Solar energy seems to be booming in the United States. In the last ten years, the solar industry has experienced an annual growth rate of, on average, 68 percent.
Many homeowners are curious about what solar has to offer. After all, solar panels harness an entirely free source of energy, the sun, to transform it into electricity. With increased availability, coupled with a dramatic drop in price, solar panels on a residential home are a more appealing option than ever before. So how much can you actually save by putting solar panels on your house?
Do Solar Panels Save Money?
Homeowners exploring alternative sources of energy are almost always after one thing: the savings. But the benefits of solar panels take time to develop. Because the initial upfront investment is still relatively high, it could take anywhere from seven to 15 years to reap the returns.
What does this look like when broken out by the numbers? On average, after tax incentives, a typical residential set up costs anywhere from $12,500 to $16,000 in upfront costs. For the average homeowner, it will take between seven to 14 years to pay back the initial investment fully.
After the initial investment has been paid off, that’s when the solar panel savings start rolling in. In most examples the investment period is 20 years. By year 20, the homeowner has paid back their investment and also earned roughly $7,000 in additional solar panel savings.
What Are the Hidden Costs of Solar Panels?
If the average installation on a residential home costs about $16,800 before tax credits, is that all the investment required? Unfortunately, unlike the traditional electric grid, solar panels also need annual maintenance which falls on the shoulders of the homeowner.
Depending on what state you are located in, your rooftop solar panels may be subjected to a yearly inspection by the relevant authority. These inspections usually cost around $150 per year. On top of the annual inspection fee is the required yearly cleaning as well.
Cleaning is necessary to remove the dirt, grime, and other buildups which reduce the overall effectiveness of the panels. A reputable cleaning company typically charges around $20 per panel. As an example, a home with 36 panels will have roughly $800 a year in maintenance costs.
Depending on what incentives are offered by the local utility company, like the hotly-debated Feed-In Tariff, the maintenance fees could make a solar panel setup much less profitable.
How to Pay for Solar Panels
If you don’t happen to have $15,000 lying around, but are still interested in the solar panel revolution, there are a few options on the table for you. The rebates, tax incentives, and loans vary significantly from state to state and even from one city to another. Do your research in advance of the install for a better understanding of the initial, recurring, and long-term investment risk.
A good place to start looking for financial assistance for residential solar panels is through your local utility. Utilities may offer a rebate on a per watt of installed capacity basis. In California, this rebate ranges between $0.20 and $1.25 per watt dependent on the municipality.
Net metering is another incentive available. However, some states have started to curb its potential. In California, it is still open and is a way to sell unused solar energy back to the local utility. This typically caps out at a single-digit percentage of aggregate customer peak demand.
There is also the federally available solar ITC which offers a 30 percent discount for homeowners purchasing solar panels. This program has seen widespread success and is extended until 2021.
Finally, a personal loan is another option, and some states even have options specific to the alternative energy market. Again, using the example of California, they have a program called the Home Energy Renovation Opportunity (HERO) Financing Program, which covers initial financing with paybacks through annual property taxes.
For an in-depth comparison of your options, check out our guide to solar panel financing.
Solar panels are an increasingly affordable energy solution, with a nine percent drop in price from 2016 to 2017 alone. Take the time to explore what your local municipality might have on offer, as well as any statewide incentives.