Planning Your Investment in Solar Energy

Planning Your Investment in Solar Energy

Are you put off by the cost of installing solar panels on your home? If you think it’s too much of an expense, you might want to think again. The installation and use of solar energy should be viewed as an investment from which you’ll see profitable returns in your home, your health, and the environment. The potential gains are real, which is why states are seeing the benefits of investing in renewable energy sources. In 2015 the Hawaiian legislature passed a mandate calling for a reliance on renewable energy for 100 percent of its electricity needs by the year 2045, and much of that will be solar. And the U.S. Department of Statistics estimated that during a three-hour period on March 11, 2016, the state of California was receiving 40 percent of its electrical energy from large-scale solar power plants. California’s goal is to be utilizing green-energy sources like solar for half of its electricity needs by the year 2030. Now that the cost of installing solar energy systems is decreasing, it makes even more sense for states — and you — to invest in solar energy.

Investing in Solar Energy: Financial Considerations

There are myriad financial implications to consider regarding the installation of solar energy systems for your home. According to EnergySage.com, the average cost to install solar panels on your home is $16,800. However, this number is a gross estimate assuming a system size of 5000 watts. It fails to take into account the ways this cost is offset, as referenced below.

Residential Renewable Energy Tax Credit – Instituted in 2005, the Investment Tax Credit (ITC) was set to expire in 2007. Given the success of the tax credit in moving homeowners toward renewable energy sources, it has been extended through Dec. 31, 2021 albeit in gradually reducing value. The maximum credit allowed is 30 percent for systems installed before Jan. 1, 2020, 26 percent for those installed during the 2021 calendar year, and 22 percent for those installed between Dec. 31, 2020 and Jan. 1, 2021.

Reduced Energy Costs – According to EnergySage.com, average savings in energy costs varies depending on where you live. Homeowners in Portland who use solar energy save an average of $38,000 over a 20-year period, and those in Los Angeles save an average of $90,000. You can estimate the break-even point on your solar system installation at EnergySage.com.

Increased Home Value – The National Renewable Energy Laboratory (NREL) found that homes with solar panels sell for 17 percent more than their traditionally powered counterparts. In addition to being sold at a premium, homes with solar systems installed typically sell 20 percent faster.

Cash Rebates and Energy Credits – Many counties and other municipalities offer cash rebates to homeowners who install solar systems. Some also offer performance-based initiatives, meaning they pay you for electricity that your system produces.

Buying vs. Leasing – You can buy a solar panel system outright or, much like renting, you can enter into a power purchasing agreement (PPA) or lease when you have your system installed. When you buy a system, you own it forever and it stays with your house unless you have it removed. With a lease or PPA, you get to use the system for the period noted in your contract – typically 20 years, during which time you’ll save around 10 to 30 percent on your monthly energy bills. Some agreements require no money down; others require an upfront payment. When you purchase a solar energy system, you are entitled to cash rebates, tax credits, performance-based initiatives and other financial incentives. When you lease, these financial incentives will be granted to the company that owns the system. The terms of your lease will depend on what state you live in and your installer’s terms, so do your homework, compare a few different companies, and explore your options.

Your Solar Energy System Investment: Do the Math

Before you sign any contracts for purchasing or leasing a solar energy system, you should run the numbers and do some budgeting. Generate a cheat sheet and/or spreadsheet you can use to calculate the real cost — and ultimate savings — of your investment in residential solar energy. Find out what rebates or other financial incentives are offered by your city, county, state, and electric company. Factor in your allowable tax credit and estimated savings on electricity per month, year, or other period. Consider if and when you might be selling your home, and request estimates from a few different contractors/installers. If you’re skilled at DIY projects, consider installing solar roof panels yourself to save even more money. Finally, calculate your break-even point; you might be surprised to find that your solar energy system could pay for itself in as little as ten years.

Return on Investment (ROI): Intangible Benefits

Intangible BenefitsNow that you know approximately how long it will take to get monetary payback from your solar energy panels, consider the additional benefits of having a solar energy system. The ability to budget your energy costs for a 20-year period, or longer, means no surprises from the electric company when they decide to raise their rates. And because solar panel manufacturers guarantee their product for at least 20 years, your investment is secure in a performance-guaranteed energy system. Solar panels provide other intangible benefits including reductions in carbon dioxide emissions, and air and water pollution. The improved environmental conditions brought about by replacing fossil fuel energy sources with solar and other green-energy sources help reduce time lost from work, premature death, and a wide variety of health problems. Additionally, if you employ a battery system in conjunction with your solar panels, you can store energy that can be used during power failures.

Solar panels are becoming more popular for good reasons. The savings are real and the cost of installation has made solar energy a product of the present, not the future as it once was. By investing in solar energy, you can ultimately save money and make positive changes in the environment. Plan your investment in solar panels today while the cost is low and tax incentives are still in effect. You’ll be glad you did.

 

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