SolarCity PPA vs Outright

[nomorecoal]

SolarCity PPA vs outright purchase

Hello Friends,
I am located in Maryland, USA and reached out to Solar City a few days ago get a quote.

My current utility charge is $0.129 kWh


Here is their latest quote.

System: 6kW DC (5.27 kW AC)
Annual production: 7052 kWh

PPA: $0.106 per kWh (2.9% annual increase)
PPA: $0.131 per kWh (fixed)
PPA: $0.067 per kWh (based on one-time payment of $9,030)


A friend of mine paid $6,321 for 5.59kW DC system in October, 2011.

I am surprised that the rates have gone up. Is anyone noticing a similar trend?


If do an outright purchase,
System: 6.24 kW DC (5.99 kW AC) [I think it will be 5.48kW AC]
PV Panels: 24 x SolarWorld, Model: SW260 Mono Black
Inverters: 24 x Enphase Energy, Model: M215-60-240-S2x

Contract Amount: $23,450 ($3.76 per watt DC)
Less:
Clean Energy Grant Program - Residential Solar PV
Federal Tax Credit
Net Installed Price per Watt: $2.47 per watt DC ($2.57 per watt AC) [I think it will be $2.81 per watt AC]

Presuming annual production of 7,300 kWh for next 20 years, the price works out to be $0.11 per kWh.

So as per my current calculation, even if I discount SRECs, going with Solar City PPA of one time payment will save me money.


Am I calculating correct?

[J.P.M.]

SolarCity PPA vs outright purchase

Hello Friends,
I am located in Maryland, USA and reached out to Solar City a few days ago get a quote.

My current utility charge is $0.129 kWh


Here is their latest quote.

System: 6kW DC (5.27 kW AC)
Annual production: 7052 kWh

PPA: $0.106 per kWh (2.9% annual increase)
PPA: $0.131 per kWh (fixed)
PPA: $0.067 per kWh (based on one-time payment of $9,030)


A friend of mine paid $6,321 for 5.59kW DC system in October, 2011.

I am surprised that the rates have gone up. Is anyone noticing a similar trend?


If do an outright purchase,
System: 6.24 kW DC (5.99 kW AC) [I think it will be 5.48kW AC]
PV Panels: 24 x SolarWorld, Model: SW260 Mono Black
Inverters: 24 x Enphase Energy, Model: M215-60-240-S2x

Contract Amount: $23,450 ($3.76 per watt DC)
Less:
Clean Energy Grant Program - Residential Solar PV
Federal Tax Credit
Net Installed Price per Watt: $2.47 per watt DC ($2.57 per watt AC) [I think it will be $2.81 per watt AC]

Presuming annual production of 7,300 kWh for next 20 years, the price works out to be $0.11 per kWh.

So as per my current calculation, even if I discount SRECs, going with Solar City PPA of one time payment will save me money.


Am I calculating correct?

Correct or not is something only you can say. You can include any factors you believe important. IMO only however, most folks are mostly ignorant of factors that can affect their long term financial well being. Some homework pays off big.

A different question to ask yourself might be: Have I included everything as it will affect my finances and probably more importantly my lifestyle and freedom of choices in the future.

a short list of some things to perhaps consider:

- Current usage/total bills.
- Util. rate struc.
- Accuracy of production estimates - they are often low when provided by peddlers.
- GUESSED future util. rate inflation rate - They are often implied as fact (not) and are often guessed high, sometimes unrealistically so by those same peddlers, and mostly for the same reasons.
- How long I plan on staying where the solar electric will be located.
- Considerations and consequences of making a 20 or so yr. commitment to a contract. Read the contract fine print from the standpoint of the other side and be cynical. Be realistic. Do you honestly expect to be in the same place for 20 years ?
- How will a PPA affect my ability to sell my property in terms of time and price.
- Buy, lease, or PPA, 10 years from now, depending on what the future holds, you may have the solar equivalent of a Commodore 64 on your roof. Some potential buyers may not think that's a beneficial thing to be buying, or buying into if a lease/PPA.

