July and early August 2018 boasted some of the hottest days on record in Southern California. Air conditioning units throughout the region ran 24-hours a day. The rest of the summer promises more of the same.
As grateful as we are for the air conditioning units that make these months bearable, we are markedly less pleased with the energy bills that arrive in the following weeks. That is, unless we have solar panels. Solar panel systems deliver homeowners significant savings over non-solar systems—typically several hundred dollars during the hottest months of the year, according to the U.S. Energy Information Administration.
And with more than 300 days of sunshine a year, very few states are as ideal as California to make the most of solar panel technology as a renewable and reliable energy source.
Add to that the fact that there has been a 53% drop in the price of solar panels over the last five years, according to figures from the Solar Energy Industries Association (SEIA), and it seems like every California home would have a raft of solar panels on its roof.
But that’s not the case: the SEIA says that while California continues to be a leading solar panel market in the United States with nearly 5.8 million homes powered by solar, there are 7.2* million households in the state that do not.
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. Here are the top five:
1. Average Utility Bill is Manageable (for Now)
According to the California Public Utilities Commission (CPUC), residential electric customers in California pay an average of 16 cents per kilowatt-hour (kWh), 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 California homes use less energy on average than households in 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. It depends on how the air conditioning is used, how many people are in the home, when the appliances are in use and many more factors.
The CPUC divides California into six 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 Coast, Mountains and Central Coast, for example, you’re less likely to use air conditioning during the summer months because you simply don’t need it thanks to 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 Gil Garcetti announced that Los Angeles—firmly situated in the South Coast/Inland region of California– as the most installed solar power of any city in America. And it’s been worth it: a 2018 study by Solar Reviews found that in the cities of Los Angeles, San Diego and Long Beach, the average monthly savings for an 1,8000-square-foot home with solar panels was around $128 per month.
It’s safe to assume that, even if a home’s energy bills are low without solar panels, 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.
2. You Rent Your 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’re paying your own utilities, even as little as the $90 a month average referenced above, you may want to consider approaching your landlord about installing solar panels.
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, the landlord has his or her costs covered on solar panel installation, and it 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,” a group of people in the same community or neighborhood, going in on solar together, usually in what is referred to as a solar garden. The community group can take advantage of the cost savings and environmental benefits of solar without having to put the 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.
3. Some People Don’t Qualify
Another reason that solar panels are not ubiquitous throughout California is that not all would-be customers qualify for financing for solar panel payments. Experian lists the average credit score in California as 687, ranking 30th out of 50 states. But while that score is on the lower end of average, it doesn’t mean that someone with that credit score can’t buy a solar panel system.
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 650 credit score to qualify. These loans are specific to solar because of the federal solar tax credit, also known as the investment tax credit (ITC), which allows you to deduct 30 percent of the cost of installing a solar energy system from your federal taxes.
In this case, the solar panel manufacturer receives the 30% 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 $5,000. You agree to pay that $5,000 tax credit to the solar panel manufacturer and the solar panel manufacturer provides you with a loan with payments based on $10,000.
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. You own the panels outright and are responsible for maintenance, but since the majority of solar panel systems come with 20-year-warranties, that isn’t as much of an impact as it might otherwise be.
One thing to keep in mind with loans, however, is If you don’t send in the $5,000 tax credit from the IRS, then your payment will go up. It will now reflect a $15,000 loan. So if your original payment as $75 a month, it will go up to $106 a month if the tax refund is not sent to the lender—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 having 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 principle.
4. 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 homeowner sometimes encounter is an overabundance of trees and shade. If the shade only cover 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.
5. 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 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 who 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.
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 30% of the price of your system, will be changing.
The Department of Energy says that the 30% tax credit is for systems installed by 12/31/2019, After that, the tax credit drops to 26%. After 2021, the tax credit drops to 22%. 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 a different sized home 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 is the month after a spell of hot weather when folks open up their energy bills. That said, Top Tier Home Energy, one of Orange County’s top solar panel companies 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.
*California Department of Housing and Community Development, January 2017
Top Tier Home Energy is Southern California’s premier solar panel installation company. The Top Tier Home Energy team is passionate about the Solar Revolution and offers the newest in solar module technology. Every solar system Top Tier Home Energyinstalls is custom designed in-house by Top Tier Home Energy engineers. Top Tier Home Energyis not a subcontractor and does not subcontract. Whether your project is residential or commercial, Top Tier Home Energy handles all of the permitting and construction. Find out more at www.toptierhome.com.