For homeowners, switching to solar can feel like a big, intimidating financial decision. However, until they’ve had an in-depth consultation with a knowledgeable installer, most homeowners don’t understand the true financial impact of going solar—because there’s more to the equation than you might think.
To the naked eye, the price tags of solar panels and solar install projects can seem hefty, but to really understand the financial impact of going solar, you have to look at the big picture. It’s crucial to look at two major factors to understand the true cost of making the switch to solar: your rising power costs over time, and the available solar incentives and zero money down financing that will offset your solar purchase. Let’s break down why these two factors have such a huge impact on the cost of going solar.
Power Bills Will Continue to Rise & Can Never Be Paid Off
Most people see their power bill as a fact of life—like death or taxes. However, solar energy has changed this. When you switch to solar and start producing your own energy, you can eliminate or drastically reduce your power bill.
At a glance, this might not seem like a huge benefit. When your car payment and mortgage are the expensive bills, smaller ones like the electricity might seem like no big deal. But those big bills likely serve a loftier purpose—for example, you pay your mortgage so you can own your own home, lock in your housing costs, and create wealth and equity for yourself or your family later in life. What many people don’t know is that switching to solar actually offers the same benefits. When you produce your own green energy and own your own power, you lock in your energy costs, and boost the value for your home, ultimately increasing your family’s wealth over time.
People buy property, homes, cars, etc. because it’s a smart financial decision to own these things instead of renting them from someone else. Sometimes there’s an upfront cost to own these things (not with solar), but over time, you pay less, and owning the item increases your personal wealth. It works the same way with solar. Currently, you’re renting power from the power company, paying a bill every month that is only going to get bigger and will never go away. Never making the switch to solar is like renting a house for the rest of your life—all the expense, with none of the benefits of ownership.
The best part? You’ll pay less for solar than you pay for traditional power! It probably sounds too good to be true, so let’s do the math to prove that you’ll spend less on solar than you do on your power bill.
In 2021 alone, electricity bills are predicted to increase by 2.8% nationally. On average, electricity bills rise by 2-4% every single year. Say your current power bill is $100 per month, on average, totaling $1200 each year. That bill is only going to get bigger over time—and you will likely be paying $250 (plus inflation!) each month in 25 years.
Let’s assume your $100 power bill is going to increase by 3% each year. Here’s how much you’ll pay the power company annually over the next 25 years:
By year 25, you’ll have spent a total of $43,751.12 on your power bill! And then, you’ll keep paying that bill, until the end of time, spending more and more on it over the course of your life. In another 25 years, you’ll have spent over $135,000 total on your power bill!
Generally, solar systems are warrantied for 25 years, and the average solar panel system cost in the Pacific Northwest is $12,750—which means you’ll spend more than three times that in the same 25 years on traditional power if you don’t make the switch.
Seems like a no-brainer, right? There’s more! Switching to solar comes with a huge array of incentives and financing options. Keep reading for a breakdown of how these make solar even more affordable.
You Don’t Have to Use Your Own Money to Go Solar
This all sounds great—until you remember that you don’t have $12,000 sitting around to go buy a solar system with. This is why many people might feel that continuing to pay a monthly bill to the power company seems more realistic than a big one-time purchase, even if it means you’ll spend more in the long run. If you’re in this boat, you are not alone! That’s why there are so many options set up to make solar more affordable for regular people and eliminate up-front costs.
In fact, the solar incentives and financing options currently available to homeowners are set up so you never even have to spend your own money to make the switch. Again, the federal and state solar incentives + zero up front solar financing literally sets you up so you never have to spend a single dollar more than what you’re already throwing away monthly on your power bill. Let’s break it down:
- Federal Solar Investment Tax Credit (ITC): The federal government has incentivized homeowners to make the switch to solar with an incredible dollar-for-dollar tax rebate worth 30% of the overall cost of your solar system. This is a rebate, not a tax write off, which means that your overall tax obligations will be reduced at 30% of the total value of your solar system. So, if you purchase a $20,000 solar system, you will receive $6,000 back from the federal government when you file your taxes. There is no cap to the total credit amount you can receive, nor is there a cap to the number of homeowners who can claim this credit. The 30% rate applies to all solar installs of any size. Currently, the 30% ITC applies to all solar projects that begin construction in 2022. The 30% tax credit will last through 2033, at which point it will drop to 26%.
- Financing: At Smart Solar Energy Co., we partner with a variety of local banks and credit unions to offer low-interest solar financing to our customers. We always recommend financing your solar system, rather than leasing or paying up-front. When you finance your solar system, you pay nothing upfront, and your payments will be smaller, realistic monthly increments. Additionally, the federal ITC and ETO incentives don’t apply when you lease your solar system, but they do apply for financed systems. You can use your lump sums from the cash rebate and the tax credit to make your first several years of solar payments. By the time you actually start paying your monthly solar bill, it will likely be equal to what your power bill would have been by that time. And the best part is, once it’s paid off, you’ll have no payments at all!
- Increased home value: On average, solar panels increase the value of a home by about 4%. If you sell your home, the increased value your solar panels provide will likely be close to the total cost of the solar system itself. When you sell, you’ll actually make money off of your solar panels—since you never had to spend anything beyond what you would have spent on your power bill, the added value to your home goes beyond just recouping your investment. If your house is worth $500,000, adding solar panels will boost your home’s value to $520,000, and you will simply pocket the extra $20,000 when you sell.
- Net Energy Metering: All grid-tied solar systems are connected to the power grid. When your solar system is producing more energy than you consume, such as during the long, sunny days of the summer, the extra energy gets fed back into the power grid. In exchange, you will receive energy credits equal to the amount of energy you provide. When your solar panels are producing less energy, like during the shorter, darker winter days, those credits you earned from the summer will go toward any energy costs you incur by using power from the grid.
Let’s do some math to calculate how much a homeowner will actually spend by going solar:
Let’s assume you install a 5kW solar system that offsets your $100 a month power bill, at a total all-in cost of $12,750.
The Federal ITC reduces that cost by 30%, putting $3,825 back in your pocket.
The state cash rebate reduces the cost by $100 per kW, putting $500 back in your pocket.
Now, the net cost of your solar panels drops to $8,425.
Next, you’ll finance your $8,425 system for 10 years at a 2.99% interest rate through a local credit union. Remember, at Smart Solar Energy Co., we partner with a variety of local banks and credit unions and can take care of this entirely for you.
Your monthly solar payments will be $81.31 (your power bill was $100), and over 10 years, you’ll pay $9,757.63 in total.
After 10 years, you won’t have any more payments, and net energy metering covers the power you use from the grid in the winter. You’re producing your own power for free, and you never had to make a payment higher than $81.31. And, if you sell your house, you’ll pocket an extra 4%. Remember our power company calculations earlier? In that same timeframe, you would have spent a total of $13,756.66 on your power bill alone. And over 25 years, you would have spent over $43,000 on your power bill; whereas with solar, your costs end after year 10—never increasing beyond the $9,757.63.
Switching to solar isn’t the daunting financial investment it’s often made out to be. If your roof qualifies for solar, making the switch now, while interest rates are low and incentives are high, will save you a great deal of money, and you’ll never have to pay anything up front, out of pocket, or beyond what you would have already spent on your power bill. We think that’s pretty smart.
Get a free solar audit to find out if your home qualifies for solar!