Investing in solar panels can be a smart long-term financial decision, but it’s important to plan effectively in order to get your money’s worth. Before buying solar panels, there are several key factors to consider. These include upfront costs, selecting a reputable installer, and evaluating electricity costs.
This guide will provide you with an in-depth insight into eight steps or factors that you should keep in mind before you purchase solar panels:
Varying Electricity Costs
Firstly, check if your home meets the requirements for a solar system. Savings depend upon two things, your electricity bills and your location. One way to offset electricity costs is through net metering, where the government pays homeowners money when they sell excess solar power.
Photovoltaic solar panels require four to five hours of direct sunlight with clear sky conditions to produce the daily electricity needs of your home. Are you living in a place with low sunlight? Do not worry, as the energy production will be low but not zero.
Furthermore, you can install a bigger system to accommodate your daily electrical needs. Solar panels have an optimum temperature (25 degrees Celsius or lower) at which they perform the best. So cool places with mild weather are the ideal locations for solar panels.
Roof Compatibility With Solar Panels
The ideal direction and angle for a solar panel to achieve the maximum energy output is in a roof pitch range of thirty to forty-five degrees facing south. Don’t have a south-facing roof? Do not worry, as most solar energy producers don’t, and they still have substantial savings.
As the season changes, so will solar output, and in a whole year, it will be balanced. For example, a shallow roof pitch will work best in summers, while steep roofs work ideally in winters. There are many homeowners whose roofs are not appropriate for fitting solar panels. In that case, they should install a ground-mount system if they have ample space.
Since solar energy is becoming pretty standard, prices are declining too. Excluding rebates and incentives, a 4kW installation will set you back $12,000, and an 8 kW unit will cost you $24,000. Plus there will be extra costs such as:
- Battery (optional).
- Solar panels.
- Meters, mounting, and racking.
Batteries are not mandatory but act as an extension of your solar system. In short, they store electrical energy when the solar panel isn’t working or when it is night or cloudy. Depending on battery capacity and technology, they can cost around $200 to $15,000.
Solar panels vary in cost by technology, manufacturer, and efficiency. The tiering system is used to rate solar panels, and Tier 1 solar panels are generally more expensive than Tier 2 solar panels.
There are two types of residential solar panels: monocrystalline and polycrystalline. Polycrystalline panels are cheaper than monocrystalline panels. The higher cost is due to better aesthetics and performance.
Inverter switches direct current into alternating current and accompanies the solar panel system. There are many types of inverters:
- String inverter.
- Hybrid inverter.
- DC power optimiser.
Each type has its pros and cons and differences in costs and performance.
Meters, mounting, and racking:
Meters are used for monitoring electrical output and consumption. All the energy usage in your home will be monitored. Mounting and racking apply to all parts that fix the solar system on your roof; they can be screws or small parts that set the panel in place.
In short, you receive credits for selling the extra electricity of your solar panels to the local utility.
The credits are rolled over to the next month with many full-retail net metering programs. This is useful for decreasing energy bills in winters.
Eligibility For Incentives And Solar Rebates
Programs like utility incentives, federal solar tax credit, and local rebates can reduce upfront costs and provide relief for many homeowners with solar systems.
Local rebates and utility incentives:
Investing in solar panels may also qualify you for performance-based incentives from your local utility company, where the amount of solar power generated is rewarded regardless of the energy used by your home or exported to the grid. Additionally, upfront rebates can further increase savings when purchasing solar panels. However, it’s important to note that as solar panels become more common, these benefits may decrease over time.
Different incentives depend upon the location and your eligibility in the program. You might qualify for several state incentives too.
Federal solar tax credit:
The U.S federal government also eases the upfront cost of installing solar panels by issuing solar investment tax credit. The federal credit is 26% of all your solar installation costs. After calculations, the figure comes out to be $3,900 in savings after purchasing a $15,000 system.
You can purchase a solar system by four methods:
Investing in solar panels can be made more affordable through solar loans, which allow you to finance your system and reduce upfront costs. In some cases, it’s even possible to obtain a solar loan without a down payment. By taking advantage of local incentives and federal tax credits, you can offset the cost of the loan. Over the course of 25 years, solar loans can produce up to three times more savings than solar leasing programs. This is because, with a solar lease, you continue paying until the end of the contract without ever owning the system. In contrast, with a solar loan, you gradually pay off the loan and eventually own the system outright.
In a solar lease, you do not own the system completely, but you can get solar panels on the roof quickly and sell the excess solar energy to the utility through net metering. However, you won’t be eligible for federal tax credits or local incentives. Plus, a solar lease doesn’t add value to your home.
Also, you cannot save much money if talking long-term. You must make monthly payments to the company providing the lease, which must be less than the monthly electricity bill. However, if you cannot loan a solar panel, then leasing it might be the best option since it has no upfront costs.
Paying with cash is the best way to have the most savings, and after 25 years of ownership, the amount saved can be about five times if compared to a solar lease and two times with solar loans. It is the best option since you don’t have to pay off anything but commit to 25 years of solar installation.
Power purchase agreement:
Like a lease, you do not own a system or have to pay any upfront costs in PPA. The monthly payment changes each month based on energy production. Contracts can be 5 to 25 years long. The rates are paid per kilowatt hour. It generally has lower lifetime savings. Only use this option when you cannot take a federal tax credit or a solar loan.
Paying Off Solar Panels
The solar panel payback period is the time it takes to pay back the costs of a solar panel which can range from eight to twelve years. The factors that can change the solar payback period are:
- Local electricity price
- Price of solar panels
- Available incentives and credits
- Terms of the solar loan (if stated)
An average solar panel’s lifespan is 25 years, more than the solar payback period.
Is Investing in Solar Panels Worth It? Key Factors to Consider
If you want an easy investment, solar panels are for you. Not only do they produce adequate clean energy, but they pay off themselves too. Not only this, but you can make money by selling the extra electricity to the utility, so there is no downside to installing a solar panel.