Tuesday, March 12, 2019

Going Solar - The Second Year

As I begin the second year of solar ownership, shown below is a table with a summary of my HEL payments, as well as payments to my electric company, JCP&L.  Also shown as credits, are the amounts I receive from the sale of the SREC’s generated from the solar array.  As before, this post will be updated periodically to reflect these payments and credits as they happen.  Note that thus far, the solar array has required absolutely zero maintenance.

Date
HEL payment
JCP&L 
SREC’s
Total Solar Payments
Mar. 11, 2019
$148.45


       $148.45
Apr. 2, 2019
     
   $8.50

       $156.95
Apr. 10, 2019
$148.45


       $305.40
Apr. 29, 2019

$2.83 (connection fee; 219 kWh credit)

       $308.23
May 4, 2019


–$224.00
         $84.23
May 10, 2019
$148.45


      $232.68
May 31, 2019

$2.83 (413 kWh credit)

      $235.51
June 6, 2019


–$220.00
        $15.51
June 10, 2019
$148.45


      $163.96
July 2, 2019

$2.78 (866  kWh credit)

      $166.74
July 8, 2019


–$220.00
      –$53.26
July 10, 2019
$148.45


        $95.19
Aug. 1, 2019

$2.78 (828  kWh credit)

        $97.97
Aug. 5, 2019


–$222.00
   –$124.03
Aug. 10, 2019
$148.45


        $24.42
Aug. 30, 2019

$2.78 (726  kWh credit)

        $27.20

As before, I have listed how fast I am accumulating solar renewable energy certificates (SREC’s; 1 SREC for every 1000 kWh’s generated), which are listed in the table below.


Date kWh
Observed
Date
kWh
Recorded
in GATS
Date SREC
Received
kiloWatthrs (kWh)
Total # of SREC’s
Sold price
Date SREC
check received

3/10/19

         8602



3/24/19


         9016




4/10/19

         9510



4/29/19


      10000





4/30/19
      10024
      1
$224.00
5/4/19

5/10/19

      10242





5/31/19
      10840
      1
$220.00
6/6/19
6/4/19


      11020




6/7/19

      11092





6/28/19

      1
$220.00
7/8/19
7/7/19


      12034




7/11/19

      12151





7/31/19
      12822
      1
$222.00
8/5/19
8/6/19


      13007




8/11/19

      13179



30% Solar Tax Credit Received

Hooray!  My 30% solar tax credit finally arrived!  Note that I filed my federal taxes in late January 2019 and I received my tax refund nearly 13 months after my solar array started generating electricity in Feb. 2018. If I had a solar loan with my installer, at this point I would be obliged to pay the 30% tax credit towards the loan.  Since I took out a home equity loan, I can, of course, use it to pay down the balance. For the moment, I am leaving it in my “rainy day” fund at Kearny Bank at 3% interest.

Friday, March 8, 2019

First Annual Return on Investment (ROI) Calculation

Using the following investment formula:

ROI = (Gain from investment – cost of investment)/cost of investment

It is easy to calculate ROI for the first year of solar usage.  

First, the cost of the investment:  $23 for the increase in home insurance + $20 to obtain my HOA’s certificate of insurance for the home equity loan + $9.97 in interest at the closing of my HEL + $337.73 in electrical costs to JCP&L + $2078.30 for 14 HEL monthly payments (Jan. 2018 – Feb. 2019) = $2469.00

This cost is balanced by the money received from the sale of 8 SREC’s = $1730.50

Let’s assume that my electrical costs for Feb. 2018 – Feb. 2019 would be the same as what I paid for electricity in 2017 (before I had my solar array), which was $1124.21.  My gain from investment is:  $1730.50 + $1124.21 = $2854.71

Plugging into the formula shown above gives us:

            ROI= ($2854.71 - $2469.00)/$2469.00 = 0.156 or 15.6%

Not bad for the first year for a relatively modest and safe investment.  Note that in years 2-14, I will only have 12 HEL monthly payments and in year 15, that will decrease to 10 HEL payments.

