Solar Economics

 

The cost of solar power is the most commonly asked question we get and the answer is, “it depends.” There are so many different types and sizes of roof — from steeply pitched Spanish tile roofs to flat, tar-paper ones — and energy needs are quite different from one house to the next, too. The homes in your neighborhood may be similar in size and roof type, for instance, but if you own a hot tub and electric car, you’re probably going to need a larger solar system than a neighbor who doesn’t have these things. Rebates and incentives vary dramatically from state to state. The cost of the solar panels themselves also varies depending on their efficiency and design.

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All these factors affect your out-of-pocket price tag of solar power, so trying to pin down a typical system cost is close to impossible. This is why we direct users to our online estimate tool to start getting a rough idea. You should follow that up by requesting a detailed price estimate from us (you can do that by signing up free here). Note, no matter who is providing you with an estimate, there should never be a charge.

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If we had to name a range of how much solar power costs, we’d say the average “turnkey” solar system (panels and installation) costs between $10,000 and $20,000 before rebates and incentives, but federal, state, and local incentives typically bring that out-of-pocket price tag down considerably and in some states — magnificently — resulting in systems that pay for themselves in just a few years. Here’s an infographic on the average cost of solar by state in the U.S., too. In places where multiple incentives were available, we’ve actually seen homeowners go solar for as little as a few thousand dollars. The arrival of solar purchase power agreements and solar leasing, too, creates a brand new option for homeowners: going solar for little or no money down. (More on these options below.)

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How to Bring Down the Cost of Solar Panels

 

Federal Solar Incentives:

Starting in 2009 the $2,000 cap on the Federal Solar Tax Credit has been lifted and instead it is 30% of the out-of-pocket cost with no cap. This rebate is a reduction of your tax obligation. It is not a deduction, it’s a credit. Its as good as cash and can be rolled over if you don’t have that tax liability.  Note, if there is a rebate provided by a utility to a homeowner as an inducement to install solar panels, then the basis of the solar equipment is reduced by the amount of the rebate.

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State and Local Incentives:

State and local incentives vary widely, change frequently, and can sometimes go all the way down to the zip code level. 

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Solar Leasing

The arrival of solar leasing is the single biggest reason U.S. solar adoption has increased so dramatically in the last few years. Homeowners love leasing because it eliminates the big upfront cost of going solar and saves them money from the very first day. You pay a monthly fee to lease a solar system on your roof. This fee is significantly lower than your former utility bill– and your rates are locked in for a period of fifteen years or more, so you know exactly how much your electricity spend will be from year to year. (By contrast, utility companies are raising their rates by an average of six percent a year).

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Other Financing Products

Even if rebates and incentives are paying for more than half of the costs of purchasing a system, there can still be a considerable cash outlay to the consumer. Interestingly, many who finance solar with a home equity loan find that their electricity savings are immediately greater than their loan payments, meaning this is another way solar can save the homeowner money from day one.

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A Tip on Shopping for Solar

If you’re purchasing a solar system, be sure to get a per watt price (versus a total project price) so you can easily compare quotes side by side. If you’re leasing a system or considering a solar power purchase agreement (PPA), the pricing is a bit more complex. With these, you’ll look at your total spend for the lifetime of the agreement, as well as your short and long term return on investment. Note, it’s usually wise to get pricing on all your options for buying solar panels, so you can compare your return on investment between methods.

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The Financial Benefits of Solar

• Save On Electricity Costs
  Your solar system will reduce your electric costs. When your system is producing more power than you are using, you sell that power to the utility company. As you do so, your meter actually spins backwards!

• Stabilize Your Monthly Expenditures
  In 2011, U.S. electricity rates experienced their fifth consecutive yearly increase above the inflation rate, and the utilities show no signs of stopping. These days, utilities are often raising rates in the name of funding big, new energy projects that haven’t been built yet and if those projects are even vaguely “green” in nature, they charge a premium. You can keep a lot more of your hard earned money simply by putting some solar panels on your roof. Whether you buy or lease, your electricity costs are stabilized.

• Increase the Value of Your Home
  A 2011 study by NREL (National Renewable Energy Lab) caught everyone’s’ attention when it found homes with solar panels sold 20 percent faster than non-solar homes and fetched a 17 percent higher asking price. For more information, see the table below. You can also check out this video on solar home value or this infographic on why some homes sell faster. There’s also this article: “Real Estate Sees Solar in a New Light.”

(Tables from Andrew J. Black’s Why Is A Solar Electric Home Worth More?)

• • Get a Positive Return On Your Investment
    Have you ever asked a car salesman what the “paypack period” is for a car? There isn’t one. Solar is one of the few things you can purchase that actually pays for itself. In some states, it even outperforms traditional investments like a CD or the stock market  because you’re saving more per month than any interest payment you could receive and possibly receiving incentives like SRECs on top of that. For most solar homeowners, payback occurs within three to ten years, depending on how expensive electricity where they live and what incentives are available in their state. A homeowner paying $200 or more per month prior to going solar will have a much shorter payback period than someone whose average electric bill was $75.

Solar Power-Advantages and Disadvantages

There are many advantages worth considering when it comes to solar energy and everything that it offers. There are many advantages that solar energy has over oil energy. Not only does solar energy benefit your pocketbook, but it also benefits the environment as well. However, there are two sides to everything, and there is a list of solar power disadvantages to accompany the list of advantages.

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Advantage: Solar energy is a completely renewable resource. This means that even when we cannot make use of the sun’s power because of nighttime or cloudy and stormy days, we can always rely on the sun showing up the very next day as a constant and consistent power source.

 

Disadvantage: The Solar Cells and Solar Panels that are needed to harness solar energy tend to be very expensive when you first purchase them.

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Advantage: Oil, which is what most people currently use to power their homes, is not a renewable resource. This means that as soon as the oil is gone, it is gone forever and we will no longer have power or energy.

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Disadvantage: Solar power cannot be harnessed during a storm, on a cloudy day or at night. This limits how much power can be saved for future days. Some days you may still need to rely on oil to power your home.

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Advantage: Solar cells make absolutely no noise at all. They do not make a single peep while extracting useful energy from the sun. On the other hand, the giant machines utilized for pumping oil are extremely noisy and therefore very impractical.

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Advantage: Solar energy creates absolutely no pollution. This is perhaps the most important advantage that makes solar energy so much more practical than oil. Oil burning releases harmful greenhouses gases, carcinogens and carbon dioxide into our precious air.

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Advantage: Very little maintenance is required to keep solar cells running. There are no moving parts in a solar cell, which makes it impossible to really hurt them. Solar cells tend to last a good long time with only an annual cleaning to worry about.

 

Advantage: Solar panels and solar lighting may seem quite expensive when you first purchase it, but in the long run you will find yourself saving quite a great deal of money. After all, it does not cost anything to harness the power of the sun. Unfortunately, paying for oil is an expensive prospect and the cost is still rising consistently. Why pay for expensive energy when you can harness it freely?

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Advantage: Solar powered panels and products are typically extremely easy to install. Wires, cords and power sources are not needed at all, making this an easy prospect to employ.

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Advantage: Solar power technology is improving consistently over time, as people begin to understand all of the benefits offered by this incredible technology. As our oil reserves decline, it is important for us to turn to alternative sources for energy.