Financial Savings

The hidden cost of going solar

Tom Brewer Uncategorized

If you’re thinking of “going solar” you’re probably spending a lot of time online researching and getting referrals from friends or family. Then it’s sitting down to review quotes, matching hardware and labor costs, filling out forms and emailing utility bills. All this effort to find the absolute lowest cost possible. We’re used to thinking of the idea of “going solar” as a one-time expense. A once and done transaction to reduce our electric bill. While cost comparing is necessary, treating the process of going solar by shopping solely on price can be a big and very costly mistake.

The first steps

Let's face it, the cost of adding solar isn't cheap, and that’s why you want to price shop in the first place. Even though the price for hardware has dropped significantly, a modern day system can still cost tens of thousands of dollars. Thinking of a battery back up? Another ten thousand or more. Then there's the roof to consider. What if it isn't in the best of shape? Do I replace it now, or wait? What if it’s good condition but needs replacing in a few years? For anyone thinking about going solar, these first steps can be the mental breaking point. Spending that much money as a one-time expense is weighed against all of your other pressing needs. In the end, even though the utility savings may look compelling, for a lot of people this is where the idea of “going solar” stops.

But the hidden costs for solar aren’t in that initial expense. To reveal them, we need to first talk about energy efficiency as a strategy.

Energy Efficiency

Newly constructed homes also come with the latest in energy efficient products. That’s obvious. But stop to think about it for a minute. When a new home is designed, every component in the home is designed around the strategy to maximize overall energy efficiency. Why? Because it will result in the lowest overall electrical use (and the smallest bill). Using less electricity also means needing a smaller solar system to power it. The more energy efficient the home is overall, the smaller the solar system needed to power it. Energy efficiency is a strategy, and one that is designed to produce maximum savings.

This is exactly where the traditional solar model falls short and the hidden expenses begin to reveal themselves. Your home isn’t new. Your systems are aging or may even be obsolete. New technology, including solar panels are continuously introduced into the market. Even products that are relatively new, or things like your roof may still require replacement in a few years.

The traditional solar process doesn’t take any of this into consideration. Systems are designed to be as large as possible to offset historical demand. There’s no solution for improving energy efficiency and no help to fund the upgrades. Without those things, treating solar as a transaction ultimately costs significantly more over the long term.

A better way.

At Reef Energy Group, we believe going solar is a part of an overall strategy. So we start by identifying the age of each of the critical energy systems that the new solar installation will support. We create a timeline to plan for upgrades. We call this our Home Energy Improvement Plan. By creating an overall plan, we are able to size the solar installation based on an overall strategy to maximize energy efficiency and savings.

To fund potential upgrades, we teamed up with Safeguard Loyalty to offer our customer loyalty program that earns cash back rewards. Our program significantly reduces the cost of your purchase over time by earning equity for each year of ownership. This equity can be utilized at any point to fund energy efficiency upgrades, or even saved up and redeemed for up to 100% of the total purchase cost.

Combining our Home Energy Improvement Plan with our customer loyalty program completely changes the traditional solar model from a transaction to an investment. Equity can be leveraged for upgrades such as battery storage, EV’s or roof replacements. Or it can be saved up and the entire amount paid back to you in cash, completely erasing the cost.

Don’t make the costly hidden mistake of treating solar as a one-time expense. Contact us today and let us customize a Home Energy Improvement Plan for you.

Moving? Selling a Home With Solar

Tom Brewer Uncategorized

One of the more common items that comes up during a consultation with a client is the question of how a potential or even planned move would impact the decision to transition to solar. For some homeowners the very thought of relocating at some point in the future is enough to keep them from considering solar, and for others the question is what impact a solar installation would have on the process of selling their home. In this blog I wanted to explore both the competitive landscape as well as the impact of how a solar system is financed. These are two very key elements to consider when talking about selling a home with or without solar. 

