Solar Economics for Homeowners

One of the things I love about doing solar installations is the people I meet. Talking to homeowners who have made the decision to go solar is both fascinating and gratifying. Some do it for environmental reasons, others do it for the economic benefits, and some people do it just because they love the freedom and independence of producing their own electricity.

Whatever the reason, solar energy is a wonderful investment. I hope and believe that one day solar is going to become the next super-trend. Rich mansions in Beverly Hills are going to be equipped with solar arrays, just so lawyers and investment bankers at barbecues can say things like, “Oh, you only have a 9 kw system? I have a 10 kw, and it’s earned me over $6,000 since I had it installed.”

When that finally happens, it’s going to be a great day for the industry. But for now, I enjoy meeting the folks who are on the cutting edge of this trend, before it becomes a high-brow phenomenon.

These are the folks who realize what a great deal it is. Different state and federal policies have made solar energy more affordable right now than ever before. In fact, the biggest problem with the incentives is that not enough people know about them.

In New York State, there are rebates that will cover 50% of the equipment costs. There is also a state tax credit worth $3,750 (It will go up to $5,000 on Sept 1st) and a federal tax credit worth $2,000.

So let’s say you’re a homeowner looking to buy a 5 kw system for $40,000 (A decent-sized system that can reduce your electricity bill by about 70%). Here’s what you’re looking at:

Initial System Cost: $40,000
50% State Rebate: -$20,000
State Tax Credit: -$5,000
Federal Tax Credit: -$2,000
Final System Cost =$13,000

$13,000 for a $40,000 system… it’s not going to get much better than that anytime soon. And that remaining cost can be easily financed with the state loan program, which provides financing for solar electric systems at 4% below lender rates.

But what do you really get for all that money?

Whatever you spend on your system, whether it’s $13,000 or $50,000, it will take you about 10-12 years to make up the cost in energy savings. But solar panels have a warranty to be productive for 25 years, and most will actually produce for 30. So once you’ve made up your initial investment in 10-12 years, you’ll probably have another 18-20 years of energy savings.

That means a $13,000 system could earn you as much as $30,000 over thirty years. It’s not the most lucrative investment, but wouldn’t you rather save $30,000 than spend it?

Not to mention the fact that this payback is based on the prices of standard electricity remaining where they are now. If fuel prices go up (and they will) the payback could double or triple. In fact, plenty of large companies are investing in solar as a type of hedge-investment against spikes in natural gas prices.

The other day I came across this bestsolarenergyblog, which features a nice article about how building owners are investing in solar as a way of “freezing” their electricity costs, and avoiding volatile energy prices.

But I digress…sorry…back on track…

There’s also net metering, where your system can earn you money if it produces more than you use (Click here to read my last post on net metering)

Another facet of the financial angle is increased property values. Real Goods, based in California, cites the Appraisal Journal of the National Appraiser's Association as saying that property values increase by $20 for every $1 of annual energy savings. That means our $13,000 system could increase property values by $20,000.

You'd be up $7,000 from day 1.

Truthfully, these increased property values are somewhat skewed, since they're based on finding someone who's interested in buying a house with solar panels, and since the panels might be done with their productive lives by the time you're looking to sell the house. But still...

Solar energy may not be the most profitable way to invest your money, but you’re going to have to pay for electricity one way or another anyway. Isn’t it better to purchase your power in a way that will save you money, even if it’s only $1, than to do it in a way that will cost you a thousand dollars a year?


Don’t Take My Word For It

“Don’t Take My Word For It” is a feature I’m going to include at the end of every post. It’s a link to a credible, scholarly source, for those of you looking for more info.

For those of you in New York State, visit the New York State Energy Research and Development Authority (NYSERDA) web site to find out more about the state incentives.

For those of you outside of New York State, visit the Database of State Incentives for Renewable Energy (DSIRE) to find out what types of incentives are offered in your state.