As with many technological advancements, it often takes time before the price point makes economic sense for the masses. And so goes the case for installing a solar system to generate your home’s electricity, while actually saving money in the process.
The cost of panels has come down significantly due to a combination of increased efficiency in photovoltaic panels, and higher manufacturing production volume.
Pair that with the various local, state, and federal tax incentives presently in place and a financially compelling picture starts to develop.
The other change in the financial equation was the introduction of leases for solar systems, which effectively eliminated the need for a large up-front cash outlay and a potentially long pay-back period.
As with any major financial decision, it’s important to evaluate it thoroughly to understand the pros and cons as well as risks and rewards. And of course living in a sunny climate makes a huge difference!
So, how do you determine if going solar makes financial sense?
Evaluate Your Usage & Costs
1. Go online or to your filing cabinet and pull your electrical bills from the past 2 years or more
2. Create a spreadsheet with usage (kWh) and cost by month (click here for a free downloadable spreadsheet).
3. Calculate your average monthly usage (kWh) and costs as well as your annual usage and cost.
Armed with this information, you can begin the process of evaluating various solar options and configurations to determine if there are financial benefits.
Different Financing Options
There are two main ways of installing a solar system on your home, 1) buying it outright, or 2) entering into a lease. Both have pros and cons, and depending on the various costs and details, one option may make more sense for you based on your situation than the other.
There are a large number of providers and installers to choose from in the market these days, and they each have different terms and pricing, but below are some guidelines that we’ve found to be fairly consistent across providers:
A Quick Case Study
Our 2-year energy usage analysis revealed that we on average use 1,027 kWh per month (12,330 kWh/year), and that we pay an average of $131.77/mo for electricity (incl. recent local rate increase of 6%).
We evaluated two local providers and found the efficiency of their panels and their pricing options varied quite dramatically. Based on the pros and cons, we opted for the lease since it required $0 down, and came with $400 in cash incentives.
We have a fixed lease cost of $97/mo plus a $7/mo connection fee to our local utility. Our system is guaranteed to generate between 12,746 – 14,088 kWh of solar energy in Year 1, more than our average annual usage.
This guarantee drops by 0.5%/year, and if we don’t generate that amount, we will be paid the difference by our lease company.
We will “bank” extra electricity that we generate rather than getting paid wholesale rates for it, such that if our usage ever exceeds our production in a given month, we can draw from our bank.
Long story short, we have a guarantee that all our electricity will get generated by solar, we were paid $400 up front and put $0 down, and will save about $27/mo right out of the gate.
Over time, the monthly savings will grow as electricity costs increase while our lease cost stays fixed.
And, of course, we’re “off the grid”.
If you think you may benefit from going solar, drop us a note and we’ll be happy to help you with your evaluation and/or point you in the direction of some local providers.
Every situation and configuration is different, so the financial picture will vary from home to home.