Category Archives: Solar

Putting A Price On Home Energy Efficiency

Originally published on CleanTechnica

Buying a house is an exciting part of life, the start of a new chapter, and frankly…freakin’ scary! Typically that’s not because of any spooky creatures but because of the massive mortgage that people usually take on to afford one, the number of things that can go wrong, and unforeseen financial burdens that these ‘money pits’ can become.

Many of the financial pitfalls can be identified early on in the buying process as part of a quality home inspection, but there’s one big dirty secret that many homes have that is a bit harder to wrap your head around when buying a new place – energy. I’m not talking about the qi (or ch’i) of the house or anything like that, but literally about the energy used by the house on an annual basis in all forms – electricity, natural gas, propane, heating oil, solar, wind, solar thermal, geothermal, etc

Let’s back up a bit. Pretend you’re buying a new car. Do you check the window sticker to see what options it comes with? How about the fuel efficiency? Estimated cost to operate for a year? Me too! …and it’s the same for a house. We want to know which energy options it comes with. Does it use natural gas for heating? Have a high tech heat pump in the basement that is dirt cheap to own and operate?

Fuel efficiency similarly translates into energy intensity. You thought I was going to say energy efficiency there, right? The actual metric for putting data behind this is the amount of energy used per square foot of the house. Roll that up over the size of the house and the months of the year and you get the mega-metric – the total cost of energy to operate for a year.

Before cars kept track of fuel efficiency, knowing what miles-per-gallon your car got was irrelevant to the market – you don’t care what your car gets and the market doesn’t value it…and it’s the same thing with a home. You can invest $15k in solar panels, $10k in energy efficiency improvements, and $3k in a new heat pump, but you’re not going to see much of that money rolling back into the valuation of the house because people don’t speak that language yet.

We need to retrain our brains, and the market, to accurately value not just the cost of the house but the cost to run the house month to month. For example, let’s dig in to the numbers on two houses:

  • House A is $1000/month to buy for 1700 square feet, but costs $300/month for the electricity bill and another $150/month to heat it.
  • Across the street, House B is also $1000/month to buy for the same 1700 sq ft footprint, but due to the solar panels on the roof and the extra insulation in the walls, floors, and ceiling, only costs $50/mo for the heating bill, with no electric bill to speak of.

Obviously the second house is worth more, and is a better value for the same purchase price. But just how MUCH more does an energy bill that’s $400 lower (every month!) make the house worth? Backing up a bit, how do we even quantify the monthly cost of energy for a house?

Putting a price tag on the cost of energy is the first step in getting a handle on the value of residential renewables – such as solar – into the valuation of the house. That allows homeowners to see the month-to-month cost and quickly extrapolate the cost of energy over the life of the house (the long term cost of energy).

This could be accomplished by reapplying the concept of the Energy Star label on appliances:

home_energy_rating

Beyond just the base concept of putting a dollar value on, and an increased visibility of, the cost of energy, less efficient homes are actually more risky to banks. Think about it. In the example above, house A carries an energy bill of $450/month vs house B with just a $50/month bill. That’s an extra $400 of monthly debt on house A that will never go away for the homeowner.

That effectively takes the monthly payment for the house from $1000 to $1450 whereas House B is only going to cost $1050/month – a huge difference. One of my favorite sayings that I’ve heard about solar is that it takes a monthly liability (the monthly bill) and turns it into an asset (increased value of the house).

Homes with higher energy bills are riskier investments for banks, as the monthly energy cost is not taken into account when the home is financed. It’s essentially a highly variable chunk of debt (particularly in this era of increasing efficiency and solar) that the bank not only doesn’t know about, but doesn’t seem to care about.

In markets where the energy bill is a large percentage of the mortgage, this can play a large factor in whether a homeowner can actually afford the full cost of the home or not. Further, the variations in energy price can, and likely often do today, single-handedly sink the homeowner’s monthly budget and kick the loan into default.

Finally, these energy costs can be rolled up over the life of the loan as part of the purchasing process. House B might only cost $18k in energy costs over 30 years whereas house A would tip the scales at $162k!! Granted, not many people are interested in stepping back and looking at the total cost of energy over 30 years, but lifetime costs often paint a picture compelling enough to trigger small changes.