Another way to look at it is that without solar, I would expect to pay $1124.21 for electricity.  With solar, I had a total cost for the first year of $2469.00 - $1730.50 = $738.50.   My net gain is $1124.21 - $738.50 = $385.71. Again, a modest amount, but over a ten-year period, that modest gain becomes several thousand dollars.

While my solar array produced slightly more than 8000 kWh as expected (8 SREC’s were obtained and sold), my electricity usage went up in 2018 relative to 2017, so I did end up having $337.73 in payments to my electric company.  There were two reasons for this:  one, in a bout of good weather over the Thanksgiving weekend, we put up all our Xmas decorations this year, as opposed to 2017 when we only managed to get out a limited subset.  Misplaced the timer, got too busy to deal with it, so for about a month they were on pretty much 24/7.  Because of the solar, I didn’t worry too much about the cost.  

Second, I thought when my roof was replaced in Nov. 2017 that the roofer was going to install a ridge vent along my attic as the asphalt shingle manufacturer recommends. Instead, without consulting me, he installed an attic fan and removed two passive in-roof vents (actually made it easier to arrange the 20 solar panels in an aesthetically-pleasing pattern). I was disappointed because if I had known, I would have paid the difference to have a solar attic fan installed instead.  However at that point, it was already a fait accompli, so there was nothing to do but pay the roofer, and move on.  With the addition of the attic fan, my electrical consumption increased compared to what it was in 2017.

Tuesday, January 1, 2019

How to use New Jersey’s 10-Year SREC program and the federal 30% solar tax credit to purchase a solar array in 2019 for less than you now pay for electricity

A new solar array can be paid for in less than 10 years by:

1.  taking out a 15-year home equity or solar loan

2.  applying your 30% federal solar tax credit towards your loan balance when you receive it in 2020

Below we look at two examples using 15-year home equity and solar loans.

A.  Paying with a 15-year home equity loan:

With the 2018 passage of the NJ Renewable Energy bill S2314/A3723, new solar projects can receive SREC’s for 10 years.  As an example, let’s say you install a 6.8 kW solar system for $20,000 in January 2019. You borrow the $20K with a 15-year home equity loan at 4.5% with monthly payments of $153.00.  Let’s assume your electricity usage is similar to mine, and you paid $1124.21 for electrical costs in the previous year (ave. monthly rate = $93.68).  Let’s also assume that in the first year you paid 14 HEL payments because you have to borrow the $$ before the solar installation.  Therefore the first year, you pay a total of $2142 in HEL payments. Let’s also assume that the solar array doesn’t quite cover all your electricity costs and you pay $200 to your electrical provider for the year.  Let’s say you receive 8 SREC’s the first year with an average sale price of $205 for a total of $1640.  For your first and most expensive year, you have spent $2342 - $1640 = $702, which is $422 less than the $1124 you spent for electricity without the solar array.

So far, so good, but your ability to sell SREC’s will end after 10 years.  What to do?  Let’s assume you file your 2019 taxes in March 2020 and receive your federal 30% solar credit of $6000 in May 2020.  If you then pay an extra $6000, along with your normal $153 HEL payment in May 2020 and continue to make monthly $153 payments on your HEL, you will pay off your loan after 9 years and 8 months.  If it’s hard to let go of that $6000, it can help to remember that you only have it because you elected to go solar in 2019.  Note:  the federal solar tax credit decreases to 26% in 2020, to 22% in 2021, then it’s gone.

In year 9, you will have 12 HEL payments of $153 for a total of $1236.  Let’s assume you pay $250 to your electrical provider that year and that you sell 8 SREC’s for an average price of $125.  In year 9, you pay approximately $1486 - $1000 = $486.  So even during the years you are paying off the HEL, you are paying less than what you paid before for electricity.  Plus you have the satisfaction of knowing that you are helping the environment and providing a more energy-secure future for your kids and grandkids.  Your solar panels are designed to last at least 25 years, so after the loan payoff, you still have 15 or more years of saving approximately $1000/yr in your annual cost of electricity.  Over time, the savings add up.

