Is solar power really worth it? This is the question that all homeowners who are considering going green ask themselves. And the question that usually follows it is: Is it worth it in my state, or my city? For most people living in the U.S., the answer is yes. Solar power is worth it!
Solar prices in 2020 are at their lowest in history. An average 6kW system cost is around $18,000 today, compared with the $40,000 that you would have had to pay in 2010. When you factor in the Federal solar tax incentive, the price could be as low as $11,000. To learn more about solar installation costs, visit here. A 6kW solar energy system can also save you around $1,080 yearly on your electricity bills. This amount may vary depending on where you’re located, your energy consumption, and the residential electricity rates in your area.
Is Solar Investment Worth It in the U.S.?
In 2020, coal’s share of electricity generation fell by 4%, while electricity generation from renewable sources grew by 3%. Coal has been dethroned by carbon-free sources because renewable energy has become more cost-effective, flexible, and, of course, better for the environment. As conventional electricity rates are increasing, more homeowners are leaning toward solar energy as an alternate way to fulfill their electricity needs. Switching to solar now is more affordable than ever with incentives like the federal Solar Investment Tax Credit (Solar ITC) and low production costs for solar panels.
The past few years have seen some great innovations in solar technology — thinner cells, increased efficiency of PV cells, advancements in materials science — which has led to the production of higher quality solar panels. These technological improvements have made it possible to recoup your total cost of installation in as few as five years.
Even with all the amazing benefits, solar isn’t always the optimal choice for homeowners, which is why we at Smart Solar Energy are committed to providing all the information you need in order to make the right decision so you can maximize your return on investment.
What Are Your Savings Goals?
One of the biggest drivers of the growing demand for residential solar is the potential savings on their electricity bills.
With a 6kW solar power system in Washington, you can expect monthly savings of $82.55 on your power bills. Over 25 years, which is the period covered by your warranty, we estimate that you will be able to save $36,022—which is far more than the average cost of a solar system!
If you’re aiming to power your home through solar energy entirely, installing solar batteries may be a good way to go. A solar battery backup will store excess energy produced by your solar panels for later use. When you install solar batteries, the size of your system will be assessed based on your daily average power usage, rather than the amount of power you consume during the daytime. This is because those who opt for a battery as part of their solar system are able to draw on their battery-stored energy at night, whereas those who don’t have a battery draw power from the electricity grid at night, when your solar panels aren’t producing energy.
To satisfy the energy needs of an average American household, a 6kW system will usually suffice. This size of solar system can generate somewhere between 17.4 kWh and 27.6 kWh a day (or 6351kW and 10,074kW per year). The location of your home, the size and type of roof, and the quality of solar panels will all influence the output of your system.
Now, you may wonder what happens if the system is producing more energy than what the household requires? In most states, you can take advantage of the net metering incentive.
Net metering allows utility customers to export the excess energy to the utility grid in exchange for credits. These credits can then be used when your system is under-producing – at night, for example. However, for those who opt to install batteries, the excess energy will be stored onsite in the battery, rather than sent back to the grid.
To learn more about how much solar can save you, we recommend using a solar calculator online. Generally, the higher your electricity rates, the more you’ll benefit financially from going solar. Note that these rates vary significantly depending on where you live. For instance, Oregon has seen a sharp increase in the electricity rates—40% over the past decade—while the rates in Florida have mostly remained constant. What this means is that, contrary to popular belief, Oregon homeowners will benefit far more from going solar than homeowners in Florida will.
We understand that going solar is a huge investment. That’s why we offer free solar audits to help you understand whether solar is right for your property and what your options are.
How Much Do You Pay for Electricity?
Your current electricity bill can easily help you determine how much you’ll save if you switch to solar. On your bill, you’ll find the rate of electricity in your area (which just means how much you pay the utility company for every kilowatt-hour (kWh) of electricity you consume) as well as your monthly energy usage. As we mentioned earlier, the rates are not the same across all states. The data from the U.S. Energy Information Administration shows that the electricity rates in July 2020 ranged from as low as $.09/kWh to as high as $.28/kWh.
Homeowners who currently pay more to the utility companies are the ones who stand to reap the greatest benefits of solar, but this does not mean that other people cannot reap the benefits of solar. Retail electricity rates have risen across the Pacific Northwest by 30% in the last 10 years. This trend is unlikely to change, which is why investing in solar now is a smart choice for most homeowners.
A Quick Comparison Between Conventional Electricity and Solar Costs
Retail electricity rates have grown steadily over the last 10 years. Across the country, electricity prices have increased by 15% in the past decade. Typically, an American household consumes 10,972 kilowatt-hours (kWh) of energy annually. As of July 2020, the average electricity rate is $0.14 per kWh. Multiplying the two gives us the amount a family spends on electricity annually, which is a whopping $1,536!
