$400k solar farm and here's how they pitched it....

berettafan · 09-17-2009, 03:26 AM

Friend was doing a cost analysis on a solar panel setup being proposed to a client. Solar guy provides lots of numbers showing why it's good. Friend starts digging in to it and doing his own analysis.

Here are some issues identified:

-Solar co. got what was more or less a 'good faith estimate' from a local bank on the financing. They asked the bank to show it as interest only. (right there the salesman is getting thrown out forcibly if he's at my home).

-Solar co. failed to show at what point the net $280k system cost (after initial tax credits which are huge) is actually paid back to the bank (remember they showed interest only....nice to know they are treating you like a Rent A Center customer looking at velour couches with cupholders).

-Marketable 'credits' are assumed over the life of the system based on generating capacity of system. Research showed the market for these credits to be utility companies who are currently req'd by law to either buy them or pay a penalty OR generate their own solar/wind power. Said laws lapse in about 5yrs.

-Public service commission licenses your system, once installed and inspected, for 15yrs (ie this is how long you may indulge in the credit sale market). This may have an impact on contracts you would enter into for sale of credits (ie if you find yourself looking for a contract to sell credits to a utility in 10yrs-assuming they are still buying-you may very well be accepting a discounted price based on the remaining yrs of certification).

Many of these issues and others will be better understood as time passes and the markets evolve. The main lesson here is in order to correctly evaluate the value of such a system you NEED to understand the laws and regulations that affect it. It is not a 'free market' that just any investment guru can predict through application of lessons learned in securities and other markets.

berettafan · 09-17-2009, 03:28 AM

Interestingly enough the system did show positive $$ flow. The present value was approx. $20k although other factors are still being considered and may impact this.

MANY assumptions were used to get to this figure and they can vary by state, cost to borrow, credit worthiness, local utility rates, future utility rates, etc etc etc.

john70t · 09-17-2009, 06:12 AM

Interesting points to consider. Good points.

-The client might want to research direct financing from different sources(mabye there are low interest gub'ment programs hidden out there).

-I think different states/utilities have different buy-back rates. I think Germany/France buys back at 7x the consumers rate, in the US it's probably 1.something. There may be higher rates available from contracts with independants.

berettafan · 09-17-2009, 06:19 AM

if the gov't would provide low interest loans (secured by the r/e of course) for a length of time that coincides with gov't reqmts that gaurantee the credit markets things would move much smoother.

legion · 09-17-2009, 07:21 AM

So without these laws forcing companies to act in a certain way, it would be a clear money-loser, right?

Porsche-O-Phile · Porsche-O-Phile's Garage

It's extremely difficult to justify life-cycle costing approaches to most homeowners who typically only hold their properties 3-5 years. This is probably where the I/O assumption is coming in, although in fairness and to have a really good analysis that can be tailored to any particular situation, they should have a set of numbers "ready to go" for traditional financing also.

berettafan · 09-17-2009, 07:30 AM

Jeff they used interest only because it produces the lowest debt service number. Really. There is NO other reason. It is dirty and slimy any way you slice it. It is meant to prey on the uninformed and poorly advised.

Legion in the case i saw yes, it would be a very clear loser. But these laws and the current 'green' climate are difficult to predict. You run into issues where the kwh production doesn't match useage patterns and net metering and credit values and lord knows what else.

I suspect we have an issue where an industry is exploding to take advantage of federal/state tax credits and there is no/little regulation of said industry. The gov't wants to dictate/encourage the action of one party (the homeowner) without adequately dictating that the other party (panel supplier) is playing fair. Homeowners are, essentially, being asked to take on corporate sized risks so Congress can see if the concept will fly.

OR so Congress can avoid a total electrical grid overload temporarily and hopefully find an alternative before the truth behind it all becomes too apparent and we have a REAL energy crisis on our hands.

DanielDudley · 09-17-2009, 05:45 PM

Quote:

Originally Posted by legion

So without these laws forcing companies to act in a certain way, it would be a clear money-loser, right?

No. Better to avoid interest payments though. I know a guy who is making more electricity then he is using, but it will take some years before he breaks even.

I can't say it would be a shame to have bonus electricity on the grid during hot summer days when everyone is running the AC due to solar gain...

but hot water is the easiest solar upgrade, gets the direct government rebate, and pays for itself in about three or so years, even in NY. Very good sense.