San Diego Solar – Everything You Need to Know
Information about Solar Panels in San Diego
Thinking about installing solar panels in San Diego, but don’t know where to start?
You’ve got questions floating around in your mind: How much can you save? What type of financing should you choose? What incentives are available? Is the process fast?
Going solar can initially seem confusing. But don’t worry, we’re here to help! We’ve outlined all of this and more to make installing solar panels in San Diego a super easy process.
For a broader state overview, see our California Overview page.
#1 Are Solar Panels Worth it in San Diego?
* Note that these are estimated values for informational purposes only, and do not take into account the full complexity of all financial projections. They also only apply to cash purchases, which means your numbers will be different if you lease your system or pay for it with a loan (factoring in interest). Also note that we are not financial advisors, so this information should not be construed as financial advice.
San Diego homeowners can take advantage of the clear skies, great incentives, and high utility rates to save some serious money by installing solar panels. While many of the financial incentives that encouraged the explosion of solar in the state are now defunct, the sheer amount of savings homeowners can see (even without those incentives) lead us to give solar in San Diego a solid rating of good.
#2 Options for Buying Solar Panels in San Diego, CA
San Diego homeowners have several options available to finance their solar installations:
If you want to save the most money possible going solar, purchasing your installation outright is the way to go. With typical installation prices hovering around $3.61 per watt in the southern California area, an average-sized solar installation costs about $18,050. That’s a lot of money, so let’s see if we can’t drop that price down and then put it into perspective.
First off, by purchasing your solar installation you are automatically eligible to receive the federal 30% tax credit, worth a dollar-for-dollar discount on your total cost. This means that just by receiving this credit your total cost to go solar drops to just $12,635. That’s a pretty big tax credit!
$12k is still a lot of money to foot for an investment though, so is it worth it?
The real question then is how much can you save by installing solar? Southern California – obviously – sees fantastic weather year-round that is perfect for solar. Couple this with the state’s high utility rates and you can see a nice return on your original investment. Over 25 years (the typical lifespan of solar panels), you can see savings up to $30,533 for a 5-kW system, with a payback of just 9 years!
To estimate these savings, we compared the total solar installation cost against how much you’d pay the utility for the same amount of power over 25 years, factoring in both solar panels’ loss due to age and wear as well as utilities’ typical rate increases each year.
Purchasing your solar installation outright is a great way to save money, but there are downsides, most notably the large initial investment you need to make. To be honest, most of us just don’t have $12k sitting in the bank waiting to be used for an investment.
Next, while you are eligible to receive all the financial incentives yourself, as the owner of the installation you are also responsible for maintaining and repairing the system. If something breaks, it’s your job to fix it or hire an installer to fix it. Solar installations are pretty self-contained and don’t require much fiddling, repairing, or maintaining, but it’s certainly something to be aware of.
Leases and power purchase agreements (PPAs) became the dominant financing mechanism for residential solar after they were introduced by installers in the late 2000s. As we saw above, purchasing a solar installation requires a lot of cash – about the same amount as a brand new car. There are other ways to finance purchasing a car without that huge upfront bill, so why not apply that to solar installations as well?
And boom. Here come solar leases. Leases allow homeowners to install solar but avoid that prohibitively high initial investment. You won’t save as much with a lease or PPA as with a cash purchase (just like a car lease is more expensive in the long run than an outright purchase), but there are serious benefits as well.
Since the solar installers own the installation for the entirety of the lease, they are responsible for monitoring and maintaining the system. If something breaks, they have to fix it and pay for it, leaving you free time to enjoy your leisure activities like disc golf or ball golf.
As they’re the owner of the installation, most of the financial incentives for going solar (including the federal tax credit) go to the installer – not you. Solar companies claim that they pass these savings onto the homeowners, so you should be indirectly benefiting from those incentives even if you’re not receiving them in your own hands.
Just like a car lease, you make small monthly payments each month for the life of the lease. Monthly payments can remain the same throughout the contract or increase slightly each year with what’s known as an escalator. You should definitely talk to your solar installer to decide which one makes more sense for you, but in general not having an escalator allows you to save more in the long-term, but your monthly payments will be higher for the first few years.