If we looked at energy costs this way more often, solar and energy efficiency would be much more likely to have increased value when the house hits the market. Markets value what is measured. We need to measure energy use and turn consumption into an easy to understand comparable metric – like MPG is for fuel efficiency.

Doing that will trigger banks and financial institutions to dig a bit deeper into the value of energy efficiency and residential power generation as a part of the lending process and overall risk assessment. If Energy Use Intensity is being looked at by financial institutions, services like Zillow will start reporting EUI, which completes the cycle back to the consumers.

Homeowners would have more incentive to invest in technologies that are better over the long run and often for the planet, such as making that $5k investment in more insulation, spending $300 on LED light bulbs, or $15k on solar. Homeowners can have the confidence that they are making an investment in the house and in a reduction in monthly operating costs over the life of the home, or at least of the product being installed. For LEDs, that’s just 22.6 years…what a ripoff :)

EVs & PVs — You Can Drive on Sunshine!

Originally published on CleanTechnica

This is an overview for how to assess a solar installation for a residential property and pair the system with an EV or two to generate your own power and drive on sunshine. This is not an attempt to document every scenario, but rather to share the overall direction and flow from which you can, with your newfound knowledge, move forward with an installation of your own. Let’s get started!

When we first put solar panels on the roof of our 2-story home here in sunny Southern California, I understood the concept but had some questions about how it all actually worked. It was quite the learning process, and since then, I have continued to add panels to the roof to offset our base usage while also adding more load to our system with the addition of 2 EVs in the last 12 months. With all this, we are now living the dream and effectively “driving on sunshine.” As there were so many learnings with both systems, this article will help frame both pieces of the puzzle in order to help others understand some of the nuances and how they work together.

The Roof today with our 17 solar panels

The first step towards getting solar panels up on your roof is sizing the system. This is one of the first steps a solar installer will typically do for your site, but you can also go through it yourself to understand the details or for a DIY installation. Many factors dictate system size but the two big ones are the usage you want to offset with new solar generation and the solar potential of the installation location.

Calculating your estimated usage is very straightforward, as your utility has a vested interest in tracking usage accurately so it can bill you for it. Look up the last 12 months of bills and capture the monthly usage in kWhs for each month. The resulting total is your starting point for annual usage. Next, take into account any big project that could impact your usage in the next few years — adding an EV (I’ll review estimating EV usage below), removing a hot tub, installing LED lighting, etc., and either add or subtract those from the annual usage total. Finally, determine what % of that usage you would like to offset. Most installers will use 90% of the production, as any excess is typically not a good investment for the homeowner. My personal goal is to continually generate at least 105% of my total usage.

To understand the solar potential of your location, use an online solar production potential calculator like PVWatts. You enter the key details of your system — some which take more work than others, like installation address, system size (from your work in the previous step), tilt, module type, etc., and the system spits out a nice annual chart of estimated production by month, including the value of the energy produced.

PVWatts Estimated Production

One of the first question folks normally ask about residential solar is “but, what about the batteries?” In most residential installations, the PV solar system will be connected to the grid, meaning that any excess energy produced will be sent to the grid. In a net metering arrangement, the utility will track how much the PV generation sends to the grid and keep a tally sheet, “netting out” usage vs generation at the end of the year. Why annually? This allows systems that generate more in the summer and less in the winter to level out over the year instead of the utility paying the customer in the summer and vice versa in the winter. This could be a whole separate article but I’ll leave it at that for now.

Now that we have our system sized up, let’s go get some bids from installers! I went with SunRun (previously REC Solar and recommend Evergreen Solar as a great unbiased solar installer finder) I’m not going to go into full detail on how systems are priced out, but there are primarily 3 options:

  • Buy this system outright with cash. The system is yours and all generation is “free” after the initial purchase.
  • Sign up for a Power Purchase Agreement (PPA). The installer will front the money for the system and you agree to buy power from them for a predefined term of 20, 25, or 30 years. Terms such as annual % price increases, duration, upfront cost, and savings vary. Do yourself a favor and read the fine print… that’s a long period of time to be locked into bad terms. 🙂
  • Financing. Finance the system through the installer. These contracts are getting sticky so definitely another one to watch out for. It may be better to finance through an unrelated bank to pay for the system vs finance through an installer. A great article on Solar Love flagged some key details on a new SolarCity financing scheme that seemed less than consumer friendly.

