We have written at some length about how Net Energy Metering (NEM) works, and about the changes to NEM that are coming, aka Net Energy Metering 2.0. While both PG&E and SDG&E have already switched to the 2.0 version, SCE customers are still able to go solar under the existing, more favorable, rules, but not for long! (NB: PWP & LADWP customers are unaffected by this change, the following is only relevant to SCE customers.)
Here is our update as we dive headlong into the brave new world of NEM 2.0.
Under the rules adopted by the California Public Utilities Commission (CPUC), SCE must continue to allow new customers to operate under the current NEM 1.0 rules, until either of the following events occur:
- SCE reaches its NEM 1.0 cap of 5% of net aggregate demand, or
- We reach the deadline date of July 1, 2017.
As of this writing, SCE is still a full percentage point below its cap, with 480 MW worth of solar to install before the cap is reached. Quite simply, that will not happen between now and the end of June, so the deadline to get in on the current rules is 11:59 p.m. on June 30, 2017.
But here is the rub—to qualify, not only must the project have been completed, but a final, signed-off inspection card must also be submitted to SCE prior to the deadline. This is going to make June a difficult month as installers struggle to get projects completed and approved in time. Since approvals are at the whim of individual inspectors, many of whom are idiosyncratic (to be kind) in their understanding of what the code requires, it is difficult to guarantee that a project will be approved on first inspection.
Prudent consumers will want to make sure that first inspection occurs on or before June 15th.
Although NEM 2.0 is not the crushing blow to solar that some feared it might become, it still has a number of aspects that make it less appealing to the solar system owner. Here are the major differences:
The coming of NEM 2.0 has some obvious consequences—there will be a crush this spring to get projects approved before the new rules take effect (so don’t wait!), and the overall savings from going solar will be reduced, although not dramatically so.
But there are some unintended consequences as well. For one, these new rules will be a boon for intelligent storage systems, both to help reduce NBCs and to shift that otherwise exported energy to peak TOU periods. Storage systems with the “smarts” to do all that will suddenly make economic sense. (More on that in the near future, but for now just three little words: Enphase AC Battery!)
Another unintended consequence is the significantly increased difficulty in properly modeling the savings to be derived from adding solar. While some installation companies use sophisticated software like EnergyToolbase (as Run on Sun does), or build out sufficiently detailed spreadsheet models (as Run on Sun also does), for many, that level of complexity is simply overwhelming. So what will they do? More than likely, just create a number that is little more than a WAG (and no, not a SWAG).
The result is that potential solar clients need to push on companies providing them with solar quotes to justify their savings numbers. If they used something like EnergyToolbase they should be happy to point that out (although there is still the risk that they used it incorrectly…). If they used their own proprietary model, they should be able to explain how it works. But be wary of numbers, especially outliers that claim greater savings without sufficient documentation.
Every now and then we get a call from someone who has solar installed at their home but they’re not happy. Typically this occurs when they get their “true-up” bill at the end of the year, and are shocked to see that the amount that they owe is way more than they expected! In many cases this leads them to believe that the system simply isn’t working, and now they want a third-party (like Run on Sun) to come out and evaluate the performance of their system.
Here are the three leading reasons why that bill is so high…
Although this tends to be the number one suspected reason for why the bill is so high, generally it isn’t the actual cause. Most systems are installed properly and are in operation. But every now and then we come across a system that simply isn’t working at all. That was the case with one man who was convinced that his system had never worked and that the company that installed it was simply out to cheat him. We didn’t see signs of that—the system had been installed and the overall workmanship was acceptable on the surface, so it wasn’t like someone just slapped the panels on the roof and ran away. But here’s the thing—this was an Enphase system so there should have been monitoring in place to answer the question of how well the system was working. Except that the installer had never bothered to complete the setup of the monitoring system!
When we came out we were able to access the Envoy directly, and while it could see the microinverters, it was clear that they had never produced any power—in over a year!
