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The cost of installing solar panels for homes have gone down significantly, and there’s no question they provide a lot of benefits. But is it really worth investing in renewable energy? Instead of just yes or no, I will explain the facts so you can decide.
Solar panels are worth it because it will reduce your power bill significantly. But if you have affordable power rates and low energy requirements, solar panels might not be for you.
We will look at the various aspects of going solar in a bit. For now I want to give you an idea of the cost vs. how much solar panels can save you.
To find out if solar power is for you, you must know the following:
- How much solar panel installation costs
- How much power solar panels can generate
- Number of years before the system pays for itself
How Much Do Solar Panels for Home Cost?
The average cost of installing solar panels for home is $4000 to $16000. The cost will be higher if you add battery storage.
The range is vast because solar panel systems come in different types and sizes. There are additional costs that you have to factor in as well:
Installation fee: this will depend on the size of your solar panels
Inverter: solar panels produce direct current. An inverter converts this into alternating current so appliances will work.
Solar batteries: batteries are used to store solar power. You can run solar panels without batteries if your home is tied to the grid.
However, grid tied solar panels won’t work in case the grid shuts down. With batteries you can keep the lights on. If you are going to install solar batteries by the way, make sure the capacity is sufficient for your needs. Solar battery installation can cost $5000 to $15000.
Additional costs: metering (to monitor power output) charge controller (if you install batteries), wires, cables and maintenance. Solar panels have to be cleaned at least once a year. Your installer can do this for a fee or you can use Docapole solar cleaning equipment and DIY.
Solar panels usually have a 25-30 year warranty. However, inverters, charge controllers, wiring, batteries (if installed) have to be replaced after some years.
This is why solar panels are considered investments. It is capital intensive, but it will pay for itself eventually. And you can earn money from solar panels by selling excess output sent to the power grid.
Tax Credits and Subsidies
There are tax credits and subsidies for solar panel systems, but the amount varies. Typically the tax credit is up to 30% of the total expenses of your solar panel system.
You can find more information about subsidies at the DSIRE (Database of State Incentives for Renewables & Efficiency) website here.
I also suggest you check the local power grid for any additional subsidies they might offer, how to sell extra solar production and other information.
If you live outside the United States, consult your local government units or the energy department. They have the information you need about solar power subsidies and incentives.
How Much Power Can Solar Panels Produce?
To figure out the potential savings, knowing how much energy it can produce is a must. This is complex so I will simplify things for clarity.
The National Renewable Energy Laboratory (NREL) provides useful information for calculating solar power production throughout the US.
Size. Solar panel output is measured in watts, ranging from 250-400 watts. A typical home needs 20-30 solar panels which can produce 6-9 kilowatts.
Solar output is set in laboratories or ideal conditions. That won’t always be the case so you have to make allowances for the output.
There are also other factors that affect solar panel production:
Sunlight exposure: more direct sunlight, higher power
Temperature: solar panels benefit from sunlight, but too much heat can reduce production
Output capacity: the higher the wattage, the more electricity the panel can produce
I also want to point out that orientation is critical. Solar panels installed on south-facing roofs produce more power than those oriented in other directions.
Solar panels must also be free from obstruction. No trees, buildings, or other objects must be in its way.
How Much Can You Save with Solar Power?
It is difficult to give an exact number because it depends on your power consumption and how much the utility company charges. But this example can give you an idea of the potential savings.
The average monthly bill for U.S. homes is $125. If your solar panels supply all the power in your home, you can save up to $1500 every year.
You can see the effect when you’re billed, but we have to account for the installation cost first.
Most solar power installations end up costing around $12000 after the tax credits, rebates and incentives. You will break even in 8 years, assuming yearly savings of $1500.
Solar panels last for 25-30 years, so you can save up to $33000 for the duration of the system.
How to Calculate Your Savings
The figures I provided are based on the national averages. Yours is probably different so the savings could be a bit higher or lower.
To find out your potential savings from solar power:
- Find out the cost of installing a solar panel system. A solar installer can give you a quote.
- Deduct the tax credits and subsidies
- Determine how much power your solar panels can produce
- Compare it with your power bill
Suppose you paid $16000 to install your solar panel. You received a 30% tax credit, which brings the cost down to $11200.
30% of $16000 is $4800, so $16000-$4800 = $11200.
If your monthly bill is $100, you will save $1200 yearly after the payback. You can also earn money by selling excess solar power production to the grid via net metering.
Will My Home Benefit by Using Solar Panels?
Households that will benefit the most from solar panels are those that have high power rates. Connecticut, Hawaii, New Hampshire and Massachusetts have the highest electricity rates in the US.
If you live in any of those states, going solar will yield substantial savings. On the other end, Idaho, North Dakota and Utah have among the lowest electricity rates in the country.
There are other factors that you have to consider as well.
No obstructions. Your solar panels must be free from obstruction and face south. Production will be lower than expected if there are trees or buildings nearby.
Output capacity. How much solar power are you going to use? Wil it cover all your daily power needs? Or maybe 50%, 30%? Larger solar panel systems cost more but provide more power.
Battery storage. Adding batteries can double the cost of solar installation. But if your area suffers from long, frequent power outages it could be worth considering. Due to safety issues, grid tied solar panels won’t work in case of a power failure.
Financing Options for Solar Panels
So after conducting research, you have determined that solar panels are ideal. Here are your financing options.
Cash Payment. This is the most expensive option upfront. But you are eligible for a 30% tax credit and additional incentives. You don’t have to pay high interest rates and you may avail of rebates offered by your local utility grid.
Loan Financing. A solar loan is ideal if you do not have the means to pay full in cash. You are still qualified for rebates and tax incentives too.
Solar loans are similar to auto loans and applying is straightforward. But you have to pay an interest rate between 4-7%. This will increase the installation cost and it will take longer to recover your investment.
Power Purchase Agreement or Leasing. Instead of buying a solar panel system, you may lease them from a solar company. It works like this:
After you agree to the lease or PPA, the solar company will install the solar panels on your home for a minimal fee. In exchange you have to pay a fixed amount monthly. A PPA is cheaper than leasing, but you will not be eligible for tax credits or rebates.
The Bottom Line
If you do not consume a lot of power or the electricity bill in your area is low, solar panels might not be for you. The cost of installation may not be sufficient compared to the savings you can make.
If you want to go green and reduce your dependence on the power company, solar panels are worth it. If your power bills are sky high and you are willing to invest in renewable energy, then it is time to switch to renewable energy.
I am an advocate of solar power. Through portablesolarexpert.com I want to share with all of you what I have learned and cotinue to learn about renewable energy.