Once your lease is over, you typically have a few different options for your installation:
- The solar installer will remove the panels at no cost to you.
- You can continue your solar lease on a month-to-month basis.
- You can purchase the installation at a fair market value (usually very cheap, though the equipment is nearing the end of its useful life, so in the near future it’ll be your financial responsibility to fix, repair, or remove the installation).
More: Solar Leases
Loans take the best parts of cash purchases and leases and put them together. You own the installation and receive all the financial incentives, increasing your savings, but you also avoid the high upfront costs that are common when you purchase solar.
You’ll typically save more money with a loan than a lease or PPA, but not quite as much as with a cash purchase. (You do have to pay interest on that loan, after all.)
A lot of organizations offer loans for solar installations these days, from banks to credit unions to dedicated solar loan companies. Each offers different loan terms, interest rates, and fees, so be sure to do your homework before moving forward, as all these components contribute to (or detract from) your total savings.
If you’re installing a 5-kW installation (the same size that we used in the Cash section above) and take out a fairly standard 15-year loan with 5% interest, your total cost jumps to $20,259 after the federal tax credit.
That’s quite a bit more than a simple cash purchase, but even with a loan, you can save $22,897 over 25 years! Savings obviously aren’t as high as cash, but over$20k with little to no upfront cost is fantastic! Your payback increases to 14 years, so it takes about 4 more years to recoup your investment, but after that you are sitting pretty, producing renewable (and absolutely free) electricity!
More: Solar Loans
#3 Solar Policy Information
Over the last 40 years, California has adopted fantastic policies to protect and encourage solar installations.
Renewable Portfolio Standard
Renewable portfolio standards (RPS) are simply goals that lawmakers make stating that a certain percentage of all electricity in the state must come from renewable sources by a certain date. Meeting these goals is typically left to utilities, in essence forcing them to adopt renewable energy much more quickly than they otherwise would have, leading to a much cleaner electricity industry at a much faster rate.
When compared to other states, California has one of the highest RPS goals in the country. 33% of all the electricity in the state must come from renewable sources by 2020 and 50% must come from renewable sources by 2030. Closing in on the first goal, utilities across the state have begun purchasing electricity from solar power plants and encouraging solar installations on a wide scale in their service areas.
If there’s any one piece of policy we can thank for pushing the solar industry forward in California, it’s the RPS.
There’s no getting around it: California has high electricity rates. If you’re just an average Joe, this means you are spending more and more money purchasing all your electricity from the utility each year. If you’re a Solar Joe though, these high electricity prices mean you can save a lot of money by installing your own solar installation and avoiding those costs (as we saw above).
California homeowners pay an average of $0.1797 per kilowatt-hour – some of the highest utility rates in the country and 30% higher than the national average. These rates are comparable to the northeast but are much higher than southern and mid-west states (and homeowners there would have a much harder time of saving money going solar because of it).
High utility prices are never fun, but if you live in California, just consider them your ticket to saving tons of money by installing solar panels!
California requires all three investor-owned utilities operating in the state, including SDG&E, to offer net metering to solar customers.
As a solar homeowner, net metering allows you to push excess electricity you produce (and which you don’t use) into the grid to be used by other homeowners or businesses. SDG&E will then give you credits on your next bill based on how much electricity you put into the grid.
Each month your credits roll over and after 12 months, you can choose to continue rolling over your credits on a month-to-month basis indefinitely or cash out and receive a payment for those additional credits. While the bill credits are based on the utility rate that you actually pay (typically around $0.17 per kWh), if you cash out your payment it is based on how much SDG&E pay the companies that they purchase their electricity from (around $0.03 per kWh).
In 2016, the California Public Utilities Commission passed the Net Energy Metering Successor Tariff, giving new regulations for all future residential net metering customers. Under these new rules, you still receive credits for any excess generation you produce that goes into the grid, but there are three major changes:
- When you apply for a net metering agreement, you now have to pay a one-time interconnection fee (estimated to be around $75 to $100).
