Solar power for homes in Texas (Houston, Austin: renting, coop, mortgage)

[FrozenI69]

I would like to know if solar power is gaining popularity down in Texas. Considering the summers are hot as hell, it would be nice to use some of the strong solar energy from the sun to power the AC.
For my GF in Houston, the biggest draw on power is the air conditioner since that accounts for 70+% of the power drawn in summer. Keeping the AC at 80 during the day and 76 at night used to cost close to $300. Now with WFH, the AC is at mid 70’s all day long, and I’m wondering if solar investment could cut down on the bills.

[Trainwreck20]

Originally Posted by FrozenI69

I would like to know if solar power is gaining popularity down in Texas. Considering the summers are hot as hell, it would be nice to use some of the strong solar energy from the sun to power the AC.
For my GF in Houston, the biggest draw on power is the air conditioner since that accounts for 70+% of the power drawn in summer. Keeping the AC at 80 during the day and 76 at night used to cost close to $300. Now with WFH, the AC is at mid 70’s all day long, and I’m wondering if solar investment could cut down on the bills.

It is expensive up-front (even with rebates from the government), but tends to 'pay back' in 7-10 years. If you move before that time, you probably recoup some of the investment in increased home value, so it is really only a risk if you move in 2-3 years, I suppose.

Solar is exempt from property tax, which is actually not insignificant.

I know quite a few people that have installed solar. One intentionally over-installed his solar and has not paid an electric bill (other than the 'hook up' fee) in close to 8 years now? Not quite sure. A typical install leaves you paying a little per month (on average), but greatly reduced. Municipalities and coops pay more for your generated power and some subsidize the install.

It is worth noting that you do not reduce you electric consumption via solar, you just use electricity like normal and sell your generated power back to the grid (at a set rate which is less than you are paying from the power company).

[astrohip]

Yes, it is gaining in Texas. You get a Fed tax credit (26% 2020, 22% 2021) to help offset the initial costs. I installed mine a couple years ago, when it was 30% credit. My payback should be 10 years or so.

If you are in an urban setting, you have to consider where to put them. Which way does your roof face, is there room for the panels, how will they look, any trees in the way, etc etc. In the country, where I am, I just put them in a field next to the house, facing south.

You also have to consider what the electric company does with your excess production. In my case, it's a co-op, common in the country. They buy it back at a flat rate, simple as that. But it's not always that simple elsewhere. ASK FIRST, do your homework.

There is a sweet spot of sizing, where the production versus the cost versus your usage all meet, for the fastest payback. Or, as TW20 noted, you can oversize, which lengthens your payback period, but helps you use even less from the elec company. BTW, in many states, it is against the code to oversize. Texas is not one of those states. CA is, for example.

Two things to note: (1) you need the money upfront, as it's hard to get a loan for solar. (2) If you plan on moving soon, it may not make sense, as I'm hearing that you rarely get your initial investment back when selling early in the life cycle.

[astrohip]

Originally Posted by Trainwreck20

One intentionally over-installed his solar and has not paid an electric bill (other than the 'hook up' fee) in close to 8 years now?

One thing to remember: Solar only creates electricity during the day (duh!). No matter how much it makes, when the sun sets, you will be using juice from the electric company again. To get around this, you need to install batteries that can store energy during the day, to be used at night. This is very expensive, and basically makes the payback period so long, it no longer makes sense from a purely financial aspect.

The primary reason you would add batteries is if you want to be reliably off-the-grid. You do not do it to save money in the short-term (or even medium term).

My solar guy, who I became friends with and talk to all the time (coincidentally, just yesterday), told me only about 10% of his installs add batteries. Just too expensive.

The only other way to avoid paying a bill is to over-produce so much juice that the money you make selling it back during the day offsets the juice you buy during the night. But be aware... they are NOT the same rate. For example, Bluebonnet Electric Coop pays me about 6.5 cents for each kW I send back. But I pay about 10 cents for each one I consume. So I would have to send much more back during the day to offset the nightly usage.

And as I stated above, you can do this, but the economics of it don't make as much sense. My goal wasn't to pay zero, just to reduce it dramatically.

[jdhpa]

Originally Posted by astrohip

And as I stated above, you can do this, but the economics of it don't make as much sense. My goal wasn't to pay zero, just to reduce it dramatically.

Once you account for the capital cost, and the lost investment (e.g., instead of buying solar panels you could use the money to buy an SP500 index fund), are you reducing it dramatically? I.e., not your monthly bill, but the total difference in capital you have after some period of time (10 years maybe).

[astrohip]

Originally Posted by jdhpa

Once you account for the capital cost, and the lost investment (e.g., instead of buying solar panels you could use the money to buy an SP500 index fund), are you reducing it dramatically? I.e., not your monthly bill, but the total difference in capital you have after some period of time (10 years maybe).