The list goes on.

[nomorecoal]

You brought up good points. However, I have already made up my mind about going solar; and now the question is between PPA and outright purchase.
The reason why I discounted SRECs is because I presume that it will nullify any money that I will spend towards Annual Maintenance Contract or repairing my roof or some other unanticipated expense.

The other factor I took in is the opportunity cost of investing that money in bonds and earning 4% (post tax) on that investment. One-time down payment of $6,838 or $7,145 is definitely more attractive as well.

[JCP]

You brought up good points. However, I have already made up my mind about going solar; and now the question is between PPA and outright purchase.
The reason why I discounted SRECs is because I presume that it will nullify any money that I will spend towards Annual Maintenance Contract or repairing my roof or some other unanticipated expense.

The other factor I took in is the opportunity cost of investing that money in bonds and earning 4% (post tax) on that investment. One-time down payment of $6,838 or $7,145 is definitely more attractive as well.

Have you checked PV Watts to validate the production numbers? http://pvwatts.nrel.gov/index.php

That would be my first step, but that will give you only your first year production. SolarWorld are rated to lose 3% of their capacity in year 1 and lose another 0.7% each year thereafter. IIRC, the guarantee is 80% after 20 years.

[Ian S]

That's quite a difference between the prepaid PPA and outright purchase but it does happen on occasion. You might want to get some additional quotes though to make sure you're getting a great deal. IMHO, if you can save significantly over outright purchase by doing the 20 year prepaid PPA, then the prepaid makes sense. Just make sure you get a copy of the PPA contract before you sign and study it with a fine tooth comb. FWIW, unlike a Commodore 64, your 20 year old solar system will still be doing the same thing in 2034 as its replacement would be. Maybe not quite as efficiently but still the capability isn't apt to have changed a whole lot. Unlike the Commodore 54 compared to a Surface Pro 3.

[silversaver]

The single pay lease price vs. outright purcahse price were BIG difference.... Have you disclose ALL your solar incentive and rebates??? The number don't add up.........

[prhamilton]

I am confused on the third option, you call it a PPA but its really a pre-paid lease right? PPA is a power purchase agreement, where you would be purchasing all the power from the system for a specified rate.

PPA: $0.106 per kWh (2.9% annual increase)
PPA: $0.131 per kWh (fixed)
PPA: $0.067 per kWh (based on one-time payment of $9,030)

Don't underestimate the value of those SREC. I think it comes out to some real money, how long it will last is the tough question. I think the reason you see the cost of prepaid leases increasing is because they are starting to assume a lot less coming from SREC and other incentives have probably been reduced.

I think that if you have the money to do a pre-paid lease its a great option. I think you should get a couple more quotes.

[J.P.M.]

That's quite a difference between the prepaid PPA and outright purchase but it does happen on occasion. You might want to get some additional quotes though to make sure you're getting a great deal. IMHO, if you can save significantly over outright purchase by doing the 20 year prepaid PPA, then the prepaid makes sense. Just make sure you get a copy of the PPA contract before you sign and study it with a fine tooth comb. FWIW, unlike a Commodore 64, your 20 year old solar system will still be doing the same thing in 2034 as its replacement would be. Maybe not quite as efficiently but still the capability isn't apt to have changed a whole lot. Unlike the Commodore 54 compared to a Surface Pro 3.

FWIW, my Commode Door 64 is still doing what it did when I bought it in 1979 or so in the same way I expect today's solar equipment will be functioning and serviceable in 2034.

Other, newer computer stuff just does the same tasks, and much more, and better, and in the view of many, delivers more bang for the buck. Provided the older stuff still functions, that's a big part of what decreases the value of the older equipment. Same with cars, houses, tools, you name it. And solar equipment.

I would expect some future progress in solar technology (but probably not as dramatic as the computer progress has been), making today's whiz bang solar stuff less valuable and desirable - not because the old stuff does less, but because other, newer stuff will deliver more bang for the buck - more, better and cheaper.

