Solar Value

[George Hatch]

I'll tell you quite honestly that in order to get to the point where you understand and can replicate-by-hand everything a DCF worksheet is doing the failure rate for the appraisers and noobs taking those courses is in excess of 50%, and that includes the retests. I've known some very competent SFR appraisers who ran up against the wall with the beginning income cap course. It's not for everyone.

Discounting future income to get the present value is an easy calculation to make. Understanding all the elements in play in a discount rate or an overall capitalization rate is not so easy.

I cannot see how any state board could mandate that SFR appraisers use that sort of analysis in their appraisal assignments.

Even with most of the smaller commercial properties where the buyers and sellers are buying an income stream it would be more common for them to either use an income multiplier or a cap rate that is best extracted from the sales data, which if you have sales that are demonstrating a cap rate then you also have sales that are demonstrating the extent of the contributory value. Buyers at those levels almost never use DCF analyses, either.

It's like developing a GRM for the appraisal of a 2-unit duplex property. You can do it easily enough if you have the data, but if you have the data then the approach itself becomes redundant because those buyers/sellers are almost always operating off the sales anyway.

This mode of analysis will work great on a multi-tenant office building where the leases are written at full-service Gross terms that include all the utilities. But if you're doing that sort of analysis then you're already baking the income and expenses into your primary DCF anyway - you don't need the separate tool for that.

 

[Meandering]

All great questions.

An income stream that is not a commercial income stream, by state laws, and is the reason the size of the panels you can install are limited to your estimated monthly usage, and not complete coverage of the roof.

When you build the DCF, you have to consider the risk inherent in some of the estimates you make.

This net metering thing is fairly new, so changes to it are fairly new. I know of no legislation that protects net metering for residents beyond next year. Because the "discount" for solar power is predicated on the utility meeting a percentage goal for renewable energy, you would have to estimate how long it will take for the utility to meet it's goal, in order to have a credible EA that the "savings" projection will last X years or months. Just because the loan lasts for 3 or 10 or 15 more years, it has nothing to do with the projected longevity of the savings.

So the OP's utility is LIPA.

Dec 17, 2014
An energy company’s proposal to build a 7.5 megawatt solar power plant on at the Calverton Enterprise Park is one of 11 selected today by L.I. Power Authority trustees for development of 122.1 megawatts of renewable energy on Long Island.

LIPA trustees today also authorized a supplemental solicitation for an additional 160 MW of renewable capacity “commencing delivery as soon as practicable in the 2018-2020 timeframe.”

The councilman predicted that other solar projects will soon come to EPCAL’s energy park, given the LIPA trustees’ directive today to seek up to an additional 160 MW of renewable energy.

The LIPA trustees’ resolution, approved at a board meeting today in Uniondale, authorizes negotiation of negotiations for individual 20-year power purchase agreements with companies proposing 11 different solar projects.

In addition to the Hecate proposal, LIPA trustees today also gave a green light to three other proposed solar facilities in the Town of Riverhead, all on privately owned lands in the hamlet of Calverton.

Community Energy Solar proposes to build and operate a 41,500-panel 10.0 MW solar facility on Middle Country Road in Calverton. The site is on the south side of the road, just east of the enterprise park. (Target commercial production date: September 2016.)

Sybac Solar, plans to build a 44,500-panel solar plant that will produce 9.9 MW of electricity on at 450-500 Edwards Avenue, vacant land located on the west side of the road about one-third of a mile south of Middle Country Road. (Target commercial production date: July 2016.)

sPower proposes a 20 MW solar facility located on two parcels: one at 100-200 Edwards Avenue in Calverton, on the west side of the road, and the other at 400-500 Edwards Avenue on the east side of the road. The sPower facility will use approximately 93,000 panels. (Target commercial production date: December 2016.)

LIPA trustees also selected: the 108,000-panel 24.99 MW Tallgrass Solar proposal located between 5-50 Cooper Street on the south side of the road in East Shoreham; a 16.0 MW solar facility proposed for Captain Daniel Roe Highway in Eastport; a 10.0 MW solar plant planned for Fairmont Avenue in Medford; two proposals in Yaphank, a 9.8 MW facility on Ramsey Road and a 10.0 MW \facility on Horseblock Road; and two 2.0 MW solar facilities on Old Northport Road in Kings Park.