B.  Paying with a 15-year solar loan:

If taking out a home equity loan is not an option for you, you can still finance a solar array with a solar loan, assuming you have a decent credit score.  Let’s assume you take out a 15-year solar loan with a 6.5% interest rate.  Your monthly payments will be $174.22. Assuming an annual electricity cost of $1124 pre-solar array and that in the first year you will pay 14 monthly loan payments because you have to borrow the $$ before the solar installation, you will pay a total of $2439.08 in loan payments.  Let’s also assume that the solar array doesn’t quite cover all your electricity costs and you pay $200 to your electrical provider for the year.  Let’s further assume you receive 8 SREC’s the first year with an average sale price of $205 for a total of $1640.  For your first and most expensive year, you have spent $2639 - $1640 = $999, which is $125 less than the $1124 you spent for electricity without the solar array.  Not much perhaps, but not bad for getting started the first year.  The financial advantage will increase the next year when you are only making 12 loan payments per year.

If you file your 2019 taxes in March 2020 and receive your federal 30% solar credit of $6000 in May 2020, which you then use to pay down your solar loan, and continue to make monthly payments of $174.22, you will pay off your loan after 9 years and 4 months.  

In year 2, you will have 12 loan payments of $174.22 for a total of $2090.64.  Let’s assume you pay $205 to your electrical provider that year and that you sell 8 SREC’s for an average price of $195.  In year 2, you pay approximately $2296 - $1560 = $736.  If you ignore price increases, you save$1124 - $736 = $388 in electricity costs for that year.  Thereafter, the savings will gradually decrease as the value of the SRECs decreases over time.  Note that for simplicity, we are ignoring the $6000 tax credit that is used to pay down part of the loan during this year.

Using a cost-of-living calculator and assuming that the 2009 to 2018 increase will be similar to the 2019 to 2028 increase, the annual cost of electricity will increase from $1124 to $1316 over 9 years.  In year 9, you will again have 12 loan payments of $174.22 for a total of $2090.64. Let’s assume you pay $250 to your electrical provider that year and that you sell 8 SREC’s for an average price of $125. In year 9, you pay approximately $2341 - $1000 = $1331. So in year 9, you pay $15 more than what we’re predicting that amount of electricity would cost without solar.

In year 10, you will only have 4 loan payments to make, so you will come out ahead financially.  After that, the solar array is paid for and you still have 15 or more years of saving approximately $1000/yr in your annual cost of electricity.

Saturday, June 9, 2018

Going Solar in New Jersey

I decided to write this blog in the hopes that it would be helpful for others to see how switching to solar in New Jersey can be paid for through a combination of solar renewable energy certificates (SREC's), the federal tax credit, and savings on your electric bill.  I provide an example of the timeline and cost required to “go solar” in New Jersey.  As of 2018, NJ homeowners will find this type of project can have both a good return on investment (ROI), as well as help the environment.


I took out a 15-year home equity loan to pay for my roof replacement and solar array.  The new roof was something I was going to have to do within the next 2 or 3 years anyway.  The portion of my monthly payment that is due to the solar project is $148.45.  Below is a table with a summary of the payments I’ve made so far.  I paid $1124.21 for electricity to JCP&L in 2017 (ave. monthly payment = $93.68).  My solar start date was February 19, 2018; therefore I started counting JCP&L payments after that date in my running total.  If after a year, I have spent less than $1124.21, I will have spent no more than I was before I had solar panels.