What I was suggesting to the OP was not a pitch for or against anything as much as an attempt to suggest the logic presented might benefit from adding some additional terms for consideration, and, in the matter of solar impact on resale values, to think ahead (guess, crystal ball, etc.), think like the other guy, and not assume potential buyers think like the OP, and also try to think out of the box (like a buyer).

Using the computer analogy: If I were to sell my house and included all the computer equipment in it as an enticement, how much more do you think I'd garner using the old computer stuff (except as museum pieces) vs. a house full of the latest gear ? Or for that matter, included no computer equipment at all and not assume prospective buyers have the same preferences and priorities as mine.

I'd suggest some analogous type of situation with respect to old vs. new solar equipment may be worth consideration as part of a solar acquisition, buy, lease or PPA.

I'd like you to explain to me the harm produced by considering some various possibilities, especially when considering choices, such as solar, that usually involve likely lifestyle adjustments and commitment of some considerable financial resources and/or, as in the case of leasing, perhaps some limits on future options that are not a consideration when buying equipment.

[silversaver]

I remember I am still using cassette player to record the data instead 5 1/4 floppy disk.... BASIC program...lol

[Ian S]

I'd like you to explain to me the harm produced by considering some various possibilities, especially when considering choices, such as solar, that usually involve likely lifestyle adjustments and commitment of some considerable financial resources and/or, as in the case of leasing, perhaps some limits on future options that are not a consideration when buying equipment.

No harm at all in considering various possibilities. I just think the comparison to computers is inapt because whether it's 2014 or 2034, a solar system is likely to be doing the same thing: generating electricity - nothing more and nothing less. Yes, some efficiency will be gained. Probably cheaper. Maybe esthetics will have improved but there simply won't be the dramatic expansion in function that there has been within the evolution of the computer and its uses over the past 20 years.

I will pose a question to you though: would you advise a homeowner to delay installing solar for the sole reason that panels may be 25% more efficient in five years? IMHO that would not be reason to wait yet what other major advance apart from price can we anticipate as panels improve?

[J.P.M.]

No harm at all in considering various possibilities. I just think the comparison to computers is inapt because whether it's 2014 or 2034, a solar system is likely to be doing the same thing: generating electricity - nothing more and nothing less. Yes, some efficiency will be gained. Probably cheaper. Maybe esthetics will have improved but there simply won't be the dramatic expansion in function that there has been within the evolution of the computer and its uses over the past 20 years.

I will pose a question to you though: would you advise a homeowner to delay installing solar for the sole reason that panels may be 25% more efficient in five years? IMHO that would not be reason to wait yet what other major advance apart from price can we anticipate as panels improve?

The answer I would like to give to a person asking that question as posed is: no. Reason: Because if that's the only criteria the asker thinks is important, and the only criterion that has a bearing on such a decision, they are , IMO, too ignorant at this point to make a good decision. So, they may consider slowing down, take a deep breath and learn something before they make another mistake.

The rest of the answer I might actually give is: it depends. I would advise a home owner considering such a decision that there are many other parameters and criteria that people knowledgeable in such things consider as important as panel efficiency. Like: How much more $$'s for how much improvement ? Have they maxed out conservation ? Will they be moving ? How soon ? More family ? Etc, etc.

At the end of the day, my advise usually comes down to: Do what you think is best, but in doing so, MAKE SURE you do your best to be as informed about the issue to be decided, and be as aware as possible of the consequences and possible outcomes of any decision. This usually takes some effort and some due diligence.

In spite of humanity's attempts to reduce everything to one word answers, life is usually not that simple.

I'm not sure I understand your last sentence. However, If your asking if it would be worthwhile waiting 5 yrs., for a guaranteed 25% efficiency increase, I'd say: First off, does solar make any financial sense in the user's case at all, and if so, under what circumstances ? That is by no means a yes. However, assuming an affirmative answer for a minute, I'd advise folks do a life cycle cost analysis on two cases, with and without a 25% increase in efficiency with ESTIMATES for all the pertinent parameters as the user considers important including incremental costs, utility rates, etc. and compare the two. The one with the better $$ outcome at 5 years is the financial winner.