There were 38 proposals submitted in response to the request for proposals issued by LIPA in October 2013, according to a LIPA staff memorandum about the RFP, the selection process and the projects chosen for development. LIPA passed over wind project and fuel cell proposals.
http://www.riverheadlocal.com/2014/...ding-one-epcal-among-solar-array-11-projects/

So given the number of projects underway, approved, being negotiated, and considered, I would conservatively estimate that the OP's savings plan may last only 3 years, but could go 5 years.

If I were to build the analysis and present it here, it would be an appraisal, which I am not prepared to do, here. But you can look for yourself at the numbers the OP has posted, and saving $100 a month against a $109 monthly payment loan that has 14 more years to run, will not be pretty, based on only 3 more years of (income stream) "savings" before the utility shuts down the net metering program, which, it is only voluntarily providing now.

Yup it just will not be very pretty. Plus the costs to dispose of them at the end of their life.

I did not find information for New York, but here is what Mass says about dead panels.
http://www.mass.gov/eea/docs/doer/renewables/solar/solar-pv-guide.pdf

Page 7, as hazardous waste. Yikes, that isn't cheap in NY.

The DCF would be an intellectual waste of time for this property, at this time, and would take an enormous amount of time to verify time expectations for net metering, competing commercial projects, historic electric bills compared to recent electric bills, contrasting weather differences between the two years for number of storms that might have created too much outlier data when trying to estimate averages over future years.

Yeah, too much will be reliant on WAGS.

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[George Hatch]

Except that the spreadsheet printout looks all technical and impressive to the readers. It sure drew in our OP.

Minor changes to the *combination* of assumptions used in one of these can have a profound impact on the results. That's why we're cautioned to be careful with those assumptions.

 

[Meandering]

Cautioned?

CRs believe detailing Sales adjustments is a lot of work.

Start detailing the estimates and backup data for credibility in a complex DCF. Like CRs, we can not just pull an estimate out of thin air. We have to have what the public knows, we have to have known, or should have known, and can verify to the best of our ability.

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[Randolph Kinney]

You know, a roof does not last forever. If during the remaining time or life of solar PV panels, the roof needs to be replaced, or repaired requiring the removal of the solar PV panels, that is an additional expense.

DCF analysis requires (besides the discount rate) a time series of additions and subtraction to the income stream as Marion and George have indicated and Michael S showing the risk free analysis of the present value of a dollar. It all depends on the assumptions and things change with time.

Personally, I have interviewed several buyers as to why they would pay extra for solar PV panels on an existing home. Some said they would never consider them because they are ugly (Cigar's observation included a political statement). Others would never pay more than the income stream for 5 years max. The unknown is what happens, for whatever reason, you have to move (job requires relocation, or you lose your job). Having the solar PV panels financed is a complication when selling the home.

Bottom line, look to the market for the acceptance and the contribution to value.

 

[Meandering]

Another thing about this that is bothering the heck out of me is it is Long Island.

There are far too many residential properties that have 35-50 front foot lots that are 35-50 feet deep, meaning they have shade influences from other properties. If they build a 3 story building adjacent, or one lot away, it will shade part of the roof of a single or 1.5 story home on a small lot. If they build a 3 or 4 story building across the street, it might shade the entire subject for most of the day, depending. In the city, can you force your neighbor to cut their tree back if it's shading your solar panels? I don't think so. And never mind the neighbor. Those trees that are planted along the side walk will also grow, and may shade a property, to which the property owner would have to fight with the city about. I'm not saying the OP's house is on a small lot, but because there are lots of small lots, it may be an influencing reason why there are fewer homes with solar panels. So in my mind, a property fit to have solar panels if on level topography, would need about 100 feet front, back and side yard to escape shade influences from neighboring properties. I might be wrong on that 100 feet, as I'm not an engineer, but I also know that the angle of the sun during difference seasons will enhance or detract from the length of shadow at the same time of day.

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[Cigar]

Marion:

In your post #80 you stated: "NYSERDA - Nope don’t find any financing program on their site." The OP claims to have gotten his loan from NYSERDA, if NYSERDA has no such loan program the OP has impeached himself/herself and at law a jury instruction can be given stating that nothing he has said is to be believed. Are you sure you are right and that there is no such program and hence the OP has no such loan?

Another question is why is he/she here? He already has paid to improve his property including the solar panels paid for with the loan, does he really have to get an appraisal a few thousand higher to refinance his home? He's stated that he intends to pay the home off early, taking a smaller loan would go a long way towards that admirable objective.

