Solar In California And The Reasons Not Everyone Has It
July and early August are some of the hottest days of the year if you live in Southern California. Air conditioning units throughout the region run 24-hours a day and every coming summer promise more of the same. As grateful as we are for the air conditioning that makes these months bearable, we less than pleased when the electric bills arrive in the following weeks. That is unless we have solar panels. Solar panel systems deliver homeowners significant savings over homes without solar. Typically the saving can be several hundred dollars during the hottest months of the year, according to the U.S. Energy Information Administration. So why wouldn’t everyone want solar in California?
California enjoys over 300 days of sunshine a year, making it an ideal place to utilize solar as a reliable energy source.
There is also the fact solar panel prices have dropped 53% over the last five years. These are figures are based on research from Solar Energy Industries Association (SEIA). So it would seem like every California home would have solar panels on its roof.
But that’s not the case. SEIA says that while California continues to be a leading solar panel market in the US with nearly 5.8 million homes powered by solar, there are 7.2* million households in the state that don’t.
So why aren’t solar panels on every roof in California? It turns out there are valid reasons that not all California consumers have embraced the movement toward solar panel energy.
Average Utility Bill Is Manageable (for now)
According to the California Public Utilities Commission (CPUC), Californians pay an average of 16 cents per kilowatt-hour (kWh). These are among the highest rates in the nation. However, monthly average bills in the State are among the lowest in the United States at $90 per month. That’s because Californians use less electricity on average than other states, due to a milder year-round temperature average of 70 °F.
But CPUC average findings aside, each household uses energy in different ways. Bills may range from as little as $40 to $800 a month or more. Factors depend on air conditioning use, how many people are in the home, and when appliances are in use.
The CPUC divides California into six regions based on climate: North Coast, Mountains, Central Valley, Central Coast, Desert, and South Coast/Inland. If you’re living in the North or Central Coast you’re less likely to use air conditioning in summer because of cooler temperatures.
People in the Central Valley, Desert and South Coast/Inland areas are far more likely to be solar panel customers. In fact, in April Los Angeles mayor announced that LA has the most installed solar of any city in America. And it’s been worth it! A Solar Reviews 2018 study found that in the cities of LA, San Diego and Long Beach, the average monthly savings for a 1,8000-square-foot home with solar was around $128 per month.
It’s safe to assume that public utilities will continue to raise rates just as they have been doing for years. Between 2006 and 2012, for example, residential electricity prices shot up 30%, adjusted for inflation, according to Energy Department figures. Experts say the price could jump an additional 47% over the next 15 years.
You Rent You Home
Unfortunately, people who rent their homes—46.2% here in California, according to the US Census Bureau—usually aren’t candidates for solar. However, just because you don’t own your home there are ways to reap its benefits.
If you pay your own utilities, even as little as the $90 a month average, you may want to consider approaching your landlord about solar.
After all, both you and your landlord want to save money. A landlord may consider leasing a system at, for example, $75 a month, and charge that amount to the tenant. The tenant ends up saving money. And the landlord has his or her costs covered on solar panel installation. T really is a win-win for both.
If you aren’t comfortable about approaching your landlord or you’re part of a large apartment community without much of a relationship with the property management firm, you still can access solar energy.
In California, many cities are experimenting with “community solar”. That is a group of people in the same community or neighborhood, going in on solar together. This is referred to as a solar garden. The group can take advantage of the savings of solar without having to put panels on their own roof. You don’t need to be a homeowner to do it, either. A quick Google search can tell you if there is a community solar program near you.
Some People Don’t Qualify
Another reason that solar is not ubiquitous throughout California is that not all potential customers qualify for solar financing. Experian lists the average credit score in California as 687, ranking 30th out of 50 states. While this score averages on the lower end, it doesn’t mean someone with that credit score can’t go solar.
Solar panel systems can range upwards of $15,000 – $30,000, before tax credits and incentives. That’s a big number and there are different ways to make it happen for you.
Basically, there are two types of solar financing. The most popular kind of financing is a solar panel-specific loan through the solar panel manufacturer. An applicant needs a minimum of 650 credit scores to qualify. These loans are specific to solar because of the federal solar tax credit. This is also known as the investment tax credit (ITC). This allows you to deduct 26% of the cost of installing a solar energy system from your federal taxes.
In this case, the solar panel manufacturer receives the 26% tax credit and deducts that amount from the principle of the loan. For example, the solar system has a price tag of $15,000. The tax credit is $3,900. You agree to pay the tax credit to the panel manufacturer and they provide you with a loan based on $11,100.
Typically, such loans are 18-months, interest-free. According to EnergySage, these loans are generally available for 10 to 20-year terms, with interest rates ranging from 3 percent to 8 percent if you have a FICO credit score of 640 or above. When own your panels you’re responsible for maintenance. However the majority of solar panel systems come with 20-year-warranties, that isn’t as much of an impact as it might otherwise be.