Date
HEL payment
JCP&L 
SREC’s
Total Solar Payments
Jan. 10, 2018
$148.45


       $148.45
Feb. 12, 2018
$148.45


       $296.90
Mar. 12, 2018
$148.45


       $445.35
Apr. 4, 2018

$17.00 (covers 2/15/18-3/15/18)

       $462.35
Apr. 10, 2018
$148.45


       $610.80
May 2, 2018

$2.90 (connection fee; 142 kWh credit)

       $613.70
May 4, 2018


–$231.00
       $382.70
May 10, 2018
$148.45


       $531.15
May 30, 2018

$2.83 (409 kWh credit)

       $533.98
June 7, 2018


–$232.00
       $301.98
June 10, 2018
$148.45


       $450.43
July 2, 2018

$2.83 (595 kWh credit)

       $453.26
July 9, 2018


–$209.00
       $244.26
July 10, 2018
$148.45


       $392.71
Aug. 1, 2018

$2.83 (709 kWh credit)

       $395.54
Aug. 6, 2018


–$203.00
       $192.54
Aug. 10, 2018
$148.45


       $340.99
Aug. 30, 2018

$2.83 (356 kWh credit)

       $343.82
Sept. 7, 2018


–$215.00
       $128.82
Sept. 10, 2018
$148.45


       $277.27
Oct. 3, 2018

$2.83 (7 kWh credit)

       $280.10
Oct. 10, 2018
$148.45


       $428.55
Nov. 1, 2018

$38.94

       $467.49
Nov. 8, 2018


–$210.50
       $256.99
Nov. 10, 2018
$148.45


       $405.44
Nov. 30, 2018

$18.24

       $423.68
Dec. 10, 2018
$148.45


       $572.13
Jan. 2, 2019

$90.11

       $662.24
Jan. 8, 2019


–$212.50
       $449.74
Jan. 10, 2019
$148.45


       $598.19
Feb. 1, 2019

$113.98

       $712.17
Feb. 11, 2019
$148.45


       $860.62
Mar. 1, 2019

$42.41(covers 1/16/19-2/13/19)

       $903.03
Mar. 7, 2019


–$217.50
       $685.53

As a point of reference, I have listed how fast I am accumulating solar renewable energy certificates (SREC’s; 1 SREC for every 1000 kWh’s generated), which are listed in the table below.  Once you establish a GATS (Generation Attribute Tracking System) account at https://www.pjm-eis.com, you log in once a month between the 1stand the 15thof the month to record the current kWh on your meter. Every time you generate 1000 kWh, you will receive one SREC on the last business day of that month.  Once you have an SREC, you can transfer it within your GATS account to one of the entities that buy SRECs (selected from a drop-down menu).  I use NJSREC.com to sell my SREC’s because of the ease of the transfer process.  The price they post on their website is the price they pay you (other sites charge a small fee).  With NJSREC.com, you do not need to create an account or login; I use their simple online instructions to transfer my SRECs to them and they use my contact information from my GATS account to send me a check.
Once I transfer an SREC, I receive an email notification from GATS.  Within two business days, I receive another notification from GATS that my transfer has been accepted.  I then receive a message from NJSREC.com when my check is mailed.  Going forward I plan to transfer SRECs to NJSREC.com as I receive them in my GATS account.


Date kWh
Observed
Date
kWh
Recorded
in GATS
Date SREC
Received
kiloWatthrs (kWh)
Total # of SREC’s
Sold price
Date SREC
check received

3/15/18

        781



3/24/18


      1031




4/13/18

      1507





4/30/18
      1969
      1
$231.00
5/4/18
5/1/18


      2009




5/12/18

      2328





5/31/18
      2753
      1
$232.00
6/7/18
6/9/18


      3001




6/11/18

      3039





6/29/18

      1
$209.00
7/9/18
7/9/18


      4008




7/10/18

      4020





7/31/18
      4670
      1
$203.00
8/6/18
8/12/18
8/12/18

      5015





8/31/18
      5523
      1
$215.00
9/7/18

9/13/18

      5764



9/27/18


      6007




10/11/18

      6234





10/31/18
      6649
      1
$210.50
11/8/18

11/11/18

      6807



11/27/18


      7003




12/11/18

      7200





12/28/18
      7382
      1
$212.50
1/8/19

1/10/19

      7500



2/9/19
2/9/19

      8009





2/28/19
      8382
      1
$217.50
3/7/19