I think you took my quote out of text. I was referring to batteries not making economic sense. Solar panels definitely make sense. If I misunderstood your quote/reply, I apologize.

As to your question, there's no way to tell. That question applies to everything in life... would I be better renting for 40 years and just investing that mortgage money? Yada yada etc. Unanswerable question.

At some point, you have to do what makes sense at that moment in time. My payback is approx ten years. That is a 10% return on my money, PLUS... at that point, it's free electricity. Which rarely goes down in cost. Will the market beat 10%? Don't know, don't care. All I know is this particular investment makes sense.

Another thing to consider, most people doing this have excess capital. They are not taking food off the table, or even selling stocks. They're just taking capital and moving it to another area. So the opportunity costs are hazy.

I hope this all made sense.

[hikernut]

Originally Posted by astrohip

My payback is approx ten years. That is a 10% return on my money, PLUS... at that point, it's free electricity. Which rarely goes down in cost. Will the market beat 10%? Don't know, don't care. All I know is this particular investment makes sense.

To get the actual investment return you need to do a discounted cash flow analysis. I did this a couple of years ago on a theoretical system. Here are my assumptions, and the outcome...

https://www.city-data.com/forum/phoe...-analysis.html

I was looking at a stand-alone system, which is why I assumed only 2/3 of the electricity is usable.

For a grid tie system you would need to estimate the average value per kWh. This could get tricky if part of it is an offset of usage, and part is sell back which is credited at a lesser rate.

[astrohip]

Way too complicated. Probably better and smarter, but beyond my needs.

Made up numbers, but the basic formula I used:

System costs $10,000. Fed gives me 30% back, so system is $7K. Based on projections, I will save $700/year on electricity versus not having solar. So after ten years of $700/year, I've saved my $7,000 investment. That's my ten year payoff, 10% return.

Sure, there's opportunity cost and discounted cash flow and who knows what else. I was a math major in college, and lifelong investor. But again, too much trouble. Let's go with easy.

This is not to discount your method, just that I didn't want to expend the neurons on it.

[Trainwreck20]

Originally Posted by jdhpa

Once you account for the capital cost, and the lost investment (e.g., instead of buying solar panels you could use the money to buy an SP500 index fund), are you reducing it dramatically? I.e., not your monthly bill, but the total difference in capital you have after some period of time (10 years maybe).

That right there is the kicker in just about everything you do, though, including the down payment when buying a house - if people do not use the money for some physical investment (house down payment, solar install, etc), do they actually end up investing it in the market? Some people yes, some people no, some somewhere in between.

Solar is almost a no-lose proposition as an investment
- the equipment has an innate value which is added to the value of you house. Similar to a swimming pool, you do not get all the value, but you get some significant fraction (maybe half?). It is also tax-free, as it cannot be considered in the appraisal of your home.
- You almost certainly pay for electricity for the foreseeable future, so the investment will continue to pay back regardless or market or world conditions. As mush as the historical market? Maybe or maybe not, but it will not 'lose' value.
- you can't impulse cash it out and spend it on a vacation. This is one of the big advantages (in reality) to buying a home - the down payment is sunk into the house.

In any case, the co-ops and municipalities reimburse you much better than the private companies do, and that is a big factor in how effective it is. Also, I think in Austin, you might be required to 'feed the grid' instead of batteries, but I am not positive. We would have long ago installed solar, but our south facing roof is completely shaded by a 300-400 year old oak and our east/west facings are not physically shaped for solar and/or partially shaded.

Edit: It looks like AustinEnergy currently pays 9.7 cents per kWh produced. You cannot MAKE money selling solar, though, only net out to zero . Iirc, you can 'bank' a certain amount of excess credit for use when the generation is lower than the usage, though.

[hikernut]

Originally Posted by astrohip

Way too complicated. Probably better and smarter, but beyond my needs.

Made up numbers, but the basic formula I used:

System costs $10,000. Fed gives me 30% back, so system is $7K. Based on projections, I will save $700/year on electricity versus not having solar. So after ten years of $700/year, I've saved my $7,000 investment. That's my ten year payoff, 10% return.

Sure, there's opportunity cost and discounted cash flow and who knows what else. I was a math major in college, and lifelong investor. But again, too much trouble. Let's go with easy.

This is not to discount your method, just that I didn't want to expend the neurons on it.

Here is ten minutes' effort in Excel. Assuming...

Electric rates increase 3% annually
Panel output degrades 1% annually
No maintenance costs
No residual value for the system

Here are the annualized return numbers for various periods of use:

10 years: 2%
15 years: 9%
20 years: 11%
30 years: 12.5%

So if you can use it for at least about 15 years the return is good.