Solar installation seems to be a no-brainer for many houses due to the growing cost of power generated from conventional sources and government incentives to reduce environmental impact.
However, the actual cost of solar panels and whether or not they will help you save money is contingent on a number of important aspects.
How much do solar panels cost for homes?
According to the most recent statistics from the Center for Sustainable Energy, the total cost of having solar panels installed together with the system may range from $15,000 to $25,000.
The cost of electricity varies widely depending on region. According to statistics compiled for the first 11 months of 2022 by the United States, the national average for the cost of one kilowatt-hour of electricity is around 14 cents. Organization for Energy Research and Development.
Learn how the long-term effects of your power bill, location, and any applicable incentives may affect your finances before you make the switch. Here are six measures you should take to assess whether or not you will save more money with solar panels than you would spend on them.
- Review your electric bill
Solar panels are able to produce their own energy and may thus significantly reduce or even completely remove the need for a monthly payment for electrical service. The higher your current bill is, the more probable it is that you will save money by moving providers. However, you should be aware that the principal costs on your bill, including power prices and use, are subject to change.
According to Garrett Nilsen, deputy director for the U.S. Energy Information Administration, "If a utility's energy rates increase, so may the amount of savings." The office of solar energy technology inside the Department of Energy. "In a similar vein, if the quantity of energy used varies, the amount of money saved may likewise fluctuate."
- Evaluate your sunshine exposure
When there is more sunlight, there is also more possibility for savings via the use of solar energy. Certain states, like Arizona and California, get an average of more hours of sunshine each day.
The output of a solar system is also impacted by factors like the direction of your house in relation to the sun, the amount of shadow it receives, and the kind of roof it has. Using the calculator provided by SolarReviews, you will be able to determine the effectiveness of the panels installed on your property.
- Estimate and compare residential solar panel prices
The installation and initial purchase of the solar panels themselves represent the bulk of the cost associated with using solar energy.
The initial investment may be justified by the low total cost of ownership over time. According to Nilsen, "the majority of systems don't call for very much maintenance and are meant to run for 20 years or more with very little change to the quantity of power that they generate."
When determining the overall cost, it is important to consider how much energy your household uses regularly (this information is often found on the utility bill you get each month) as well as the size of the system that can produce the required quantity of power. The size of the system may be estimated for you by using certain tools, such as the SolarReviews calculator.
According to the CSE, the cost of a typical household 5-kW system ranges from $3 to $5 per watt, which translates into a range of $15,000 to $25,000 when installation is included. This cost is calculated before applying any tax credits or incentives.
If you are aware of your present energy use, you will be able to determine how much money you will need to invest in solar panels.
According to Vikram Aggarwal, CEO of the solar marketplace EnergySage, you should shop around for solar panels in the same way that you would for other expensive things, such as a vehicle or a television. Certain firms provide rebates and other initiatives to lower the overall cost of installation.
Aggarwal suggests obtaining price estimates from three to five different contractors. EnergySage aggregates customer evaluations, certificates, and Better Business Bureau profiles of solar firms, in addition to other information, in order to assist you in locating reliable service providers.
- Take advantage of government incentives
A legislation that was just approved at the federal level provides financial incentives to homeowners who make improvements to their homes' energy efficiency, such as putting solar panels on their rooftops. The Residential Clean Energy Credit is a significant upgrade to an existing energy-related tax break that was scheduled to expire at the end of 2023. This credit enables taxpayers who have solar (and other authorized clean energy equipment) installed to recuperate 30% of the cost in the form of a federal tax credit. Previously, this credit was slated to expire at the end of 2023.
That translates to the fact that a solar system that costs $15,000 would result in a credit equal to $4,500 (30% of $15,000), which may be used during tax season to minimize the amount of federal taxes that are owing. The credit, however, does not include a refundable component. This means that any money left over after your total tax liability is paid will not be returned to you. However, the remaining portion of the credit can be carried over to other tax years and used to the payment of those taxes.
The credit is available for qualified equipment installed after the deadline of December 31, 2021, and it will continue to be offered at the 30% rate until 2032. After that, it starts to become progressively lower.
You may be eligible for additional benefits like cash back, an exemption from property tax, waived fees, and expedited permits, depending on the state where you reside. Homeowners who generate more electricity than they need from their solar panels may be able to sell it to their local utility providers in some states. Reviewing the database of state incentives for renewables and efficiency might help you get information on your state's credits.
- Keep an eye on trade policy
Alterations in the trade policies of the government may also have an effect on pricing. Throughout the last decade, there has been a wide range of tariffs placed on imported solar cells and panels, which has affected both supply and pricing. According to EnergySage, tariffs increased 16 cents per watt for the typical user in 2018, which resulted in an overall cost of $960 for a 6-kW system. Another example would be if tariffs caused a decrease in the value of the dollar.
In June of 2022, President Biden put a hold on the implementation of any additional tariffs for a period of two years.
- Decide whether solar is the right choice for your home
If you reside in a region with high energy costs and an adequate solar rating for your house, and if you can afford the initial expenditure, it is worthwhile to put solar panels on your home while the 30% tax credit is still available. Doing so will benefit both the environment and your financial situation. But you shouldn't anticipate completely disappearing your monthly electricity cost overnight.
If you want to buy solar panels, it is in your best interest to look for financial benefits. If you'd prefer to spread the expense over a longer period, you may want to investigate financing options such as solar loans. Keep in mind that you may avoid the expense of purchasing solar panels by opting instead to lease them. Leasing solar panels results in a reduced initial cost; but, since you do not own the panels, the addition of solar panels will not increase the value of your property, and you may not be eligible for any financial advantages.