ALBUQUERQUE, N.M. — Some solar installation companies are now aggressively canvassing Albuquerque neighborhoods in search of new customers, bringing the solar electric shopping experience to people’s front doors for the first time.
Utah-based ZingSolar in particular, which arrived in New Mexico last year, is knocking door-to-door in Albuquerque, Los Lunas and other places, signing up homeowners to either lease solar systems, or buy them outright with no upfront costs.
For most New Mexico consumers, it’s a totally new shopping experience, one many never knew was available until the sales reps rang their door bells.
And company pitches can make the benefits seem like no-brainers, empowering homeowners with a completely newfound ability to dump their electric utility in favor of moderate monthly solar bills that can often save money from the start while racking-up thousands of dollars in accumulated savings over the years.
Such promises can indeed be quite accurate, but like all consumer products, industry experts say the benefits can vary widely depending on the system a homeowner purchases and the terms and conditions of their contracts. Before committing, consumers should educate themselves about costs and benefits, learn all they can about the company pitching a system plus the details of any contract they offer, and shop around among solar firms for the best deal available.
The right fit
“People are not used to shopping for energy,” said Ryan Centerwall, CEO of the Albuquerque-based installation firm Affordable Solar. “It’s a different experience, and consumers are usually not educated about it because we live in a world where the local utility is generally the only decision regarding electricity. Homeowners need to take the time to consider all options and become informed, the same as you would shop for a car or a television.”
Given the lengthy, 25-year commitments and warranties generally connected with either leasing or buying a solar system, consumers need to make sure from the start that the contract they sign is the right one for them.
“These agreements are based on many assumptions, and to get a return on investment, those assumptions have to hold true for 25 years, not just the first few years,” said Affordable’s general manager, Trishelle Kirk. “That means looking at a few key components of systems before committing, as well as the company doing the installation, to make sure it will produce the electricity offered.”
These days, there’s a lot to choose from, with about 60 contracting and installation companies operating throughout the state, including three national companies that arrived last year – Solar City, Vivint Solar and ZingSolar. A sharp drop in prices in recent years, plus government tax credits to help consumers buy solar systems, have also made them a lot more affordable.
In New Mexico, the system price for an average home usually ranges from about $17,000 to $23,000, depending on the size of the system needed. A 10 percent state tax credit in effect since 2008 is ending this year. But a 30 percent federal tax credit remains available, cutting the cost for a $17,000 system to just $11,900.
Most companies now also offer a range of financing options through banks and credit unions, with loans scaling from a low of seven years to 20 or 30 years, and with no upfront costs.
The newest consumer option, however, is leasing a solar system for 25 years, which ZingSolar, SolarCity and Vivint now offer in New Mexico.
“We’re doing a lot of installations in New Mexico now,” said ZingSolar energy consultant Adonae Anderson. “I personally have overseen 30 installations.”
Under the lease option, ZingSolar fronts the cost of the entire system and homeowners pay a monthly charge for the power it generates, the same as they would with a utility. The payments, however, are set from the start at a lower amount than the homeowner’s average monthly utility bill today.
The monthly charges increase by 2.9 percent per year in later years, but ZingSolar says that’s much less than the average 5 percent annual increases expected on utility bills over the next 25 years, providing substantial accumulated savings over the life of the lease. And when the lease is up, the system becomes the homeowner’s property, unless they ask the company to take it down.
For a homeowner paying an average of about $100 per month to Public Service Company of New Mexico for electricity, that would mean about $57,000 paid to the utility over 25 years if costs rose an average of 5 percent per year as projected, Anderson said. With ZingSolar, that same homeowner would pay out about $39,500.
“If you paid the utility, it’s like half a mortgage in 25 years,” Anderson said. “That electricity is now a debt you can officially get out of.”
Leasing could be a good option for homeowners with few tax liabilities, or for consumers with poor access to credit to finance their own system.
“It could be the right path if you can’t use the federal tax credit,” Affordable’s Centerwall said. “But consumers should carefully consider the cost escalations a leasing company charges in later years to make sure the savings add up over time, not just in the first years. Also, if customers don’t stay in their homes for 25 years, they need to clearly define their options for transferring the lease to a new owner.”
For homeowners who can access the federal tax credit, purchasing a system may well be the best option, because it offers far greater savings over time. Homeowners can opt for short-term loans that mean higher monthly payments than their current utility bills in the first years.