So how can a solar system owner prevent this? Simple—when your system goes live, make sure that the installer walks you through the operation of the system so that you can see with your own two eyes that the system is actually producing power. (This could be a readout on the inverter/monitoring system, or a spinning performance meter, or an indication that utility meter is going backwards.) Better yet, ask them up-front how will you be able to know that your system is working, and then when it goes live, make them prove it to you!
This second case is actually far more likely: the system is performing, but it is not meeting your savings expectations. In our experience there are two main reasons for this: hype and over use.
One reason for this disconnect is that a dishonest sales person over-hyped the savings to be had from the system installed. For example, we have seen “savings” projections based just on the size of the system, without regard for how shaded the system was, or its orientation - to say nothing of the actual rate structure that is being used by the utility.
Shaded systems produce less energy. Systems aligned away from South will produce less energy. A utility customer on a time-of-use rate structure may well save less than one on a tiered rate structure (depending on how those rates are designed).
The point is to beware of overly simplistic savings projections. A proper analysis will factor in all of these issues to provide the best possible estimate of savings.
Even the best savings projection is predicated on future energy usage being consistent with the historical data that the solar company was given (unless increases are specifically discussed and included). While many people with solar power systems become vigilant about reducing their overall energy consumption, others go in exactly the opposite direction. Indeed, it is not uncommon to hear people say that part of why they want to “go solar” is so they can afford to run their air conditioning “more” during the summer.
Solar power systems are finite resources—they can only produce so much energy consistent with the size of the system, and most utilities limit system size to the historical energy usage average at the site. If you install solar, but then triple how much energy you use during the year, you shouldn’t be surprised if you are not saving any money!
Which leads us to the most likely culprit—there has been a failure to communicate between installer and consumer. At the root of this is Net Metering and the complexities of most energy bills. (A big part of the blame here goes to the utilities who seem determined to make their bills as complicated as possible!) Let’s provide an overview of this issue and then illustrate with a specific example.
Solar system owners - at least here in SoCal - operate under utility rules known as Net Energy Metering, or just Net Metering for short. Here is how this works: on the day when your solar power system is given “Permission to Operate” (or PTO) by the utility, your billing will shift to Net Metering (often the utility will change your meter to allow for that switch). Every day, as your system operates, you will either be exporting (selling) energy back onto the grid, or importing (purchasing) energy from the grid.
Think of it this way: you get up at 6 a.m. and it’s dark outside. You turn on some lights, the radio, coffee maker, etc. Your solar system isn’t producing anything (it’s dark outside, remember?) so you are purchasing energy from the grid. You go off to work as the sun comes up, and your system turns on. All day long, your solar system is producing energy, but there is no one there to use it—the A/C is off, the TV is off, the house is dark—so all of that excess energy is sold back to the utility. Your fancy new meter keeps track of all of that energy coming and going.
Every billing cycle the utility will look at those readings—how much energy did you sell compared to how much did you purchase—and “net” out the difference. If you were a net seller of energy, you will have a credit. If you were a net purchaser of energy you will have a balance due. But here is where some people get confused—your bill won’t ask you to pay for the energy you used that month. Typically you will only be charged for whatever “customer charge” there may be along with taxes and other fees. The bill for your energy usage (or credit, if you are so lucky) is carried forward to the next billing cycle, and the next, and the next, until you get to the anniversary of your PTO date. Now your usage will be “trued up” and you will either get a bill to pay (assuming that for the year you were a net energy purchaser) or a check (assuming you were a net energy seller, but don’t get too excited because that payment is really tiny).
Here’s the thing, depending on how much of a net energy purchaser you were, that bill could be pretty significant, in some cases well over a thousand dollars or more!
Of course, you would have been receiving bills every cycle that showed what you were accumulating (either a balance due or a credit) but since there is no related payment required, it is easy for some to overlook those bills, and if this process has never been explained—or even if it was but the consumer simply didn’t “get it” at the time—this can lead to a nasty surprise.
Bottom line - solar companies need to do a better job here in explaining how this works. (Hence this post!)