Yet another question, why did the AI all of a sudden come up with a way to capitalize solar installations, that seems out of character for them, government pressure or government money?

 

[nicholz12]

Marion:

In your post #80 you stated: "NYSERDA - Nope don’t find any financing program on their site." The OP claims to have gotten his loan from NYSERDA, if NYSERDA has no such loan program the OP has impeached himself/herself and at law a jury instruction can be given stating that nothing he has said is to be believed. Are you sure you are right and that there is no such program and hence the OP has no such loan?

Another question is why is he/she here? He already has paid to improve his property including the solar panels paid for with the loan, does he really have to get an appraisal a few thousand higher to refinance his home? He's stated that he intends to pay the home off early, taking a smaller loan would go a long way towards that admirable objective.

Yet another question, why did the AI all of a sudden come up with a way to capitalize solar installations, that seems out of character for them, government pressure or government money?

AI probably came up with the analysis as I am sure there are appraisers, homeowners, lenders etc. scratching their heads and thinking... shouldn't this be worth something or not, And, how are we going to handle this, perhaps some legal battles are already in the pipeline re this situation. We've had no direction from AI or from state instructors on how to handle this as far as I know.
I think the residential appraiser is left holding the bag on this one as in many parts of the country there are insufficient comparable sales and listings to warrant credible results with the comparable sales approach.

 

[Mikeyvee17]

Marion:

In your post #80 you stated: "NYSERDA - Nope don’t find any financing program on their site." The OP claims to have gotten his loan from NYSERDA, if NYSERDA has no such loan program the OP has impeached himself/herself and at law a jury instruction can be given stating that nothing he has said is to be believed. Are you sure you are right and that there is no such program and hence the OP has no such loan?

Another question is why is he/she here? He already has paid to improve his property including the solar panels paid for with the loan, does he really have to get an appraisal a few thousand higher to refinance his home? He's stated that he intends to pay the home off early, taking a smaller loan would go a long way towards that admirable objective.

Yet another question, why did the AI all of a sudden come up with a way to capitalize solar installations, that seems out of character for them, government pressure or government money?

Refer to post #118 which is a link to the New York State program where I obtained my loan.

 

[Meandering]

Marion:

In your post #80 you stated: "NYSERDA - Nope don’t find any financing program on their site." The OP claims to have gotten his loan from NYSERDA, if NYSERDA has no such loan program the OP has impeached himself/herself and at law a jury instruction can be given stating that nothing he has said is to be believed. Are you sure you are right and that there is no such program and hence the OP has no such loan? ?

I am sure I am right that I found no financing program from their website. As far as impeachment goes, the OP's story starts with he paid $60k for solar panels the appraiser said had no value, then gets changed to the cost of the solar panels was actually only $30k but then after rebates was a cost to him of about $15.5k then if you do the math based on his second day loan terms, as the first day's stated loan terms don't work, so based on the second day's loan terms he had to put down $279 in cash to wind up with a monthly payment of $109.02, so yeah, I'd say he impeached himself from the beginning.

Another question is why is he/she here? He already has paid to improve his property including the solar panels paid for with the loan, does he really have to get an appraisal a few thousand higher to refinance his home? He's stated that he intends to pay the home off early, taking a smaller loan would go a long way towards that admirable objective.

If I were to venture a guess of why he's here I'd have to be playing psychoanalyst. I am not a psychoanalyst but would venture his $60k imaginary cost has been used to impress neighbors and friends, and sounds really good when someone else says it's worth nothing. So, if we do the numbers and a bit of research, it's a losing position, financially, and there must be a need to inject cash, so get a new loan, based on a higher value. It did not happen for him and he's mad.

Yet another question, why did the AI all of a sudden come up with a way to capitalize solar installations, that seems out of character for them, government pressure or government money?

Again, I'd have to be playing psychoanalyst to answer that. But, I would venture why as the market was crashing did the AI meet with the Treasury and change the definition of disposition value from a future value to a current one? Couldn't have been that with a declining market, a future disposition would result in lower numbers than a current one? Nope, I have no idea what the AI thinks. But, I also have no idea why in the midst of an economic collapse, we suddenly need a solar program, universal healthcare and new, more encompassing free trade agreements. Just doesn't seem like an opportune time to expect people to come out of pocket for things they had done without for so long. But again I'm no psychoanalyst. I just read the market and report.