Sifting Through Misinformation about Solar Energy

Aug 27, 2020 at 10:15 am by pj


 

By DIEGO GARCIA

 

Being part of the Solar Energy industry for the past four years and sick of the misleading information about the real benefits of solar panels for residential usage, I decided to write this article.

Especially in the last months, due to the pandemic, more than 90 percent of business development efforts for solar installers are now in digital advertisement.

 I advise and build customized solar projects for approximately 15-20 homeowners per week, every week. Very often, they ask me questions regarding misleading information they receive as a consequence of having been identified by normal algorithms of target ads on social media and search engines. These ads are being produced by companies that are taking advantage of the evident boom and growth in solar needs for homeowners.

 We have created this article with the purpose of clarifying some of the false statements that create an impulse in average homeowners and give a false motivation or expectation, which these companies themselves have never met, resulting in a bad experiences and outspoken testimonials about how solar damaged their lives or how they were victims of “sales dogs” pushing them to purchase.

Here are points that need clarification or explanation:

 

Solar is free:  Well, first, generally nothing is really free in this world, probably smiling or hugging is, but when it comes to solar energy, normally it is not. The radiation from the sun is free and it is a guarantee for the next 5 billion years according to NASA. However, in order to capture that radiation, you need to have a device that is able to transform that radiation into energy – solar energy – because the real source is the sun’s radiation. So, you need to have some sort of equipment that is either purchased or leased, which means it is not going to be free.

Whenever you see advertising that solar is free, that is because they are using the fact that the sun’s radiation is free, and sometimes when a homeowner decides to purchase solar and obtain loan approval with zero $0 money down, it’s kind of free, meaning they did not feel the financial impact to disburse money upfront or increase monthly expense. So, if it is not affecting your budget and you don’t have to pay anything upfront – just get approved – then they can advertise it as financially free.

 

New solar program available: There are few new programs available in the area we live in. There are basically two ways to have solar: purchasing or leasing. If you purchase, you can pay cash or finance. If you finance, you have two options – regular financing or the PACE program. Regular financing is most likely always available, you just need to have your credit in good shape, and you will be approved for the loan. In the PACE program, which is another type of financing that uses the equity you have on your property, there are more changes when it comes to new, available territories that can qualify for the program.

In reality when you see an installer advertising a new program in your area, this is most likely because they have targeted your zip code, with the average household income  required to be approved for any of the financing options they have available. It may also be that the higher the average square feet per house in the area, the higher the energy consumption usually is, which means more solar panels to sell.

 

Get paid for solar energy:  This is a very big statement and we are going to write another complete article just on this subject, however, when you see these ads or marketing statements, it’s because the company will increase the ultimate purchase price of the solar array in order to be able to pay you a “sign in” bonus.

Of course, there may be regular discounts for military, veterans or first responders, but when you specifically see advertisement on getting money because you sign for solar,  usually the solar company will be increasing the price per watt to recover that customer “sign in” bonus.

In the end, the customer will pay for this sign in bonus on top of the solar system cost adding value to the total loan amount and adding interest for this loan, if financing, for 10, 20, or whatever number of years they’ve chosen. The nature of the business is that you are hiring a company to install your solar system. Why should they pay for you to hire them? It’s similar to going to the movies and getting paid for watching it. Unless you are an actual professional film critic, it really doesn’t make sense to pay for it. Get a good company with top tier technology and local presence to serve you for the following years.

The other situation when a solar contractor advertises about getting paid for solar energy, is related to the money they tell you that you can expect from the regular utility provider (Duke, OUC, KUA, TECO). This is very different state to state, and for every utility provider.

From our experience, if you are receiving payments because you install a bigger solar system than what you actually need, you are probably being paid at a quarter of what you initially pay for the energy you use. In central Florida, after reviewing many homeowners’ electric bills from different providers for years, we know the overall cost including connection fees, energy cost, fuel cost, transportation cost, maintenance cost, local, state and federal taxes, securitization fees, etc. is ranging between 11 cents per watt to 15 cents per watt. When you do get paid, they pay you between 3 to 4 cents per watt because they usually pay you on a yearly basis – you won’t receive a check based on a monthly statement – and they will balance out the energy you pull from the grid and the energy you push to the grid via the bidirectional meter to do it.

From our perspective the residential solar industry is designed for the homeowner to reduce electric consumption, paying lower cost per watt from the solar array, but it is still too early with political and legal barriers for a homeowner to be able to make serious money from their solar array as a source of income. This happens because technology usually develops first, and legislation follows new legal needs.

 

Secure your federal tax credit: We have to disclaim that for tax credits you should contact a CPA or the person you trust doing your tax preparation or personal accountant in order to receive advice on this matter. Solar installers are not experts when it comes to confirming if you are or will be eligible for a tax credit.

The government has in place a residential energy credit that should be claimed through the Form 5695[5]. During 2019, this tax credit was 30 percent of all investments in renewable energy for homes, and for projects installed during 2020 this credit is 26 percent. This has been changing year to year.

If you are eligible for the tax credit, this means that you are going to receive a financial benefit or “discount” on your tax bill, but you must honor federal tax obligations. In our experience only 60 percent of homeowners are eligible, and this happens because of many variables, including annual income, deductions, composition of the household, dependents, changes in tax laws, etc.

Our advice is if you are purchasing a solar system because of the tax credit, please talk to your CPA first and then acquire the system knowing with more certainty whether  you are going to receive the benefit.

Be aware that when they make the estimate for the monthly payment, almost all the financial institutions assume you are eligible for the credit and that you will be paying toward the principal of the loan before 18 months that amount to sustain the same monthly payment. Ask your consultant how much the monthly payment will be in case you don’t receive the tax credit. Compare apples with apples.

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Diego Garcia is an Energy Specialist with Clever Energy. If you want to do business with honest and professional solar energy experts, please book your virtual solar consultation at http://www.gocleverenergy.com or call 407.274.1531 for information.