Consider a hypothetical solar system owner, let’s call him Bob. Now Bob is a smart guy, but this is the first solar power system he has ever owned. His installer explained everything to him when the system went live, but Bob was distracted by the excitement of a potentially zero bill. His system has Enphase microinverters so he has been receiving energy production emails from Enphase every month, and that looked cool, but he never attempted to reconcile his Enphase report with his utility bill (Bob’s not so big on balancing his checkbook, either). But to be fair to Bob, the Enphase report that he receives is for each calendar month, but his billing is every two months, and they aren’t calendar months; rather, they run from meter read date to meter read date (e.g., 7/28/2016 to 9/26/2016).
The good news is that Enphase has a reporting feature that allows you to enter any two dates since the system went live and receive day-by-day energy production, with the total at the end. Let’s see what we can learn when we put Bob’s billing data next to his production data from the Enphase reporting feature:
Ten months of Bob’s usage versus production
The first two columns show the start and end dates for each meter reading/billing cycle. The bought column is the amount of energy that Bob purchased from his utility. (Whoa, what happened during the latest billing cycle???) The sold column is the amount of energy that Bob sold back to his utility during that period, as reported by the utility. The next column is the amount of energy that Bob’s system produced during the dates in the billing cycle, according to the Enphase website. But wait, how can this be? In that first period, the utility says that Bob only sold 774 kWh of energy, but Enphase says his system produced nearly twice as much, 1,338 kWh!
How do we make sense of this disparity? The answer is simple: local consumption. It is important to remember that the utility has no idea how much energy Bob’s system is producing, all they see is how much energy Bob is selling back to them. So both Enphase and the utility are correct, they are just measuring different things. Enphase measures total energy produced. The utility measures energy sold to them—the difference is energy used to power Bob’s house that didn’t come from the utility; rather, it came from the solar system! In that first billing cycle, Bob’s system produced 1,338 kWh and of that, 774 kWh were sold back to the utility, meaning 564 kWh of that production were used to power his house. And that means that Bob’s total consumption for the month is the amount that he bought from his utility, 1,402 kWh, plus the solar production that was consumed locally, 564 kWh, for a total consumption of 1,966 kWh. Applying that reasoning to the rest of the data shows that Bob’s overall consumption has increased in every billing cycle except one, with a whopper over the holidays! (Maybe too many holiday lights?)
The production data shows that Bob’s system has been performing appropriately - increasing over the summer months, decreasing over the winter months. Here’s a graph that puts that all into perspective:
The blue represents the actual energy produced each day. The gray line is the predicted system production (in this case modeled using the CSI calculator). Over the lifetime of the system, the maximum amount of energy produced in a day was 29.7 kWh (42% above what was predicted for that day) and on the day when this graph was created, the system produced 15.7 kWh.
Generally, the performance peaks well above what is expected (particularly in the late June through early November period). But once we get into mid-November things deteriorate—not because of a fault in the system, but because of abnormally wet weather here in SoCal (as we head into a 1″/hour rain storm today!). For much of the past two months, actual production has fallen well below what was predicted, with just 77% of predicted being realized so far this month. And yet, despite all of that, overall the system has still produced 99% of its estimated lifetime production.
This points out a couple of key things to me: First, you just gotta love the data that is available through the Enphase monitoring system. It allows system owners and installers alike to have near-real time access to system performance, as well as to review long-term data to discern trends and uncover patterns. Priceless!
Second, we as solar professionals need to do a much better job of informing our clients so that they know what to expect. (I’m leaving out the hype-sters who couldn’t care less what the consumer knows as long as they make a sale.)
We live with this stuff every day but for most of our clients, this is all brand new, and confusing. We need to take the time to explain how this works so that they can understand the actual value of their investment.
Being a full-service solar company means, in part, that from time-to-time we are asked to step in and fix a system that is no longer operational and the original installation company is long gone. Or the installer is still around, but the client was so annoyed by the sales/installation process that they don’t want to have anything to do with the company anymore. We even get calls from clients who are pretty sure that their system is working, but the way the install went - excessive delays, mismatched parts, or just an overall sloppy look - has left them with an uneasy feeling, and they want a second set of eyes to come out and give them peace of mind. All in a day’s work and we are happy to help.
