Powered By the Sun

On a regular basis, clients reach out to us with a variety of financial questions. When they ask about installing solar panels on their home, these conversations have commonly been prompted either by a pitch from a solar sales company or a desire to make their home more resilient during weather-related outages or rolling blackouts. This week, the state approved PG&E’s proposed 12.8% cost increases for electricity in 2024, and we expect cost to become more relevant in prompting homeowners to consider harnessing the power of the sun. 

While the motivations for making a change may vary, it is not a simple decision. There is a complex set of considerations when making a plan to invest money upfront to reduce energy usage and energy costs over time.

The condition of your current roof should be one of your primary considerations when contemplating a solar installation. An experienced contractor will give you a professional opinion about the limitations of your particular property. A common recommendation is to install enough capacity to provide about 85% of your energy. If you are thinking about adding an electric vehicle charger or converting a gas stove, clothes dryer, or water heater to electric, you’ll need to add that to your calculations as well. 

All roofs are not immediate candidates for solar. Sometimes, the very things you love about your house may limit your options. Shading from trees on your property (or often a neighbor’s property) can reduce the productivity of panels or limit how many panels you can effectively place. Structural features such as gables, hips, and valleys, as well as three-dimensional interruptions of chimneys, vents, and dormers, make for an attractive design and happy occupants but are less helpful when considering solar installation.  

Going solar may also require upgrading electrical panels for the system to work properly and meet city codes. Many older homes in the Bay Area are still using original electrical panels with much lower voltage ratings than needed for new construction or upgrades that require more significant electrical usage. 

While you might expect that installers could bolt a few panels to your roof and have you up and running within days, the design and permit approval process with your utility and municipality is lengthy. Going solar in California usually takes approximately 45 days from the time a signed contract is submitted. Many planning departments remain understaffed following the pandemic, and processing times are longer than they had been in the past. Having the right expectation coming into a project like this can help support a positive experience.  

In light of recent natural disasters, going solar to develop independence from the grid is becoming a more common motivation. It is important to note that in traditional solar home design when the sun goes down, your home will still need to stay connected. If your local utility has an outage, you are still vulnerable. To address that and create real independence, your design should include batteries to store excess energy. While adding battery storage can improve your resilience during power interruptions, they are also an expense addition to your project.  

Adding solar to your home is an investment. There is an upfront cost, which then leads to significant monthly savings based on the amount of energy your home produces; your system may mostly or fully offset your energy needs each month. In other cases, your home may produce more energy than it uses, allowing you to sell some of that excess energy back to the grid. This process is governed by a system called Net Energy Metering or NEM. 

The rate that household energy producers are paid for selling back energy to the grid was historically a major selling point for those looking to go solar. Over the last ten years, this rate has gone through several revisions, changing the calculus of what an estimated payback period might look like.  

As solar has continued its journey to mass adoption, utility companies have become overwhelmed with the amount of energy they are buying back from customers during daytime hours, which is not always when the system needs it the most. Peak evening usage, particularly in winter, needs a more resilient system. This has led to the most recent change in California to NEM 3.0, which has further reduced the rate local utilities will pay for excess energy during daylight and supports a higher rate for excess energy sold to the grid after sundown. The new NEM system encourages battery integration with home solar systems to expand the structure and provide additional energy when the grid needs it the most. 

For those interested in going solar, there are a number of financial incentives available. At a federal level, the Inflation Reduction Act restored the full 30% Residential Clean Energy tax credit towards installation costs, and it is available through 2032. This clean energy credit equals 30% of the costs of new, qualified, clean energy property for your home. Additionally, starting in 2023, this credit also applies to battery storage in addition to solar panels. 

California also offers a number of incentive programs. One is the Self-Generation Incentive Program, which offers rebates to residential homes and businesses that install a solar battery with a rooftop panel system. Another is the Active Solar Energy Exclusion, a program that exempts from property tax assessment any property value added until the property is sold. The exclusion is set to end on January 1, 2025. 

We regularly meet with clients to discuss the possibility of changing their home’s energy configuration and recognize that each situation is unique. These decisions are not simple. As you prepare to meet with solar experts to find the solution that makes sense for you, we are here to help you understand your financial options.

Taking steps to develop independence from an unreliable grid saves energy and money and, more importantly, can give you peace of mind.