It’s no secret that solar energy is the most abundant renewable energy in the world. We get it directly from the sun, after all. It’s the cleanest renewable energy too.
Considering that the sun has been shining for billions of years now, we are kind of late in adopting solar energy. The idea has been around for a while. Yet homeowners are only starting to use solar panels to harness solar energy for their homes.
But is solar energy cost-effective?
It’s true that solar panel systems are more affordable now. With the government backing this initiative, producing power is now a real possibility.
Do the savings outweigh the initial installment costs? Let’s find out below.
Dissecting the Costs
You might have heard this a thousand times: you’ll save a lot using solar panels. People will then give you vague numbers and present them as your projected savings.
However, that number differs in each home. You can’t know for sure how much your savings will be unless you take the time to calculate it.
So is solar energy cost-effective for you? See for yourself by looking at the following factors.
Your Electricity Bills
On average, residential electricity rates are at 12 cents per kilowatt-hour. Based on location, though, it can go as low as 8 cents per kWh and as high as 20 cents per kWh. Rates also tend to fluctuate over the years.
Then, you have to consider how much electricity you’re using. Are you on the low end or do you end up paying huge bills every month?
If you install solar panels, the cost of the system will replace your bills (in an ideal setting). You’ll be generating your own electricity; if you produce enough resources for your home, you won’t be getting bills from your usual electricity provider anymore.
That said, those with higher bills will get more savings out of solar panels than those who don’t use much electricity.
Still, having solar panels will protect you from fluctuations and surges in price. You can also keep enjoying it decades after you’ve paid it off.
The Cost of the Solar Panel System
After your electricity bills, you should also consider how the costs of solar panels. Cheap systems will look enticing, as they will allow you to save a significant amount each month. However, they may not be the best option if you’re aiming for long-term savings.
Higher quality equipment will last longer. They’ll keep producing electricity for you for a longer time. Your total savings in 25 years will be higher than if you opt for cheaper equipment.
You have to review all your options first and see what you can afford. Consider this together with your bills to see if going solar today is more cost-effective for you.
Remember that the biggest solar companies don’t always have the best offer, although they may have the advantage of being more reliable and having more experience.
Your Payment Plan
Do you have a huge sum of cash lying around for some solar panels? Paying in cash nets you the most savings; you’ll get an ROI in no time. But installment plans can help you save too.
Instead of electric bills, you’ll be paying a monthly installment fee. This is still usually lower than your bills (again, it depends on your electricity usage and cost of solar panels), but you might be looking at only 10 to 30% savings.
If you choose to lease solar panels instead, your savings will be even lower.
After paying off the solar panel system, you still have to pay for maintenance and part replacements. While the panels usually have warranties lasting over two decades, the other parts may have a shorter warranty period.
There’s no easy way to calculate how much you’re going to spend on maintenance. But you can try to make guesses based on the current prices of replacement parts and their lifespan.
Location and Sun Exposure
You’ll get the most out of your solar panels if you live where the solar resource is abundant. Areas like the Southwest receive more sun year-round. As such, solar panels can produce more power in a single day.
However, even the Northeastern U.S. can benefit from solar panels. Since the electricity costs are higher here, they’ll still get huge savings.
Tax Credits and Incentives
The Northeastern folks also benefit from better local incentives. Such incentives are available anywhere though.
The federal government gives tax incentives to encourage citizens to adopt solar energy. You can get as much as 26% of your total installment costs as a tax credit. Most homeowners are eligible, so make sure you check that out.
Is Solar Energy Cost-Effective for You?
You’ll need to account for all the things above to determine your ROI.
First, you need your electric bills for the last 12 months. Add them up and then multiply by 25 (this is the average lifespan of solar panels). Keep note of that number; this is the lifetime utility power cost.
Next, let’s calculate the cost of the solar panel system. Use an online calculator to determine the size you’ll need based on your monthly electric consumption. Then, look around for some published prices of systems.
Then, calculate the installation costs, tax incentives, and projected maintenance costs. Add them to the cost of solar panels.
Finally, subtract the cost of solar panels from the lifetime utility power cost. This is your ROI; if it’s a positive number, that’s your projected savings. If it’s negative, that means you’ll be spending more than you’ll be saving.
You can now see: is solar worth it for you?
Of course, this is only an estimate. It doesn’t account for things like an increase in utility rates, repairs, and unforeseen circumstances like moving out of your home.
So Are Solar Panels a Good Investment?
With so many factors to consider, is solar energy cost-effective still? We know one thing for sure: it will always pay itself back in no time, as long as you choose a reputable solar company.
Savings aside, you’ll also be helping the planet recover by using renewable energy. Why not save money and help save the environment at the same time?
Of course, there is a lot more to learn before you invest in solar energy. If you need more help, feel free to check out our other posts right here to discover more great tips.