If you have home solar panels or are considering having them installed, here's what you need to know.
Home solar panels, not usually a subject of controversy, have become a hot issue in statehouses around the country.
Utilities and advocacy groups have launched a multimillion-dollar campaign to end what they say is an unfair advantage some states give to homeowners with rooftop solar panels.
The Koch brothers, anti-tax activist Grover Norquist and some of the nation’s largest power companies have backed efforts in recent months to roll back state policies that favor green energy. The conservative luminaries have pushed campaigns in Kansas, North Carolina and Arizona, with the battle rapidly spreading to other states.
Another group working to repeal solar laws and green energy requirements is the controversial American Legislative Exchange Council or ALEC, which brings conservative state lawmakers together with business and industry representatives to write draft legislation.
ALEC has written model legislation targeting net metering, the LA Times says.
The utilities and allies also are challenging laws in Washington, California and South Carolina.
It’s all about net metering
The campaign centers on a practice called net metering. Laws in many states let solar homes send excess electricity back to the utility. Those homeowners are compensated with credit on their bills.
Carrie Hitt, an official with the Solar Energy Industries Association, an industry group, told Money Talks News that 46 states have some form of net metering.
Some states, like Kansas, require utility companies to get a share of their power from renewable sources.
The utilities claim net metering dumps unfair costs on customers who don’t have solar panels. It leaves fewer households covering the costs of keeping utility systems running, they say.
The state net metering laws and state and federal tax credits for home solar installations are credited with helping reduce the load on the nation’s aging electric system.
The Washington Post wrote about a 2012 report by the American Society of Civil Engineers:
[The report] described the nation’s electrical grid as a patchwork system that ultimately will break down unless $673 billion is invested in it by 2020.
If investment isn’t increased by at least $11 billion a year, the report said, the electrical service interruptions between now and 2020 will cost $197 billion.
A report from the Edison Electric Institute, an industry advocate, however, calls solar panels “threats to the centralized utility business model.”
The score so far
After months of lobbying and debate over the issue in California, the Legislature ordered the state’s public utility commission to act by 2017 to create a plan that examines rate structures and ensures non-solar households don’t pay extra.
Arizona responded to the campaign by allowing utilities to charge solar customers a $5-a-month fee — considerably less than the $50 fee the lobbyists wanted.
Utilities and their allies were unsuccessful in their attempt to repeal a Kansas law that says 20 percent of the state’s electricity must come from renewable sources.
You won’t get rich off of net metering
Are solar households freeloading by sending electricity back to the grid?
The LA Times says:
The arguments over who benefits from net metering, meanwhile, are hotly disputed. Some studies, including one published recently by regulators in Vermont, conclude that solar customers bring enough benefits to a regional power supply to fully defray the cost of the incentive.
Utilities deny that and are spending large sums to greatly scale back the policy.
You’ll never get rich selling your electricity back to the grid. In fact, you can’t make money at all, just credit. Utilities put limits on how much electricity they’ll accept from customers. The best you could possibly do is to reduce your electric bill to zero.
However, without net metering, the LA Times writes, “solar power would be prohibitively expensive.”
Costs and return
The hope of recovering a solar investment eventually with credits is an incentive for many homeowners. It takes 5.6 years on average to break even on the cost of buying and installing a household solar system, according to Boston Solar, an installation and sales company.
Here’s a look at how the costs and returns break down.
Powering a home. At least 8,000 kilowatt-hours a year are needed to supply electricity to a 2,000-square-foot house without electric heat or an electric water heater. It takes about 6.5 kilowatts of solar panel capacity (energy produced at any one time) to meet that need, MSN Real Estate says.
The costs. Trinity Solar, a solar design and install company based in New Jersey, explains how to calculate costs of purchasing and installing a home solar system. According to Trinity Solar’s website, a 6.9 kilowatt rooftop solar system costs roughly $16,800. That includes:
- $24,000 purchase and installation cost.
- $7,200 one-time federal tax credit.
The payback. Trinity Solar says this system would earn roughly a 12.5 percent return:
- $1,242 in electric bill savings annually.
- $863 more in savings on your bill from net metering, or returning your excess electricity to the utility.
Or, go solar for free
A household’s installation cost can vary enormously from Trinity Solar’s example, depending on state laws and incentives. Also, where it’s available, an option called third-party financing lets homeowners install home systems for a reduced cost or even free.
In exchange, the third-party operator gets the electricity and sells it back to the household at a contracted rate that’s usually lower than the local utility’s, says the website of the Solar Energy Industry Association, an industry trade group.
In these arrangements, a homeowner’s costs are determined by type of agreement. The association’s website says:
Third-party financing of solar energy primarily occurs through two models. A customer can sign a traditional lease and pay for the use of a solar system or the customer can sign a power purchase agreements (PPA) to pay a specific rate for the electricity that is generated each month.
It’s unclear how much the loss of revenue due to third-party providers is spurring the utilities’ campaign. But the association says that, in California and Colorado, third parties have become the dominant way for households to go solar. Forbes describes the third-party industry’s rapid growth.
What’s your experience with home solar panels? What do you think of the arguments that net metering costs non-solar households more? Join the conversation by posting a comment below or at Money Talks News’ Facebook page.