Oily Rag: Solar Sense

Solar sense

By Frank and Muriel Newman

Some say that solar power is the way of the future, but the high upfront cost of solar panels has been a stumbling block. So there was a ripple of excitement within the oily rag community recently when a media headline exclaimed, "Free panels place solar power within reach for kiwis".

However, on further reading, it is apparent that while there are lots of free things for the frugally minded, solar power is not yet one of them.

The story was about a company called Solarcity, which recently went nationwide with a new solar power option called "solarZero" whereby home owners can get solar panels installed on their roof at no upfront cost – as long as they make a 20 year commitment to pay a fixed monthly fee. According the company this is a first for NZ but is not uncommon overseas.

The zero upfront deal involves the householder entering into what is, in effect, a rental and servicing agreement. At no stage does ownership of the panels pass on to the householder.

The monthly fee ranges from $55 to $280, depending on the number of panels that need to be installed, which in turn depends on the power consumption of the household.

The website has some handy calculators to show the potential savings. For example, a "normal" household (not that oily rag households are normal!) that pays $300 a month in power bills would save around $119, but out of that, they would have to pay $110 a month to Solarcity. Over the 20 year period of the contract, the payments would total $26,400.

The net savings to the householder would therefore be $9 a month ($119 less the $110 fee), or 3% of their power bill. In other words, the energy cost savings of $119 are split $9 to the householder and $110 to the solar panel provider.

Since solar power is only generated during the day and storage cells are not included in the deal, customers would still have to buy power from their electricity company for night-time use.

While Solarcity has provided a new option for those wanting to make a switch to solar energy, committing to 240 monthly payments is a big, long-term financial undertaking that requires a good deal of serious thought.

What happens if you were to sell your house within the 20 years - which is quite likely given the frequency with which people move house? In that case you would have a number of choices: convince the new owner to take over the remaining payments, relocate the panels to your new home (at your cost), or pay up front the remaining monthly payments due under the terms of the contract. For example, if someone 10 years into the 20 year commitment leaves their home to go into a resthome and is not able to convince the new home owner to take over their contract, they would be left, in our example, with a bill of $13,200 to be paid as a lump sum.

While some may say solar panels add to the resale value of a home, we doubt that and take the view that the rate of innovation is such that the units may be of little or no value much quicker than the 20 year term of the contract.

It is also questionable whether it is wise to make a 20 year commitment to a solar power system, when the solar industry is undergoing rapid improvements in technology. The cost of solar power units has fallen significantly over the years and we don't see any reason why this will not continue.

Solar energy may be the way of the future, given the vast roof areas that could be used to capture the sun’s energy. However, having done some number crunching, we are not convinced that a very long-term rental agreement with its inherent uncertainties is as attractive as it might sound. Householders should consider the up-front capital payments and assess the saving in energy costs as a return on their investment.

Thank you for your questions and tips – please keep them coming! You can send in your ideas and join the Oily Rag mailing list, by emailing us at tips@oilyrag.co.nz or by writing to us at Living Off the Smell of an Oily Rag, PO Box 984, Whangarei.

*Frank and Muriel Newman are the authors of Living Off the Smell of an Oily Rag in NZ. Readers can submit their oily rag tips by email at tips@oilyrag.co.nz.

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