Don’t Pay For Solar!

Don’t Pay For Solar!

Have the Utility Buy it for you.

HelioPower solar energy system. Palm Desert, CA

Are You Suffering From A High Electric Bill?

You are not alone. Many people suffer needlessly because they are under the impression that going solar to reduce or eliminate their high electric bill is expensive.

You may be one of them. What if I told you that you can greatly reduce or eliminate your electric bill with a home solar system AND have the utility pay for it?

In other words, what if you could get solar essentially for free? Why Lease when you can own the system with a smart finance strategy?

Why give your energy savings to the solar leasing companies? You could even put as much as $135,903.52 in your bank account over the next 25 years by using this strategy in conjunction with careful financial planning.

I did it for my family and I’m here to share my strategy with you. Get your electric bills and calculator ready. Here’s how it works…

Step 1: Getting Started

  • Your Credit Score: 640+ to Finance or 700+ To Lease
  • Your Federal Tax Appetite: You may qualify for a 30% credit of your out of pocket solar costs.
    • Easy Math Version: $20K Solar Cost = $6K Credit.  If you payed $6K in federal taxes the year you installed solar, the $6K credit would zero that out. You’d pay no federal taxes.
    • If you payed only $3K in federal taxes, you could roll the rebate over into the next year and pay $0 federal taxes two years in a row to use the whole credit.
    • If you don’t pay federal taxes or don’t pay enough to use the full credit in X number of years… you can get the same benefits by leasing or using a PPA.
  • Your Area’s PACE/HERO Eligibility: Property Assessed Clean Energy – Allows you to finance solar on your property taxes
    • 10% equity in your home is required, but there are no FICO score requirements.
    • Must be current on taxes, mortgage, and have no bankruptcies in the last several years.

Hopefully, you’re fortunate enough to have a good credit score, a tax appetite (meaning you can take advantage of the solar tax credit), and/or live in an area where P.A.C.E. – A.B. 811 financing is available.

If you are so lucky, you will have LOTS of financing options at your fingertips when you are ready to go solar.

Have The Utility Pay

OK, so now you’re probably asking yourself, what does all this have to do with the Utility paying for my solar system?

Essentially, it has everything to do with it.

Let me explain.

Let’s say that today you’re spending $250 per month on average with your electric company.

You’re pretty much stuck paying the utility for that electricity if you enjoy things such as lighting, refrigeration, air conditioning, washing and drying your clothes, etc.

Additionally, since 1971 (according to the CPUC – California Public Utility Commission) your electricity rates have increased on average 6.7% annually with the bulk of the increases concentrated in the three upper electricity tiers.

Using the magic of compound interest, if the current trend of the last 42 years persists you’re $250 monthly electric bill becomes $448 per month by 2023 – $250(1+0.067)^10=$448.

Even more startling, over the course of 10 years, you will have paid $40,866.64 to the electric company.

With today’s home solar prices, that amount of money would buy you a 10-12 kilowatt high efficiency solar system significantly more power than what is needed to eliminate a $250 monthly bill!

Step 3: Putting Money In The Bank

Consider this…

If your average electric bill is $250 today,

And you payed the incredibly high price of $40,866.64 for a solar system (the amount you’d pay the utility at a minimum anyway),

And it takes you a full 10 years to pay that off with your chosen financial vehicle and diverted utility payments (as you’ll see… I did it in 6),

And we consider a 25 year useful life for the solar panels and a 12 year useful life for inverters (though some today are 25 year products).

Then, you would avoid paying the utility another $135,903.52!!

The  Math: [$250(1+0.067)^25]-$40,866.64 – $5000 (inverter replacement).

If you can pay it off sooner, the savings become even more compelling.

Step 4: A Real World Example

So the question is: how do I get the Utility to pay for my solar system so that I can save tens or even hundreds of thousands of dollars?

The answer is incredibly simple. I’ll use myself as an example. In 2007, my monthly electric bill was $220 per month.

Applying the same calculus to my own situation, I figured that in 10 years I would have paid $35,962.64 for electricity supplied by local utility.

A solar system to suit my needs (after rebates and tax credits) came in at $21,500.

Solar, therefore, seemed like a no brainer. In fact, six years in I’ve saved $18,742.45 with one year left for the system to pay for itself.

To be honest, I really didn’t feel like writing a check for $21,500, so I did what many of my savvy finance mentors recommended – I used O.P.M – otherwise known as ‘other people’s money’. I simply used my HELOC (home equity line of credit) to buy the solar system and DIVERTED MY MONTHLY UTILITY PAYMENTS to the bank that loaned me the money.

A few interesting things happened:

  1. My loan payment was $157/month (saving ~ $63/month over the utility payment).
  2. I could write off the interest since solar is a home improvement thereby increasing the monthly savings to ~ $118/month.
  3. My home appraised for $22,000 more after the solar was installed upon refinancing it a year later.
  4. The improvement did not increase my property taxes.

Due to some additional fiscal conservatism on my part, I diligently paid down the principal and now own my solar system outright and have an extremely low annual electric bill ($58 in 2012).

Step 5: What It Means For You

A lot has changed since I redirected my utility payments into a home solar system back in 2007?

The good news is that today there are many more financing options available than were available to me.

Better news is that with home values coming back from the dead, home equity and other types of home improvement loans are once again readily available after half a decade of recession.

You options today include:

  1. Solar Lease or PPA from SunRun or another source that allows you to save some money out of the gate and increase savings over time as utility rates continue their unceasing march upward. You’re paying the utility anyway; why not take control of your power by redirecting utility payments into this money saving option. SunRun is perfect for those of you who can’t realize the tax credit and/or like the idea of a 20 year hassle free warranty and a low buyout or free removal at the end.
  2. Divert your utility payments to a P.A.C.E loan like WRCOG HERO, Ygrene, etc and own the system in 6-8 years. Better yet, if you can’t take the tax credit or prefer to borrow less upfront, go with a pre-paid SunRun PPA and finance that with a PACE loan.
  3. Obtain an Equity Line, Signature Loan, Home Improvement Loan or the like from your bank or credit union (as I did) and have the utility pay that loan off for you by redirecting electric bill payments and taking advantage of tax incentives.

In summary, if you enjoy the benefits electricity provides but would like to insulate yourself from inevitable future price increases and save yourself lots of money, redirecting your current and anticipated future electric bills into a solar system makes tremendous sense for most people.

After you’ve done so, you’ll have a much more pleasant problem to deal with: what to do with all those savings!

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