My Solar System's Production Summary

Before you lock in and sign papers, dig into the return on investment that the solar salespeople (yes, they are trying to sell you the system, even if it’s a zero-down deal) pitch to you. A few tips — look for price increases in the retail electricity they are comparing to. For instance, in my area, Tier 1 rates were $0.12/kWh when I signed up and they projected 5% increases every year. To validate that, I went in and flattened the price of electricity for a “worst case scenario” payback. Since 2011, however, we did offset the small amount of Tier 2 power we had been paying for ($0.19/kWh) and our Tier 1 pricing has gone up quite a bit and is now $0.15/kWh which is inline with the solar company’s projections.

I have also built an Excel sheet (as I’m prone to doing) to track our solar production, home usage, efficiency savings (improvements in total usage vs base), payback, etc. There’s a notable blip in Jul ’13 when we went from 5 to 12 panels, with each calendar year change as we “net out” and either add or subtract the annual bill or credit into the equation and add in any pricing changes in the “SCE $/kWh” column. I dropped a copy into my Dropbox public folder if anyone wants to find all my errors/reapply/make it your own (link).

solar_savings_thing

What a whirlwind of data. Now that your head is spinning with numbers, take a break, grab some coffee, and come back in 5.

We’ve determined what your usage is for the year, adjusted for all the great efficiency improvements you’re going to make with your tax returns (right?), sized the system based on your specific location, and worked through the financial side of the system. What now? Let’s throw an EV into the mix! Put some miles on those solar panels! But seriously, how do you figure out how much power you’ll need to get back and forth to work? Come with me, friend…

When buying an EV, you enter a new world of numbers and metrics. Nobody will tell you the most important factor in calculating your energy usage, but it’s simple — miles per kwh. Basically, how far you can drive on one unit of electricity. Boiling it down to the basics, your EV has a certain battery size — say 24 kWh — and gets a certain range — like 84 miles. Roll those two together and you get the manufacturer’s estimated miles/kWh rating. In this case, that’s 84/24 or 3.5 mi/kWh for my 2014 Nissan Leaf. I must have a light foot because I have averaged 4.1–4.3 mi/kWh since we’ve had it… which also means I get more miles out of a charge, which is nice.

Now that we know how efficient your EV (or EV-to-be) is, just roll that into the number of miles you drive per year or plan to drive in the years ahead to get your EV’s annual kWh usage. You can run this through the same usage-to-system-size calculation to determine what size PV system you need to power your car. In my case, I used the actual production averages from my panels to calculate this at a “high” miles per year number (12,000) and a “low” miles per year number (8,000) to understand what those thresholds looked like, then sized accordingly.

Our Leaf Charging in a Santa Monica, CA Parking Structure FREE!

Tracking solar generation allows us to understand our system payback vs retail pricing, aka “what you would have paid for the power” — or the cost of the solar system per month. Keeping a running total of the savings allows you to estimate payback time for the system, at which point the system is effectively producing free power. Tossing an EV into the mix, I track EV savings as :

[miles driven / mpg of the car we replaced * price of gas for the month (actuals)]

minus

[miles driven / (mi/kwh of the car) * retail cost of electricity/kWh]

Or… in simple terms, the amount of money we would have spent on gas minus the money we would have spent on electricity = savings from the EV vs a gasmobile.

Solar-powered charging at home is the most cost-effective, environmentally friendly form of vehicle-based transport that fits our lives (today). After we added the first EV in late 2014, we decided to go all-in and added a second EV just a few months ago. We are currently saving money on our electricity bill with the 17 solar panels we have up on the roof, with another 10 panels that we’ve already purchased that are currently waiting for a home electrical panel before we can add those to get back to a state where we are producing more power than we use. The second EV put us back “into the red” but also gets us off gas, which is a bigger win in my book. :)