Meanwhile, the costs of solar has sunk to historic lows. In 2010, a 6kW would have cost you $40,000 or more. Today, the costs hover around $18,000, before taking into account a federal solar tax credit and other incentives. Residential solar energy systems will cost you somewhere between $0.08 to $0.10 per kWh.
You should keep in mind that electricity prices fluctuate annually, seasonally, and even monthly, whereas solar provides you energy at a constant rate so you don’t have to worry about the volatility of grid prices. However, bear in mind that your system will generate more power in summers than it will during winters.
The agreement between energy companies and solar homeowners is such that you use whatever energy is generated from your solar panels, and whatever extra power is produced is fed back to the utility and you receive credits in return for it. These credits can later be used when your electricity usage exceeds the system’s output, like in winters or at nighttime.
You can also calculate your daytime electricity usage easily. You just need to note down the meter reading in the morning and then once again in the night. Subtract the first reading from the second and you’ll know just how much electricity you used during the day, when your system was generating electricity.
For those wanting to rely completely on solar power, there are some great storage options available. Installing solar batteries will ensure that instead of sending off the power to the grid, the energy is stored for your later use. This will help you further lower your electricity bills and also keep your power on if the power to the grid goes out.
Solar power is worth the investment not just due to monetary benefits, but also environmental benefits. While utilities mainly use fossil fuels to generate electricity, your system will be producing clean energy through a 100% renewable source — sunlight.
Are Savings With Solar Power Real?
Solar installation has a high upfront cost and that makes many people question whether they will actually save if they invest in solar. The answer is: absolutely!
Solar savings are very real, and in the span of the system’s life, you will be able to avoid several thousand dollars that you would otherwise have to spend should you choose to stick to conventional electricity. When you switch to solar, the common belief is that it’s costly, but you actually end up saving money in the long-run, and with financing options available, you never have to make a large payment to make the switch.
Switching to solar has also become much more affordable due to the solar investment tax credit, which offers a dollar-for-dollar tax rebate of 26% of the total cost of your solar energy system when you file your federal taxes. Starting in 2023, this federal tax credit will be reduced to 22% and it will go away completely in 2024. This is why we recommend to those considering solar to act now, while this incentive is at its peak.
While the overall solar costs may decrease, the solar ITC will be gone and you will lose out on big savings. Be sure to also reach out to us and see if there are any local solar incentives in your area as certain areas do offer additional local incentives.
Over the years, the payback period of a solar power system has also improved. With a high quality system, you can expect to reach payback in 7 years or less. After that, for the remaining period of the system’s life, you will keep saving on your electricity bills and may even be able to eliminate it completely.
As we alluded to earlier, an average 6kW solar power system can save you around $1,000 yearly. This number will vary largely in relation to the electricity rates in your area. Wherever you live, going solar will effectively reduce your power bills.
A solar audit is recommended so that you get an accurate estimation of the number of panels you need to cover your electricity needs. With that information, you can further decide whether you want mid-range residential solar panels that provide a return in 3 years or top-range panels that generate a return in 5 years. You may wonder why would you want to wait for an additional 2 years to get returns on your investment? The answer lies in the fact that higher quality panels will ensure greater reliability and longevity of the system than mid-range or low-quality panels. Your decision will depend on how long you plan to stay in your home and the budget you may have allotted to going solar.
Another important point to take into consideration is how soon you want the system to pay for itself. In the best case scenario, you will break-even on your solar investment within 5-7 years. To get an ROI in less than 5 years will likely involve buying cheap equipment that is unreliable, and a payback period that exceeds 11 years would probably mean that the system is oversized. An oversized system is not always a bad thing, especially if you are expecting an increase in your energy needs in the future, such as the prospect of buying an electric vehicle.
What Is Your Budget for a Solar Power System?
If you only want to pay a mere $5,000 for a solar power system, it might be possible, but it’s not worth it. You should definitely get quotes from different sellers, but ultimately, you should not compromise on the quality of your home’s solar panels or any of the other equipment in your system.
Investing in solar is an important decision, and one that shouldn’t be taken in haste. Choose a reputed solar installer to work with, like Smart Solar Energy, that provides great customer service and is trusted in the industry.
You might be able to find a way to save a few bucks here or there when switching to solar, but it will cost you more in the long run. Imagine installing solar panels that are cheap & underperform, or worse, break before your system even reaches payback. Or picking a small contractor with no reputation that goes out of business in a few years, pushing your warranty out the window. It can quickly turn into a nightmare of regrets. This scenario is fully preventable if you don’t turn to low-cost, unreliable solutions.
So, Is Investing in Solar Worthwhile?
We think you already know the answer!
If you’re seriously considering switching to solar, now is the time.
With a high quality system, you can expect to reap the benefits for decades to come. You will save large amounts on your electricity bills, produce clean energy, and if you decide to sell your home, your property will be valued 3% more than one without solar panels installed.
Interested in learning more about residential solar costs and incentives? Check out our free educational resources here.