But lately we have come across a different situation: the system is fine, but the financing is burdensome. Now we aren’t talking about leases or PPA’s here - we’ve outlined at length our views on those. No, these are credit-worthy folks who are feeling trapped by their high-interest solar PACE loan. PACE, as you may recall, stands for Property Assessed Clean Energy, and it allows homeowners with less than stellar credit to qualify for a loan to improve the energy efficiency of their home, including by adding solar. PACE financing is not tied to the homeowner’s personal credit, and the debt “runs with the land” as part of the property tax assessment (hence the name).
Lots of solar installation companies love PACE because it is easy for them to find out in advance whether the prospective client is likely to qualify - and if they have equity in the home and are up to date on their mortgage and property tax payments they almost certainly will, and for far more than the cost of a solar system. The paperwork is handled electronically, funding decisions are fast, and there are no “dealer fees” - points, really, that often are charged back to the client.
So what’s not to love?
In a word, the interest rate. At a time when Home Equity Lines of Credit (HELOCs) are readily available and at interest rates often below 4%, PACE loans can be double that or more depending on the term! That means on a 10-year loan to finance a $20,000 solar system, the PACE borrower could pay as much as $6,500 more over the life of the loan. Ouch!
Let’s be perfectly clear: PACE is a great program for people looking to lower their energy bills but who don’t have great credit. Their annual savings from installing solar or other PACE-funded improvements will regularly exceed the cost of the loan, providing real value to them. But if you are a homeowner with great credit, you shouldn’t let yourself get stuck with an unduly expensive loan, just because some solar sales guy thought PACE would make his life easier!
If that is the situation you are in, shop around. See if you can qualify for a HELOC to pay off your PACE loan - you might learn that a simple switch will greatly increase your solar savings!
All solar companies market themselves, Run on Sun included. But lately we’ve come across some particularly puzzling ploys being touted by some companies as if they were a benefit to the consumer, when all they really are is a way for the solar company to cut their costs at the consumer’s expense! Let’s peel back the onion layers on these three ploys to see what is really going on…
One of the major solar companies built its entire business model around this ploy, and a bunch of aggregator sites have popped up offering much the same thing: a quote on a solar power system without ever visiting the consumer’s home. Certainly for some folks - the very busy or the very shy - this might sound appealing. You can get a quote for your system without ever having to deal with those pushy salespeople.
The advantage to the solar company should be pretty obvious - they avoid the time and expense of sending a vehicle and a salesperson to your home, thereby saving the salesperson for only those potential clients where a face-to-face meeting is required.
So how does this ploy cost consumers? The simple truth is that no one can properly install a solar system without actually coming to your home and seeing the actual conditions on the ground. While satellite images are great for making preliminary assessments, there is just too much that could affect the ultimate cost of the system that cannot be determined remotely. For example, the other day we noticed a sag in a roof while taking our measurements. Upon closer inspection it was discovered that one of the roof rafters was split and caused the roof to sag. That damaged rafter needs to be repaired or replaced before solar can be safely installed. The homeowner was completely unaware of the situation until we pointed it out to him.
When a solar company gives you a quote without having performed a comprehensive site evaluation, their quote will be hedged as “preliminary, subject to revision following engineering review." Which means that after you sign the contract, they will “discover” the issues that they should have told you about initially. But now you will have signed a contract and to move the project forward you will have to accept a change order increasing your cost. Great deal for the solar company, not so much for the consumer.
This one to me is a real head scratcher - the solar company that brags that they will install solar on your home in one day! Seriously?
Solar power systems, when installed correctly, should provide you with trouble-free operation for twenty years. Given that time frame, do you as a consumer really care whether the install takes one day or four? Frankly, in ten years of doing this, we have never had a client ask if we could complete the installation in one day.
Of course, that doesn’t mean that clients aren’t concerned about how the installation will be done, they are. But they are interested in knowing that it will be done right, and right the first time.
The solar company promoting this ploy wants to suggest that they have this so dialed in that it will take them no time at all. But what is really happening is that they are telling their crews to throw it up on the roof and move on to the next job. That translates into lower labor costs for the solar company (i.e., more money in their pocket), but no real benefit for the consumer.