But electric rate hikes will push the utility bills higher than the loan payments on solar systems in later years, and once the loan is repaid, it’s then generating electricity for free, effectively wiping away a homeowner’s electric bill.
For the homeowner with an average $100 monthly electric bill, a $19,000 solar system might produce all the electricity needed. The tax credit would reduce that to just over $13,000. And with a 15-year loan, the buyer may pay between $110 and $120 per month.
By the end of the loan, the consumer would have already recovered the investment through savings from locked-in prices that buffered against utility rate increases, and after that, there are no more electric bills.
Still, consumers need to shop around for the best deal, making sure that a solar system can actually produce all the electricity a company promises, that the firm installs it adequately to assure maximum sunlight, and that warranties fully protect the consumer over the 25-year life of a contract.
“Make sure the product and equipment you’re buying is backed by good companies with good warranties,” said Regina Wheeler, CEO of Sunpower by Positive Energy Solar. “Be informed. Seek multiple quotes from different companies to build your understanding and confidence.”
Some companies like Positive Energy offer particularly high-quality solar panels that are sturdier and more energy efficient than others, and they provide particularly strong warranties. That makes their systems a bit more expensive than others, but for some homeowners, quality is key.
“These days, installing solar seems like kind of a no-brainer,” said Sutter Sugar, an Albuquerque Realtor who contracted Positive Energy to install panels on his home in the Northeast Heights. “The technology is getting better and more efficient and the price keeps dropping. I’d be surprised if it doesn’t become a lot more popular now.”
- Consumers can learn more about solar companies serving the New Mexico market by visiting solarreviews.com. That website rates each company based on reviews by solar customers.
- When shopping around for a solar system, check the background of companies through the Better Business Bureau at bbb.org, and through Angie’s List at angieslist.com.
- The Solar Energy Industry Association’s website, at seia.org, has a huge range of free information to learn about going solar, including a new Residential Consumer Guide to Solar Power, published last February and available for free download.
Nuts and bolts
DO YOUR HOMEWORK: Going solar can, potentially, save homeowners a lot of money in the long term, but it’s a significant commitment that can easily go sour if consumers rush into buying or leasing a system without doing their homework.
“Shopping around strengthens the tools in a homeowner’s hands,” said Rob Davis, consultant with the Albuquerque installation company Affordable Solar. “You need to compare everything to get the best deal. It’s not just the price, but how the system is designed and installed to make sure it produces the electricity needed.”
UNDERSTAND WHAT YOU’RE BUYING: In general, that’s two things:
- Solar photovoltaic panels, which convert sunlight to electricity
- Inverters, which convert the raw direct current (DC) coming through the solar panels into alternating current (AC) used in homes and buildings
SIZE MATTERS: The size of a system, which is usually placed on rooftops, depends on home size and layout, the amount of electricity residents consume, house location and sunshine availability. Solar installers survey homes for free to determine size and the best layout for maximum sunlight.
The goal is to generate at least as much power as an electric utility would otherwise provide. That’s critical, because if the system produces less, the utility will make up the difference, undermining savings from the solar panels.
PRICE, OUTPUT: System size largely determines price, but the electric output can be significantly hindered by poor installation, such as locating panels under shade. Installer knowledge and experience are key.
“This is still a young industry with lots of new people coming in,” said Kate Jackson, senior technical adviser with Sunpower by Positive Energy Solar. “The homeowner should know how knowledgeable a company’s employees and installers are.”
Solar panel quality can also vary, with some systems losing more generating capacity over time than others. That makes system warranties essential, not just for the equipment, but for installation workmanship. Most companies offer 25-year warranties, but some only cover equipment, not transportation and installation costs if something goes wrong. “You need to read the fine print,” Jackson said.
NET-METERING: “Net-metering” is when local utilities buy excess electricity produced in summer months beyond what a homeowner consumes. The utility uses that for its other consumers and then credits it toward the solar customer’s bill. Later, when the solar system produces less than a homeowner needs, the credit is used to buy back electricity from the utility.
HOME VALUE: Buying a solar system can raise the value of homes, but the New Mexico market is still young, with too few solar homes finding their way into appraisals yet to estimate how much value is added.
“But in more mature markets, like Arizona, it’s adding like 50 percent to 80 percent of the system’s total cost to the value of a house,” Jackson said. “The value added depends on the installation quality, how old the system is, and what warranties are still in effect when ownership is transferred.”