When You Shouldn't Buy Solar in California

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Here in California, now that it is possible to pay-as-you-go for solar and switch to solar power with a lease or a PPA, which is the best way to get solar? (In many other states, pay-as-you-go plans are not an option because utilities in those states won’t allow the competition, but in California, three companies offer residential PPAs or solar leases – Solar City, SunRun and Sungevity).

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For us in California, there are good reasons for or against both ways to go solar: both buying and pay-as-you-go. It all depends on your circumstances.

For most people, there is no choice (because buying is just ruled out, for financial reasons) but here is what to consider if you can buy, and thus in California, have a choice.

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Advantages of buying solar versus pay-as-you-go plans.

Hands down, buying saves the most money over time, easily twice as much. Someone with a high bill, say $500 (about 1,000 kwh a month) will have spent over $400,000 over 25 years in PG&E territories, (enough to buy another McMansion and swimming pool that typically is the cause of such a high bill.) Compared with the relatively minor expense of about $35,000 to supply that approximately 12,500 kilowatt hours annually, it is a no-brainer.

If you need to borrow, the interest typically doubles the loan amount. But even including the interest cost – bringing it to say $70,000, (compared with over $400,000 to do nothing) unless you can’t (or won’t) borrow from a bank, buying outright saves the most money.

You save the most – about $365,000, in this example – if you have the cash on hand, or $330,000 if you go to a bank.

But there is a catch with buying.

The greatest hurdle for buyers is psychological: inertia. The most ridiculous procrastination devices pop up. So, you go back to your life, having shelved this big buying decision…. indefinitely.

1. You (or your spouse) are stuck with the responsibility of assessing the quality of the solar company you pick. For many people, this can lead to get stuck in a deadly form of procrastination where the horror of making a decision permanently cripples action. (Don’t! Just pick any one of the top five or ten installers in your region. It’s not rocket science.)

2. Other needs for that money seem more immediately important. You have a kid to put through college, your spouse prefers to renovate the bathroom, etc. The humongous savings of solar get shelved. (Do you really think family needs like these will cease coming up over the next 25 years? Cutting your bill now will free up savings for all those other projects in the future)

3. The process of investigating solar further cripples you from taking action because some super nano cell being researched at MIT that your friend read about on Yahoo News promises some x percent efficiency increase – you should wait till that happens. (This is the “so where’s my jet-pack?#8221; argument. But on an increasingly finite planet, there are material limits: progress could go the other way way, too.The longer you wait for some perfect energy source, the more competition there is from other nations. China and Europe are investing big-time, while we wallow in oil spill. By the time “efficiency” is at some theoretical acceptability level, solar materials might be in short supply – for you.)

4. “Prices will drop in a few years.” (When 25 years worth of solar power costs less than 25 years worth of utility power: that’s cheap enough! You don’t put off switching to a cheaper cable service because if you wait a few years, you might get a better deal somewhere else…)

If you or your spouse are susceptible to any of these four kinds of deadly solar purchase procrastination, then buying is not for you, even if you can afford to. Because by procrastinating, you actually are making a choice: for no solar at all.

That’s when you shouldn’t attempt to buy, even though you’d save twice as much, but  join the crowd that is already “renting” with a lease or a PPA. With no investment required, there’s no big investment decision to make.

Image: Trendir