Two factors are making solar panel installation a better deal for homeowners than it was in the past—the federal and state tax incentives, and the rising cost of electricity from traditional sources.
According to a study from the Edison Electric Institute, electricity prices went up 2.5% annually from 2000 to 2006, (which means they beat inflation, which was calculated to be increasing 1.99% annually in that period) and are following a steady upward trend. That rising cost is being driven in part by the rising cost of fuels, such as coal and natural gas.
As those lines continue to go up, so will your electricity bill. That means making an investment in solar panels likely to pay for itself in a shorter period of time.
On top of that, there are the tax credits. In an effort to encourage homeowners to go green, the U.S. government has offered significant tax credits for installing solar panels as an alternate energy source. While a tax break that allowed renewable energy companies to recoup 30% of a new project back as a cash grant after construction expired this year, a residential federal tax credit of 30% will remain in place until December 31st of 2016.
Additional credits vary state by state, but if you live in a sunny state with a high solar rating—a measurement of the average solar energy available for your home—such as Arizona, California, or New Mexico, you may find additional incentives like cash back, waived fees, and expedited permits. You can look up the available credits in your state here.
How much will residential solar panels cost me—and how much can I save?
Solar panels don’t come cheap: with installation, they can cost around $5 per watt, or $15,000 for an average residential 3kW system. While the system itself is a significant initial investment, it has immediate monetary and environmental benefits.
The average U.S. household consumes about 1 kW per hour of electricity, or 900 kWh per month. For example, an energy efficient fridge will use about 350 kWh per year (at an average utility cost of $0.12/watt, that’s less than $50 a year), while a large plasma screen TV can use as much as 700 kWh per year (about $100/yr).
But those costs aren’t expected to stay steady—remember that electricity costs are on the rise, and your use of electricity probably is, too.
If you installed a 3kW system, you can approximate that, based on an average amount of sunlight, the system would create 450 kWh per month—about half of your monthly electric bill. Estimating that bill at $100, your initial investment will save you approximately $50 a month for the life of your solar panel system.
Research offers from different solar companies—some have programs that lower your cost of installation substantially. For instance, Gen110 gives users a low cost installation of solar panels as well as a guaranteed electricity rate.
If you live in a state with a suitable solar rating and can afford the initial investment, it’s well worth installing solar panels in your home while the 30% tax break is in place—for the good of the environment, but also for your wallet. You can approximate the solar rating and effectiveness of a solar energy system in your hometown here simply by entering your zip code, your utility provider, and the cost of your monthly energy bill.
If you do decide to install solar panels, keep an eye out for other government incentives. A few states, including Oregon and California, allow homeowners with large solar panels to essentially sell excess power to their local power companies through “feed in tariffs,” resulting in residential income of hundreds of dollars a year. These systems are limited and fill up quickly, but as solar power continues to grow in popularity across the United States, citizens and lawmakers are pushing to expand the program. Keep in mind, however, that as alternative energy becomes more popular the prices will continue to fall—don’t invest in solar panels with the expectation that you will recoup the expenditure in the resale of your home.
Above all, remember that even though your solar energy panels are saving the planet—and, eventually, your bank account—it’s still important to conserve energy as much as possible.