Navigating Solar Power Investments

Navigating Solar Power Investments: What Homebuyers Should Know

The allure of solar power is undeniable, particularly in sunny states like Arizona, where energy savings and environmental benefits are top of mind for homebuyers. However, recent industry shifts—like the bankruptcy of major player SunPower—highlight the potential risks buyers should consider when purchasing homes with solar systems.

Key points:

• The Rise and Fall of Solar Industry Giants
• Understanding Solar Panel Longevity in Arizona
• Potential Savings from Solar with SRP
• Key Risks for Buyers: What to Watch Out For

The Rise and Fall of Solar Industry Giants

From 2015 to 2022, residential solar installations in the U.S. grew by an average of 15% annually. While purchasing your solar system outright is certainly an option, many homeowners chose Power Purchase Agreements (PPAs), which allowed them to install solar with no upfront costs. However, SunPower, once a leading solar company, recently filed for Chapter 11 bankruptcy, having lost $200 million in 2023. The downfall was due to high interest rates, internal financial issues, and market shifts in 2024. Industry experts, like Gordon Johnson from GLJ Research, have warned that the solar industry is "rife with fraud," adding further uncertainty for homeowners looking to invest.

For buyers considering homes with existing solar systems, SunPower’s collapse illustrates potential risks, such as losing warranty protections and uncertainties about ongoing maintenance.

Understanding Solar Panel Longevity in Arizona

Arizona’s intense desert heat, while perfect for solar energy production, can also pose challenges for the long-term durability of solar panels. Most panels are built to last between 25 and 30 years, but their efficiency slightly decreases over time, dropping about 0.5% each year. This means that after 25 years, your system may still operate at around 88% efficiency. Regular maintenance, such as cleaning panels and inspecting connections, can help mitigate the effects of Arizona's harsh climate.

Potential Savings from Solar with SRP

For homeowners in the Salt River Project (SRP) service area, solar systems can lead to significant savings. SRP offers net metering programs that credit homeowners for excess electricity generated by their solar panels. Depending on the size of the system and electricity usage, homeowners can expect to save between 20% to 50% on their energy bills. However, it’s essential to stay informed about SRP’s solar policies, as they can change and impact long-term savings potential.

Key Risks for Buyers: What to Watch Out For

Before purchasing a home with a solar system, buyers should carefully review:

• Warranty and Maintenance: Does the solar company still exist? If not, who will honor the warranty or provide ongoing maintenance?
• Power Purchase Agreements: Ensure you fully understand the terms, including transferability and the cost implications of these agreements.  It’s important to understand that a PPA agreement becomes a lien against your property that must be paid off or assumed by a potential buyer of your home should you decide to sell the home.  This often poses a challenge for potential buyers who are cost-conscious. It is not uncommon for buyers to insist that the PPA be paid for by the Seller during the escrow period. 
• Solar System Age: A system nearing the end of its 25-30 year lifespan may need expensive replacements or upgrades.

Solar energy can be a fantastic investment, especially in Arizona’s sun-soaked climate. However, as the SunPower example shows, industry uncertainties and potential risks should not be overlooked. Buyers need to do their due diligence on solar agreements, warranties, and the financial health of the companies involved to make a well-informed decision.

For more information, be sure to check out updates from SRP and EnergySage for the latest in solar policies and options. And remember, work with us at the Sonoran Lifestyle Team at RE/MAX Sun Properties, your local Fountain Hills Realtors, to navigate your solar power investments effectively!