably not $2/watt more expensive though… We build in a margin that allows us to take care of our customers for a long, long time. Our warranty is incredible and the system is built to last. For example, we throw away the connector that comes with Sun Power panel to use a more robust one. We eliminate a lot of different metal on metal connections that cause electrolysis and corrosion, and we spend some extra money to do this. Our highly trained, in house crew costs some more, but if you got people up there drilling holes in your roof you want to make sure they know what they’re doing.

  7. Avatar for Dan Dan says:

    Nice article, Dave. I’ve had similar experiences here in SF. I think people are generally very tentative about any purchase of this size, regardless of how compelling the numbers are. I also think that one of the biggest hindrances to wider solar adoption is this widespread belief that some phenomenal new technology is just around the corner and they’re better off waiting. Look at the crazy hype around NanoSolar.

    -dan

  8. Avatar for James Thomas James Thomas says:

    Excellent article. Thanks David Llorens for composing your thoughts, as I am running into similar obstacles with p.v… so, I’ve shifted my attention to thermal, as the payback is 5/1. It truly is a numbers game. I am certain that if you had Apple’s Think Different advertising campaign budget behind you, your results would be much different. At least you made one sale. That is more than I have right now.

    Perhaps the next strategy is to establish independent solar coop incentives that are not regulated by power brokers or private interests, whereby neighbors share the total cost of a system – dealer makes a small commission or charges a small fee on a hypothetical $1,000,000.00 install. Grassroots legislation is a big driving force of the industry. San Francisco, being the progressive city that it is, people would rally and sign the win-win petition, and then mandate it.

  9. Avatar for CelticSolar CelticSolar says:

    You make a good argument for solar. I live in Oregon, power does not cost as much, the incentives are not as good, we don’t get as much sun, yet I have solar panels. So why are people not buying your “logic and numbers”? I can guess. Your presentation starts with the gross cost. They hear that and are too in shock to hear the rest. You might try working the numbers ahead of time, presenting them with the benefit first, then the rest of it as a means to getting there. Sadly, we are often not long term thinkers. The short term pain of paying $60,000 now is too much even if it pays itself off in 4 years and is pure profit every day after. Also, some people have a strange guilt about taking rebates/credits or incentives, they feel like they are accepting welfare or charity. Not sure what you can do there other than tell them their tax dollars funded these. Good luck in helping people see the light.

    “the sun is the most laid back landlord ever” LOL, that’s a good line.

    Rock on,
    cs

  10. Avatar for Paul Paul says:

    Dave, Great article. I run into this everyday with my business. It is an up hill battle to be sure. Recently, I have noted that there are more and more people interested in solar space heating, likely because they are getting huge oil bills. I get at least one or two calls a day about it. Like you, I try to present the facts without the high pressure sales stuff, but some people don’t get it. Perhaps it is too new, or perhaps the traditional electrical service is more comforting, I don’t know. Many people don’t like change or new things. That is why McDonnalds and Walmart do so well, you can shop or eat anywhere and get the same stuff. Doesn’t mean it is good. It’ll catch on, I am sure of it.

    I have also noticed that there is a certain cool factor in solar panels lately, at least around here. I have had many questions about the panels on my house, everyone from the UPS man to the Real Estate Agent selling the house down the road. If the system is working, I invite them in and have them look at the water temperatures, and put their hand on the pipe coming down from the the collector on the roof. Everyday is another opportunity to make a difference.

  11. Avatar for PVgeek PVgeek says:

    Can you post the direct mailer that you sent to these 1000 people or email it to me? A good direct mail conversion rate is usually 2.7%, but for gods sake this is San Fransisco! These are the best rebates in the country and this is one of the richest most progressive cities in it. I planned on hanging 25,000 Solar Coupons door hangers out there and can’t believe you can’t even break even advertising solar…in San Fransisco!

    I got an idea, why not put up fake solar panels around town so people think solar is all the rage and jump on the band wagon?

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