The money saved by reducing energy costs determines a solar system’s ROI. This calculation is based on initial investment costs, including tax credits or rebates, divided by the average annual electricity rate.
While the upfront investment may seem high, reputable solar installers often offer governmental or utility-based incentives that significantly reduce out-of-pocket costs and shorten the payback period.
How Solar Panels Can Save You Money
Tax Credits
In addition to lower energy costs, solar panels can save you money in several ways. First, you can claim the federal tax credit that covers 30% of the system cost. The credit is available to all homeowners who own their homes and itemize their taxes. This includes those who take the standard deduction. How much money do solar panels save depends on a few things, including your electricity usage, the size of your solar power system, and how much sunlight it gets. The average household uses about a thousand kilowatt-hours a month. If your system produces enough electricity to offset that usage, you can save almost $1,500 yearly.
To help offset the cost of a home solar power system, you can also claim state-specific incentives and rebates. These vary by state, with some offering cash back, property tax exemptions, or waived fees. You can find a list of state incentives on the Database of State Incentives for Renewables and Efficiency. In addition, many states offer annual incentives like solar renewable energy certificates (SRECs), which give you credit on your utility bill for the electricity your home generates.
Cost
The upfront costs of solar panels depend on your energy usage, roof size, and type of system. A solar calculator can help you determine the best system size for your home and what to expect in terms of upfront investment. Prices also vary depending on whether your system is grid-tied, grid-tied with storage (hybrid), or off-grid.
Most respectable solar companies provide free estimates for their systems. The cost of a solar panel system can be reduced by the 30% federal tax credit and state and local incentives. However, the overall cost of a solar system will always be higher when compared to a traditional power source like fossil fuels.
Once the initial investments have been made, your monthly energy savings will cover your home’s electricity costs. These savings can be recouped in 3 to 4 years, even less if you upgrade your system with battery storage.
The payback period can also be shortened by investing in a performance monitoring system, which can provide details about the performance of your solar panels on an hourly basis. Other factors that can impact the payback period include your location and how sunny it is in your area and the rate you are paying for utility power. For instance, a home solar power system can produce enough energy to meet its demand with just a few panels. In contrast, homes in cloudier states will need a more extensive system and may wish to invest in a backup battery to supplement their daily energy needs.
Energy Savings
Solar panels generate energy, which can significantly offset or even eliminate your electricity bill. This can reduce your dependence on finite fossil fuels, which hurts our planet.
Your savings can vary greatly depending on the size of your solar system and how much electricity you use. The average estimate is that solar power can save homeowners about $1,600 annually in electricity costs.
The cost of solar panels can be mitigated by various rebate programs, such as the Federal Tax Credit and state or local incentives. Additionally, many people choose to lease their solar equipment rather than purchase it. This lowers the upfront investment and can offer flexibility for household budgets.
How long it takes to earn back your initial investment depends on how much you spend on the solar panel project and what electricity rates are in your area. With current electricity rates and average annual electricity usage.
Solar can also help reduce energy costs in areas with high electricity prices.
Maintenance
While upfront costs are the bulk of the initial cost of solar panels, they can be offset by minimal long-term maintenance and repair costs. These primarily come from routine inspections, cleaning, and repairs. The exact cost of these services depends on the size of the solar panel system, its location, and how much sunlight it gets.
A good inspection should thoroughly assess the panels and all related equipment, including junction boxes and display meters. A qualified inspector will also look for corrosion and any signs of wear and tear. Additionally, the inspector should check to ensure no tree branches or new construction obstructs your panels.
Additionally, a quality inspection should include reviewing the warranty coverage on your solar panels. The provider you choose will significantly affect the overall panel performance and warranty coverage. Reputable providers include most maintenance costs in their all-in prices.
Many homeowners purchase a solar operations and maintenance (O&M) service package after installation. This option is less expensive than re-roofing or other post-installation costs, and it helps ensure your solar investment pays for itself and saves you money over time. Depending on your chosen plan, O&M can include maintenance and cleaning, monitoring, and insect control measures.
