Solar & Energy Conservation Financing
How to Pay For It
Despite the diverse reasons for purchasing a solar system, a common thread exists when it comes to deciding: “What is this going to cost?” There are now options that allow you to take advantage of very affordable financing, added to the available incentives that make choosing solar power easier than ever.
Capital for solar and energy-efficiency upgrades is generally simple to obtain for qualified applicants, and Southern View Energy has access to numerous sources for low or no interest financing, tax incentives, along with information on currently available tax credits and utility rebates. A well-designed energy upgrade can provide you with a positive cash flow from ‘Day 1’ with your new energy savings, while paying off the capital investment. In many cases, the financial gains from this type of work can be used to pay for the cost of the project.
And for businesses, financing eliminates the internal debate concerning the retention of capital versus reducing the operating costs of energy. The ROI from energy efficiency results in not only that, but lowers costs as well. Plus the benefits of having affordable power, better efficiencies and new, highly-reliable equipment that pays for itself very quickly with the energy savings. A strategic energy efficiency investment can also be an excellent hedge against future utility rate increases over which you have practically no control.
Basic Payment Methods
This is perhaps the most attractive option for owners who have accumulated relatively comfortable reserves, and live in an energy market where a PV investment’s return exceeds yields by other conventional investments. In the north Georgia power market, the average annual return on investment (ROI = annual production, or savings / system cost) with solar energy can be in the 6-17% range (varies due to different avg. rates among utilities), which we believe is an outstanding value. Perhaps best yet is the fact that these returns are considered to be relatively conservative with respect to the fact that they can only increase as utility rates and/or inflation rise. And when has either of them gone down (for long, if at all) in the last 20 years? Right!
First Mortgages & Refinancing
Typical home mortgages are often the very best financing arrangement, as your interest is entirely tax deductible. The additional amount added to a mortgage payment to include the cost of a solar system is typically far less than the current electric bill, automatically saving money every month. Many owners find it to be to their best advantage by refinancing their current mortgage (particularly with the current low interest rates), and include within it the cost of their new solar system.
Home Equity Line of Credit
For those homeowners who have built enough equity, a home equity line of credit (HELOC) allows them to borrow as needed against the equity in the property. Although the interest rate may vary, they are very often tax deductible.
3rd Party Financing
Southern View Energy offers low and no interest loan options to qualified applicants through its primary lending partner, EnerBank USA. This affords an owner the time to realize their federal tax credit and/or other rebates, plus all of the energy savings they’ve received during that time --- the result of which is that their principal amount has been substantially reduced. They use the time to plan on moving their remaining loan amount into another low-cost vehicle.
Many times card issuers will offer low or zero interest rate promotional periods that can make these an attractive temporary financing option. And like other 3rd party financing they can use this period to capture the tax credit and energy savings advantages, before the promotional period ends. However, the long-term higher interest rates and non tax-deductible nature of all credit card payments make them a very secondary choice for financing a solar power system.
Bank secured and unsecured loans
Most secured loans are home-equity based, and may be tax deductible. Interest incurred from unsecured loans is not tax deductible.
Energy Efficient Mortgages, Energy Improvement Mortgages
For homeowners who want to finance energy efficiency measures, e.g. - Solar in new or existing homes. Offered through both FHA and VA home loan programs, these allow for a very low (typically under 4%) interest rate on amounts up to 5% of the home’s total value, capped at $150,000 of valuation (or an $8,000 loan amount). A very unique advantage of the EEM is this: It is held outside of any DTI (debt-to-income) calculation in determining your eligibility or the rate for main mortgage.
What Can Help Reduce My Costs?
30% Federal Tax Credit
The federal government offers the Federal Investment Tax Credit (FITC) for solar electric and solar hot water systems, for both personal and business tax purposes. It was extended for a 10 year period by an act of U.S. Congress and lasts (for application) until December 31, 2016 with a zero maximum (“uncapped”) tax credit amount. Businesses and homeowners alike are given a 30% tax benefit for the cost of having invested in such renewable, clean energy systems in the form of this federal tax credit, and it has a lifetime “carryover” period (in other words, if you don’t chose to or cannot use all of your credit in the first, or any other year it “carries forward”) on personal taxes, and businesses have five years of carryover.
Net metering is a billing arrangement in which electric power generated by your solar panels but not used in your home at the time it’s been generated (if you are simply grid-tied, and not off-grid of course or running a grid-tied with battery back-up system) is “sent up” to the utility’s grid. This excess power is credited to your next bill, quarterly or annually (their discretion, it’ll be in your contract with them) at their “avoided cost” rate, which is lower of course than retail rates (what they charge), but all the same its very nice to have. This way nothing goes to waste with your solar energy!
How Are My Solar Electric Costs Broken Down?
Panels make up the largest cost of a solar system, accounting for approximately 40-50% of the total cost.
The inverter typically accounts for about 10-15% of a system's total cost. With a 10-15 year lifespan for central inverters these often must be changed once during the 25-30 year lifetime of the panels. Somewhat more expensive (by 10-20%), but increasingly popular, are micro-inverters that come with 20-30 year warranties.
Racking, Mounts, Cabling, Connectors, Switches, Fuses
Racking, wires, disconnect switches, fuses and other necessary hardware make up 10-15% of the cost of a system.
Labor typically accounts for the remaining 15-20% of the system cost.
The hands-off nature of a solar energy system is one of its prime attractions. And now you can keep track of the system's daily operation, and assure it is functioning optimally. While any system installed by Southern View Energy is guaranteed solid performance, some owners wish to have the convenience of seeing what their system is producing on a monthly, weekly or even daily basis. As a result, solar production monitors have become more widespread, and for a low initial cost (generally a 5% add to your total system cost) you can have monitoring installed on our system. Southern View Energy recommends this, and can provide systems with monitoring that you can read either at the inverter itself (generally located near the main power panel) or from any web-connected computer.
One of the great things about solar electric modules is that they have no moving parts and therefore require very little maintenance. The following potential issues are fully covered under Southern View Energy’s optional Solar Annual Inspection & Maintenance Program:
- Soiling: Dust, dirt and bird droppings can diminish energy production, although normal rainwater is generally sufficient in our area to keep solar panels clean. If needed, a low-pressure hose and squeegee sponge can be used to spray the panels clean.
- Cracked Panels: Solar panels are made of tempered glass and are very durable. They are all designed (on average) to withstand a minimum of 3/4 inch sized hail at 120mph.
- Animals/Birds: Squirrels have been known to only occasionally chew wires resulting in short circuits, while birds may take up residence…but this is usually a pretty “inhospitable place” for wildlife as its in the ‘wide open’, full of sun and (in the summer at least) gets very hot up there!
- Trees: Occasional trimming may be required to prevent shading and additional soiling.
- Corrosion: Very minimal, but all electrical circuits are subject to corrosion. Properly wired for weather protection by using only outdoor-rated cabling (and specifically for PV purposes), along with UL-listed and NEC rated weather protective connections and enclosures meant for the task assures that your system remains safe from the effects of naturally occurring corrosive conditions over time.