by Andrew Sendy, SolarReviews
As a general rule, solar power has a lot of advantages. It’s good for the environment, increasingly affordable and provides a modicum of freedom from utilities.
But all those factors, while important, aren’t the main reasons people install solar on their homes. What ultimately matters is solar’s return-on-investment (ROI), including the amount of time the system will take to pay for itself—more commonly known as the payback period.
The payback period depends on multiple factors such as federal, state, local and utility incentives, average electricity costs and amount of insolation in your area (the amount of sun your array gets over time).
Fortunately, the payback period is just that—a finite period limited by the overall cost of the PV installation. Once you’ve paid off the system off, the ROI begins to increase—and the full value of solar reveals itself.
For some real-world examples, let’s examine three different cities with varying levels of average monthly electricity costs: Charleston, S.C. ($173), Reno, Nev. ($129), and Albuquerque, N.M. ($90):*
An average solar-electric system in Charleston, S.C., where the average monthly electric bill is $173, would cost $13,000 after government incentives pay for between 30 percent and 65 percent of the installation. Over the 20 to 25 year lifetime of the system, you would save $45,000.
You would pay off your solar system in approximately 5.7 years—and it would increase the value of your home 3 percent. In Charleston, with an average home price of $283,000, that would bring you a nearly $8,500 increase in value.
In Reno, where the average monthly electric bill is $129, a rooftop-solar system will cost approximately $18,000, and you would save $19,000 over the 25 year life of the system.
At the end of 10.5 years, you would completely own your system. If you sold your house the next day, you would increase your home value nearly $10,000 on an average home price of $320,600.
After federal, state, local and utility incentives, an average solar system in Albuquerque, N.M., costs approximately $11,000. Over the 20 to 25 year life of the system, it would save you $18,000—and after 8.1 years, you would own the system outright and your ROI would truly start to grow quickly.
For an average home in Albuquerque, the 3 percent increase would be around $5,600 on a price of $187,900.
As you can see, the payback times and ROIs are as varied in the United States as the cities in them. What is inarguable, however, is that prices for solar installations continue to fall as the main components (modules, racking and inverters) continue to drop. So do careful research on your specific area to see how much solar energy can save you on your home.
But let’s be clear: No matter what the payback times and ROIs, most experts agree that solar installations are a good investment for homeowners. After all, the electricity savings will provide homeowners a better ROI than a five-year certificate of deposit (CD) at current interest rates. In fact, a Reuters report said that this is true in nearly 90% of all states.
The wild card in all this is, of course, the current trade case before the U.S. International Trade Commission (USITC). Brought by two module manufacturers, it alleged they couldn’t compete because of international competition.
Last month, the USITC found the manufacturers had been injured, and now the solar industry is waiting for the commission to recommend what penalties should be levied against the foreign competition.
Most industry observers believe the most likely penalties will be tariffs, which could essentially double the price of modules overnight if the penalties the petitioners seek are imposed without modification (though few expect them to be imposed that way).
Still, the sheer volume of solar installations in the United States, especially in the residential market, should hold off the worst of those price spikes from affecting them—and current data says solar installations are still one of the best home improvements you can make—bar none.
How does solar compare to other investments in terms of return?
Forbes reports that in many cases, with the federal, state and local incentives, homeowners can recover almost 97% of their investments and increases the value of homes. In contrast, a luxury kitchen remodel only brings a 60% payback.
A report by the National Renewable Energy Laboratory found that in most areas, the payback period is often four years or less—meaning that installing solar panels provide 100 % ROI. According to the website Modernize, a home-improvement advice site, “you won’t find that for cost-comparable home improvement projects, such as installing a garage, adding an addition, or remodeling your kitchen.”
Clearly, solar is a better investment than granite countertops—meaning you should start exploring your solar options today.
After all, why shouldn’t you control electricity future and save money in the process?
*All data is based on owning the system outright. Other financing methods may change the payback calculations.