I'd also remind the potential user that there are no guarantees in life. Educated guesses are better than wild, ignorant ones, but still guesses. Example: Not too many people in San Diego or So. CA figured their utility rates would be dropping by double digits in the next year or two. But here we are.

After the best guess at a decent financial choice/path, then begins the real work of deciding where each of those alternatives, or something else (which, BTW may well be to forego solar at this time) previously unconsidered, fits into the user's other lifestyle choices and family decisions, and how they see those decisions fitting into what they want out of life. In spite of my constant focus on cost effectiveness, I really do believe it is but one of the things to be considered.

Unfortunately, it is usually the only one considered, but even worse, perhaps the least understood.

[Ian S]

OK, let's see if I can approach this in another way. Assuming your system is still working as designed 20 years from now, what new feature(s) in 2034 would convince you to tear it off your roof and replace it with a new system? The point being that this is an easy question to answer for replacing a 1994 PC with a 2014 Surface Pro 3.

[J.P.M.]

OK, let's see if I can approach this in another way. Assuming your system is still working as designed 20 years from now, what new feature(s) in 2034 would convince you to tear it off your roof and replace it with a new system? The point being that this is an easy question to answer for replacing a 1994 PC with a 2014 Surface Pro 3.

For a lot of reasons, I think you ask a rather nonsensical question. Since the future isn't here and unknown, and my crystal ball is in the shop just now, stating what I'd like under those conditions is, in effect, wishful thinking and daydreaming, not planning, and little better than mental masturbation.

For all I know, in 20 years I could be living in a cave. Que sera, sera.

Be that as it may, since you ask, I'll indulge your fantasy with perhaps some seminal thoughts:

If, 20 yrs. from now I have a solar array that meets my needs and is functioning properly, and appears fit for purpose then and in the future as best as I may be able to guess the future, probably not much.

However, trying to be proactive about things, I'd like to think that if events and advances in energy present viable alternatives to my then current thinking, I'd have enough common sense and sack to examine my then current situation and see if changes are warranted from a cost effective standpoint as best as I could estimate/guess.

If so, I'd then decide if the potential, estimated monetary savings are worth the non monetary cost with respect to changes to my lifestyle, sensibilities and priorities. I'd then take my best shot. Never an easy decision, for me anyway.

So, at and on the end, just like the diaper, it depends.

Hope that satisfies your needs.

[SunEagle]

OK, let's see if I can approach this in another way. Assuming your system is still working as designed 20 years from now, what new feature(s) in 2034 would convince you to tear it off your roof and replace it with a new system? The point being that this is an easy question to answer for replacing a 1994 PC with a 2014 Surface Pro 3.

Providing an good answer for a situation 20 years from now would be similar to asking a 5 year old what they will be doing at age 25. Very hard to get an accurate answer.

As for comparing replacing a 20 year old PC to a 20 year solar PV system. That is easy.

A PC back in 1994 was obsolete 3 to 5 years after it is built. 10 years after it was built it can't run any new software due to hardware incompatibilities. So for me a PC is a 5 year investment. Going longer only adds to the pain of keeping it going. And based on my history I am on my 4th computer since 1994 so I am about due for a new PC but I really do not like the Windows 8 software.

Now if my PV system was installed in 1994 and is still producing say 85% 20 years later, the chances are it will still be producing for another 10 years (granted at a smaller %) but during those 10 years any additional costs to keep it going would be a lot less than ripping it off my roof and starting over again. Maybe (since 2024 is in the future) there will be a better PV solution to consider but who knows what will happen in ten years and I have no idea what I will do.

[Naptown]

a purchase in Maryland is always a better option provided you
1- have the cash to do it
2-have the tax liability to cover the 30% federal credit
I routinely see costs on purchases when all is said and done about .04 per KWH and lower on cash purchases here.
And this is using American made panels not Chinese whatever that SC offers