Keep The Solar Tax Credit In Mind
Keep in mind, however, if you don’t send in the $3900 tax credit from the IRS, your payment will rise. It will now reflect a $15,000 loan. So if your original payment was $75 a month, it will go up to $106 a month, a 42% increase.
Customers can also lease their solar panels from the solar panel provider. Leasing can bring instant cost-savings benefits with little or no money down. The power you produce will lower your monthly utility bill. The solar company owns the panels and is responsible for maintenance. In order to lease, however, the customer must have a higher credit score, around 700.
The typical lease period for solar panels is 20 years. At the end of the lease, you have the option of buying the panels outright for fair market value. Or you could have the solar panel company remove the system from the house. It’s up to you. Leasing may be a good option for people who want to keep their options open.
If the idea of financing through the solar panel manufacturer or leasing panels isn’t appealing, another option is to get a traditional loan from your bank or financial institution. The monthly payment may be slightly higher, and the credit score requirement may be different, but the 30% tax credit can be used to pay down your principal.
Some Roofs Don’t Have Enough Useable Space
The fact of the matter is that some homes aren’t candidates for a solar system. Their “footprint” isn’t large enough to accommodate the system that the home needs to produce the most solar energy. Covering every available inch of a roof is simply not practical, especially given that fire code requires three feet of clear space from all ridges. Solar panels are rectangular; a roof with many varying levels can preclude any installation.
While solar panels can be installed on the ground on a separate structure, that isn’t always a practical solution. You’d need to add trenching, conduit, concrete and steel framing, which generally will add 20- 30% more in costs to your solar panel system.
Another problem homeowners sometimes encounter is an overabundance of trees and shade. If the shade only covers the solar panels a portion of the day, it is possible that they still absorb enough sun. Or, if the problem can be addressed through a good tree trimming, then, by all means, a solar system can work. The important thing is taking shade issues into consideration before installing panels to make sure you’re getting your money’s worth.
Some People are Skeptical
Throughout history, the introduction of technology has given some people pause. A 1933 New Yorker article recalled what it was like when telephones were first for sale: “People admitted that telephones were ingenious contraptions and wondered just how they worked, but they no more thought of getting one of their own than the average man now thinks of getting an airplane. As a matter of fact, for a long time, they were of little use in a home. Since almost nobody had them, there was no one to talk to.”
Solar panels are a little like that. When they first debuted 20 years ago, they had their share of naysayers. Even now, some people are skeptical. And many have a good reason: they may have encountered a fly-by-night solar company or been subjected to an annoying “hard sell.” They may have had friends who installed solar panels, only to find that the company they used overcharged them or did not customize a solar panel system that worked best for their home.
Sadly, when solar panels did appear on the scene, there were disreputable companies that took advantage of people’s trust. One company, since gone out of business, would require an 80% down payment, deliver a few pieces of racking, but never come back to install the system. Another company, also now defunct, would form an alliance with another company to fix prices. In the Wild West days of the early solar panel industry, things sometimes got out of control.
Solar Is A Mature Industry
Now, twenty years into it, companies take pride in providing customized, cost-efficient systems that provide energy savings for years. Yet people still may not believe that a solar system is right for them.
Some say that they’ve been watching the prices for solar panels come down over the years and they are waiting for the costs to drop further. At first glance, this seems reasonable: after all, solar panel systems have dropped significantly in the last five years. But now the prices have stabilized and are not expected to drop further. Plus, depending on what part of California you are in, local incentives may be phased out. The federal tax credit, currently 26% of the price of your system, will be changing.
The Department of Energy says that the 26% tax credit is for systems installed by 12/31/2020, After that, the tax credit drops to 22%. Once 2022 rolls around, the tax credit is gone! Given this information, it’s better to buy or lease a solar system before the tax credit changes.
Another reason that some may not believe a system is for them is that they haven’t done their own research on the right solar system for them. They may have a friend with different sized homes and a different number of people in their household, from whom they got their information, and decided solar panels weren’t for them based on someone else’s energy needs. It’s important to have a qualified solar professional make an in-person assessment of your home so that the information you have is the most recent and most accurately reflects your needs—and your eventual savings.
Find Out More About Solar
The best time for solar companies in the month after a spell of hot weather when folks open up their energy bills. That said, SunPro Solar, one of Southern California’s premier solar panel installers doesn’t want people to buy solar panels because they’re motivated by a big bill. They want them to make the investment before the hot weather ever hits so that they can access the savings all year ‘round.
If you believe you are ready to make the investment into solar, call SunPro Solar today at 951-678-7733 to schedule your free no-obligation energy consultation.
*California Department of Housing and Community Development, January 2017