- You must pay monthly utility charges for programs like nuclear decommissioning and low-income and efficiency programs based on your total gross kWh consumption from the grid, without taking net metering into account. Existing net metering customers also have to pay these charges, but they are calculated based on their net total consumption. These charges are typically around $0.02 to $0.03 per kilowatt-hour.
- All future net metering customers will be placed on time-of-use rates. If you’re used to the standard tiered utility rates, this will be the big change for you (though it’s fairly simple once you get the hang of it).
As of December 2016, Pacific Gas & Electric in northern California have already begun implementing these new rules. SDG&E customers can expect to see changes by summer 2017 at the latest.
More: Net Metering
In California, the approval process to connect your solar installation to the utility grid is quick and painless, thanks to the state legislature passing Rule 21 ensuring it is so.
With SDG&E (as well as the other 2 investor-owned utilities), you are eligible for the Fast Track interconnection process when you enter into a net metering agreement. Fast Track offers a simplified approval process with minimal review requirements, so you can get your system up and running as quickly as possible.
Solar homeowners in California enjoy some of the best pro-solar access rights in the country, thanks to the 1978 state-wide Solar Rights Act. This act protects your right to sunlight and also restricts HOAs from denying you the right to go solar.
The state also passed the Solar Shade Act in 1978, providing solar homeowners with legal protection from excessive shade from neighbor’s trees and shrubs, as long as the trees were planted after the solar system was installed.
All this to say, if you’ve got a cantankerous HOA or neighbor who might try to cause you grief for going solar, you don’t need to worry. The state of California has your back!
#4 Financial Incentives, Rebates, and Tax Credits
With the solar industry being so mature in California (and so many homeowners having already installed solar), many of the truly great state-wide solar incentives have expired. However, San Diego homeowners are still eligible for the single best solar incentive available today – the federal tax credit – as well as tax exclusions and, of course, net metering.
Federal Tax Credit
We’ve already mentioned the federal Residential Renewable Energy Tax Credit in sections above, so suffice to say that this credit is incredible! As a tax credit (not a tax deduction), it’s equal to a dollar-for-dollar 30% discount on the total cost of your installation.
Again, the tax credit goes to the owner of the installation, so if you financed your installation in cash or with a loan, you are eligible to receive this awesome incentive.
The credit was originally set to expire in 2016, but Congress extended it until 2019, at which point it drops to 26% until 2021, then 22% until 2022 when it completely runs out.
Should your tax liability be insufficient to claim the entire credit in one year, you can break it down into more manageable chunks over several years. Talk about easy!
More: Solar Federal Tax Credit
Property Tax Exemption
When you install solar in California, you’re also eligible for a 100% state property tax exclusion on the value of your installation. So if you spent $18,000 on solar for your $200,000 home, you only pay property taxes on the $200,000 value of your home, not the $218,000 total value.
The state-wide average for property taxes is around 0.74%, so installing a 5-kW system lets you save about $110 in your first year. This obviously isn’t a huge amount, but considering how much you are already saving, it’s just icing on the cake!
General Increase in Home Value
Solar panels on your roof can add some serious value to your home, as long as you own the installation. Depending on the age of the system, solar panels can add an average of $4.51 per watt to the total value of your home, and as much as $5.90 per watt if the installation is new. This means that the 5-kW installation we referenced above could bring over $20,000 to the price of your home.
If you financed your installation with a lease or any other mechanism where the installer retains ownership of the installation, according to a study by Lawrence Berkeley National Lab, your solar doesn’t really add value to your home. But it doesn’t detract from your home either. When researchers compared similar homes, some with solar and some without, sales price and time on the market were about the same.
If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.
What to Do Next?
So is installing solar panels in San Diego a good deal? No, it’s a great deal! Clear skies, high utility prices, and great financial incentives mean going solar in San Diego can save you some serious cash. Just be sure to do your homework, get estimates from several installers, and review agreements carefully.
Did we miss any other important considerations for San Diego homeowners? Add them in the comments!