The simple truth is that craftsmanship takes time. You, the solar consumer, are going to be living with this for the next twenty years - maybe that extra day or two will actually inure to your favor!
This may be the scammiest ploy of all. The solar company prominently displays that they will install solar on your home for free! And who doesn’t love free, right?
Of course what this really means is that the solar company wants you to sign on to a 20+ year agreement (either a lease or a Power Purchase Agreement) to pay them every month for the privilege of having that “free” solar on your roof. The end result is that you end up paying as much as twice as much to that solar company as you would have if you had purchased the system outright - and you still won’t own it even after twenty years!
And yes, I know that not everyone has the cash on hand to purchase a system outright, but there are better options than leasing. For consumers with good credit, a home equity line of credit will be way cheaper than going with a solar lease. If your credit is not so great, you could look into PACE financing which is not tied to personal credit. PACE is more expensive that a HELOC, but still a better deal than a solar lease.
At the end of the day, all of these ploys work in the solar company’s financial interests, and not the consumer’s. The folks that dream up these schemes are shrewd - consumers need to be just as shrewd if they are to avoid getting fleeced!
Happy New Year!
When deciding to invest in a photovoltaic solar system one of the first questions everyone has is how to finance the cost. While solar continues to be a great long-term investment, with payback periods often in the 4-7 year range, the hefty outlay is more than many homeowners feel comfortable fronting. Hence, the concept of the zero-down solar lease financing model and third-party system ownership (TPO) was born. While SunRun invented the model in 2007, the three behemoth national solar companies - SolarCity, Vivint Solar, and SunRun - rose to the top over the last five years due to the popularity and ease of the model for customers. Until this year, nearly 100% of Vivint Solar’s business was with solar leases and power purchase agreements (PPA’s).
However, as we at Run on Sun point out to all of our potential clients and in various blog posts, solar leases are simply a bad deal. And, what do you know, finally the wider public seems to be coming around to this fact! GTM’s recent report, “US Residential Solar Financing 2016-2021“, showed that for the first time since 2011, direct ownership of residential solar systems will surpass third-party ownership in 2017. The solar lease has been rapidly decreasing in popularity since it peaked in 2014 with 72% of the market. GTM predicts that in 2017 55% of residential solar systems will be bought outright through cash or loans, and the trend will continue with 72% of all systems sold owned directly by 2021.
GTM Research: Residential TPO Penetration and Installations by Ownership Type, 2011-2021
There are several factors at play in this shift. The total cost to go solar has declined rapidly in recent years meaning the upfront cost continues to be less frightening. Today there are more attractive solar loan options available to homeowners as well. One popular option in California is the PACE (Property Assessed Clean Energy) government loan program which is repaid as an assessment on the homeowners property tax bill. Mosaic is another solar loan program available nationally. While loans do have interest rates and dealer fees to be aware of, the benefits of owning a system outright far outweigh the costs of third party ownership - such as financially damning escalator clauses, the inability to take the tax credit or local rebates, and the risk of selling your home to buyers who don’t qualify for (or want) the solar lease.
Overall growth of the solar industry is also beginning to slow this year. After growing at more than 50% annually for the last four years, the residential market is expected to see a slower growth rate of 16% this year. The report shows that growth has slowed among all solar installation companies, but much more so for the top three national companies who previously relied upon the popularity of the solar lease. For the first time since 2013, these three will together install less than half the market’s solar systems as their growth slows to just 12%. By contrast, growth among the remaining solar power installation market will slow to 36% according to GTM. It will be interesting to see how the “big three” handle this shift in the coming years.
One thing to note is that while growth is slowing among the largest companies, solar continues to grow overall. Smaller local companies have always offered, and preferred, to sell systems outright rather than through leases and these companies are becoming more popular as more research shows the true value of ownership vs leasing. As one of those companies, we have always stood by the data and educate all our clients on the realities of financing options as the last thing we want is to be in the business of locking people into a twenty-year-long bad deal! Curious as to the specifics of leasing vs owning? Check out our blog from almost two years ago: Top Five Reasons to Stay Away from that Solar Lease!
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