Consider solar if your utility bill is high, you live in an ideal location, and you qualify for tax savings or other savings.
As traditional sources of electricity become increasingly expensive, solar panels seem like a no-brainer for homeowners.
There are a few key factors that determine whether solar panels save you money or not. It is estimated that installation and the system together can cost between $15,000 and $25,000, according to the Center for Sustainable Energy.
Electricity prices are affected by location. In 2021, the nation's average electricity cost will be about 13 cents per kilowatt-hour, according to the Energy Information Administration.
You should consider your electric bill, location, and incentive options before making a choice. To figure out whether solar panels will save you more than you spend, follow these six steps.
1. Assess your electric bill-Solar panels generate their own power and therefore can significantly reduce, if not eliminate, your electricity bill. Switching is more likely to be beneficial if your bill is high. It is important to keep in mind that electricity rates and usage - the major charges on your statement - can fluctuate.
"If a utility's electricity prices fluctuate, so could the savings," says James Nelson, deputy director at the Department of Energy's solar energy technologies office. "The degree of energy savings can also vary if consumption changes."
2. Measure how much sunlight you are exposed to - The more sun there is, the more energy it can produce and the more solar power you can save. In certain states, like Arizona and California, there are more daylight hours per day.
In addition to the orientation of your home, how much shade it receives and the type of roof on your home all affect the performance of your solar system. Calculate the efficiency of panels in your area using a solar calculator.
3. Calculate the cost of solar panels - Installing solar panels and purchasing solar panels account for the majority of the costs.
The long-term expenses can compensate for the upfront costs. “Quality systems don't need much maintenance and last up to 25+ years with not much change to electricity that is produced," Nelson says.
Consider how much energy you typically consume - your consumption is listed on your monthly utility bill - and what size will generate the amount needed when calculating the total price. You can estimate the size of your system using some online tools, such as the solar calculator.
A 5kW residential solar energy system costs between $3 and $5 per watt, which comes out to the $15,000 to $25,000 range. Keep in mind that this is the cost before the federal tax or other state credits and incentives.
It's suggested to get three to five quotes from various contractors. Look through Better Business Bureau, customer reviews and certifications profiles, and other information to help you find the best solar providers.
4. Consider incentives - For homeowners who install solar panels, the government offers significant incentives. Federal tax credits allow taxpayers to claim 26% of installation costs for systems that are placed in service by Dec. 31, 2022. By 2023, the credit will be reduced to 22% and expire in 2024, unless Congress renews it.
Federal tax benefits are nonrefundable, so the savings cannot be refunded. Rather than paying more in taxes, you can reduce - or even eliminate - the amount you owe.
Credits may vary according to location. You may receive additional incentives, such as cashback, property tax exemptions, waived fees, or expedited permits, depending on your state. Some states allow homeowners with solar panels to sell excess power to their local utilities. Check out the database of state incentive programs for renewables and energy efficiency to learn about credits available in your state.
But benefits will not last. It may not be worthwhile to wait too long once incentives disappear.
5. Be aware of trade policy - Government trade policies also affect prices. During the first month of 2018, President Trump increased import tariffs on solar cells and panels by 30%, with the percentage set to drop 5% every year until February 2022. In 2020, the tariff rate will increase to 18% from 15%. A 16 cent increase per watt resulted in a $960 hike for a six-kW system in 2018.
As foreign-made panels become cheaper, the effect of tariffs may weaken over time.
6. Take action - Solar panels are worth installing on your home if you live in an area with high energy rates and a suitable solar rating, and you can afford the initial investment - both for the benefit of the environment and your wallet. Do not expect your electricity bill to go away overnight.
Make sure you shop around and look for incentives before purchasing solar panels. You can lease solar panels as well as buy them. Although this method has a lower upfront cost, you may not be eligible for incentives because you don't own the panels.