New Home Competition

To start, every homeowner should be aware of is that in California, beginning in January 2020, all new residential home construction and multi-family residences of three stories or fewer, must be built with solar panels. The California building code Title 24 part 6 has very few exceptions, such as access to a community solar project for homes with insufficient roof space, or an exemption for homes in highly shaded lots. So what this means for any homeowner selling their existing home is that any home built after 2020 that is competing for that same sale will have the competitive advantage of offering cheaper solar power. If the buyer is having to choose between two homes they feel are potential candidates, this difference in cost, which can be tens of thousands of dollars in savings over the lifetime of ownership is obviously a strong factor for the buyer to consider. 

Existing Home Competition

At the same time that new homes are being constructed with solar panels, California continues to lead the nation in conversion to solar across existing homes. A quick glance down any residential street confirms this, you’d be hard pressed not to find at least one or more homes with panels already installed. For most of us, panels and the sight of a solar array have become so commonplace, that much like utility poles, we hardly pay them much attention any longer. 

As with selling against a home built after 2020, selling against a neighbor with solar panels on an older home places the home relying on fossil fuels at a competitive disadvantage. Over time as the rate for utilities continues to spiral relative to solar, this difference in price point continues to widen, making the choice easier for the buyer to go with the more energy efficient home. 

Selling a Home with Solar 

Selling a home with solar is also positively reflected in the sale price. According to a recent Zillow research study, homes in the US with a solar installation sell for an average of 4% more than homes without, and more than 80% of home buyers say energy-efficient features are important when considering a home for purchase. Take a trip to any home improvement store and you will find energy savings down every aisle. From LED light bulbs, to tankless water heaters, to high efficiency washing machines, consumers seek out ways to save money and reduce their carbon footprint. A home powered by solar energy is one of the best selling points a home has to demonstrate energy efficiency to a prospective buyer. 

The Impact of Financing on Selling

The largest difference in selling a home with solar is how the system is financed. Each has relative merits and some with possible drawbacks, so let’s examine each. 

Cash Purchase – By far the easiest way to sell any home with solar is if the system is already paid for and owned outright. In this instance, the sale process is pretty straightforward, the system is either passed along to the new owner as an asset, or the entire system can be removed by the seller to be used at their next residence. The decision is based largely on how long the system has been installed and whether or not the seller has realized sufficient return on the investment. There is very little to no drawback with this financial option if the homeowner is confident they will be in the home for long enough to have fully paid off the system through the resultant savings on electrical costs. 

Loans – Similar to a cash purchase, if the system is fully paid for the owner can either leave the installation or remove it and use it again. However, if the system is not yet fully paid for, the type of loan will determine the options the seller has. A secured loan will mean the seller must pay off the remaining value of the loan prior to sale as the property is used for collateral to fund the install. An unsecured loan does not hold collateral, so the home can be sold without the loan being paid off, however the homeowner is still required to make the payments even though they have moved. Secured loans typically do not carry prepayment penalties and in either case of secured or unsecured the increased value from the solar installation should be able to eliminate most or all of the remaining balance due. The potential drawback in this financing option is if the move occurs early on, where the value of the system has not depreciated enough to be sufficiently offset by the increase in home value. 

Power Purchase Agreements – Unlike a loan or cash purchase, a power purchase agreement operates much like the utility service it replaces, in that the system is paying a solar provider an established amount based on solar energy use. There are two main options for selling a home with a PPA. For most sellers, the option to select will be to have the agreement transferred to the new buyer. This will typically involve a credit check, and the buyer will want to understand the terms of the agreement, and any escalation that is built in. The second option is for the seller to completely buy out the remaining value of the system. The potential drawback to this financing method is if the buyer does not qualify for funding, or does not for some reason want to qualify to assume payments.

PACE financing – PACE financing is unique in that the loan is attached to the property and not the person who took out the loan since payments are made through property taxes. This loan solution also places a lien against the property until it is paid off. This financing solution has the most visible potential drawback as as many lenders will not allow a buyer to obtain a mortgage with a PACE loan as they are structured to take precedence over the mortgage. 

Buyers and sellers alike continue to place a premium on the cost savings that an energy efficient home provides. With the wide range of financing solutions available, a transition to solar energy should be thought of as a part of an overall strategy to reap maximum gains from the sale of a home, not as an obstacle to prevent it.