Do Solar Panels Save Money? Yes. Here’s How

This story is part of Home Tips, CNET’s collection of practical advice for getting the most out of your home, inside and out.

More than 500,000 new residential solar panel systems have been placed on roofs final yr, in accordance with the Solar Energy Industries Association. Despite larger uncertainty within the financial system and solar industry in 2022, photo voltaic panels are virtually sure to repay in the long term. Panels purchased from a reputable solar installer and optimized for greatest energy production will save more cash over time. And there are even solar options for renters

Residential photo voltaic set up prices fluctuate due to their measurement, native incentives and native prices, however one average cost of installation is about $20,000, in accordance with the Wood Mackenzie power analysts. (Wood Mackenzie makes use of a median set up measurement of 8 kilowatts and a median of $2.99 per watt. Many residential solar systems will be smaller.) Tax breaks and financing options could make going photo voltaic extra inexpensive.

With only a few items of data and somewhat math, we’ll present you easy methods to estimate the payback interval in your photo voltaic panels and discover out once they’ll begin saving you cash.

Read extra: 5 Things to Consider Before You Buy Solar Panels

Are photo voltaic panels actually price it?

A payback interval is the period of time it takes to earn again your preliminary funding. Solar panels may also help you save sufficient cash on power payments over time to offset the upfront prices. How a lot you save per 30 days depends upon the dimensions of your photo voltaic system, your private home’s power consumption and different elements. 

Calculating the payback interval shall be distinctive to your circumstances because of the variability of the upfront prices, in addition to the distinction in power prices primarily based in your location. But listed below are some pointers that will help you estimate when you’ll break even. 

Find out your upfront prices

First, you must estimate how a lot your preliminary funding shall be. Along with the system prices, you need to embody potential set up prices and different charges as a part of organising your service. Check cost estimates in your area and go from there.

Tax incentives may also help rather a lot

Homeowners can obtain a one-time tax credit of 26% off the purchase price of a photo voltaic system. If the preliminary photo voltaic panel funding usually prices round $20,000 in your space, the tax credit score would internet you $5,200 once you subsequent file taxes.

What’s extra, some utilities supply incentives and rebates for putting in solar energy. Check together with your native power provider to see if they provide any incentives. 

You must know the way a lot you pay in your electrical invoice

This estimate assumes you’re going to get all your energy from photo voltaic. While some houses will be capable of get 100% of their electrical energy from photo voltaic, and even promote some surplus power again to the grid, others will nonetheless have an electrical invoice to complement utilization. This will fluctuate broadly from residence to residence, relying on what number of photo voltaic panels are put in, regular power consumption and extra. Get more tools to calculate your home’s potential savings here.

Now you’ve got a way of how a lot power you will save, login to your electrical utility firm account and calculate a median of your final a number of electrical energy payments. Go again at the very least six months, if potential, to account for seasonal temperature modifications and different fluctuations in value. Let’s assume you get 100% of your utilization from the panels and at present pay a median of $125 per 30 days in electrical energy payments, or $1,500 per yr. Now you’ve got the data you must estimate the payback interval for photo voltaic panels. 

Estimate how lengthy it’s going to take to repay your photo voltaic panels

First, multiply your photo voltaic panel value by 0.26, which is the tax credit score you obtain for putting in your system. If you spend $20,000 on it initially, your tax credit score is $5,200. That takes your preliminary funding all the way down to $14,800.

Now, let’s think about power financial savings. Divide your preliminary funding by the $1,500 you usually pay the electrical firm per yr; that is how lengthy it will take in your financial savings to equal the quantity you spend. Using the instance above, you’d divide your preliminary funding of $14,800 by $1,500: The result’s a payback interval of just below 10 years.

That would possibly seem to be a very long time on the floor, however photo voltaic panels can simply final 25 years. 

You can additional expedite your payback interval by selling renewable energy certificates, or RECs. These are measured in megawatt hours of electrical energy that come from a renewable supply. Electric firms should buy some electrical energy from renewable sources, that means you may save extra by promoting power generated by your photo voltaic panels.

One extra vital factor to learn about photo voltaic

Some elements may improve your payback interval. Before putting in photo voltaic panels, you must examine the situation of your roof. Panels can final 25 years, so in case your roof isn’t in tip-top form, you might need to make enhancements earlier than putting in photo voltaic panels. If this is applicable to you, ensure that so as to add these prices to your preliminary funding. 

Overall, solar energy could be an costly proposition, particularly with the upfront prices. However, the long-term effectivity they supply can greater than offset the preliminary funding, resulting in financial savings for years to return.

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