Solar Panels, are they worth it?
Curated by Brad Hoffer w/ ChatGPT - www.xlyourfinances.com
The best deal for solar panels depends on your individual circumstances and energy usage. When it comes to owning vs. the solar company owning the solar panels, both options have their pros and cons.
If you own the solar panels, you will be responsible for the upfront cost of purchasing and installing the panels, but you will also be eligible for tax credits and other incentives. Additionally, you will own the energy produced by the panels, which can significantly lower your electricity bill.
On the other hand, if the solar company owns the panels, they will be responsible for the upfront cost and maintenance of the panels. However, you will typically pay the solar company a monthly fee for the energy produced by the panels. This can be beneficial if you do not have the upfront capital to purchase and install the panels, but it may not result in as significant savings as owning the panels outright.
When it comes to how many solar panels you need and what direction your roof should be facing, it depends on a variety of factors, including your energy usage, the size of your roof, and the amount of sunlight your roof receives. Typically, a solar panel system can offset 70-90% of your energy usage, so you will need to evaluate your energy usage to determine the appropriate number of panels.
As for the direction your roof should be facing, ideally, it should face south to receive the most direct sunlight throughout the day. However, east- or west-facing roofs can still be suitable for solar panels, as long as they receive ample sunlight. A professional solar installer can evaluate your roof and provide guidance on the best placement for your panels.
Here is an example that can help you understand the Return on Investment of a solar system. In this example we will assume the following conditions. The house uses 1200 kwh per month. We are purchasing 300 watt solar panels which costs $1100 each. We are assuming this system benefits from Net metering and we are estimating tax and SREC credits. The cost for electricity is assumed to be 10.42 cents per kwh.
To calculate the Return on Investment (ROI) for buying a solar panel system using the given conditions, we need to first determine the size of the solar panel system required to offset the monthly usage of 1200 kWh.
A 300-watt solar panel produces an average of about 1.2 kWh per day, or approximately 36 kWh per month. Therefore, to offset a monthly usage of 1200 kWh, we would need approximately 34 solar panels (1200 kWh / 36 kWh per month per panel = 33.3 panels).
The total cost of 34 solar panels would be $37,400 ($1,100 per panel x 34 panels). Assuming that the system is installed before the end of 2022, the federal tax credit would be 26% of the total cost, which would be $9,724 ($37,400 x 0.26). So, the effective cost of the solar panel system after the federal tax credit would be $27,676 ($37,400 - $9,724).
Assuming the system is eligible for net metering, any excess electricity produced by the solar panel system can be fed back into the grid and credited on the customer's utility bill. The value of this credit depends on the state and utility company policies. Let's assume that the credit is equal to the retail rate of electricity, which is $0.1042/kWh.
If the solar panel system produces more electricity than the house consumes during the billing period, the excess electricity will be credited at the retail rate. If the solar panel system produces less electricity than the house consumes, the customer will need to pay the difference at the retail rate.
Assuming the solar panel system offsets 100% of the customer's monthly usage of 1200 kWh, the annual savings from the solar panel system would be $1,500.48 ($125.04/month x 12 months) in electricity bills. In addition, the customer can earn SREC (Solar Renewable Energy Credits) revenue, which varies depending on the state and market conditions.
Let's assume that the SREC revenue for this system is $100 per SREC, and the system generates 1 SREC per year. So, the annual SREC revenue would be $100.
To calculate the ROI, we need to add the annual savings and the annual SREC revenue, and divide it by the effective cost of the solar panel system:
It's important to note that this calculation does not take into account any state or local incentives, potential increases in electricity rates, or maintenance costs, which could impact the ROI.
Effective cost of solar panel system after tax credit = $27,676 Annual savings from solar panel system = $1,500.48 Annual SREC revenue = $100
Total annual benefit from solar panel system = $1,600.48
ROI = Total annual benefit / Effective cost of solar panel system = $1,600.48 / $27,676 = 0.0579 or 5.79%
We can now calculate the number of years it will take to get a return on investment (ROI) for the solar panel system. To recoup the cost of the solar panel system, we can divide the effective cost of the system by the annual benefit:
Years to recoup cost = Effective cost of solar panel system / Total annual benefit = $27,676 / $1,600.48 = 17.29 years
Therefore, it would take approximately 17.29 years to recoup the cost of the solar panel system and start realizing a net benefit from it.
However, it's important to note that solar panel systems typically come with a warranty of 25 years or more and can continue producing electricity even after the initial investment has been recouped. So, the system can continue to provide savings and benefits for many years beyond the point of recouping the cost.
In conclusion, investing in solar panels can be a worthwhile endeavor, but it requires careful consideration of individual circumstances and factors. Solar panel systems contribute to environmental sustainability by reducing dependence on fossil fuels and decreasing greenhouse gas emissions. They offer the opportunity for homeowners to generate clean energy and reduce their carbon footprint.
It is crucial to conduct a comprehensive evaluation of the local solar policies, available incentives, net metering programs, SREC markets, and installation costs specific to one's location. Additionally, working with a reputable solar installer can provide valuable insights and help determine the feasibility and financial benefits of installing solar panels.
Taking all of these considerations into account, solar panels have the potential to be a viable long-term investment, providing both financial and environmental benefits to homeowners.
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I have been an Auditor, Analyst, Accounting Manager, Business Systems Manager, Controller, School Board Vice President, Director of Finance, CFO and COO over the past 2 decades of work experience. In my free time I developed the XLYourFinances spreadsheet and website I enjoy golf and spending time with my family. We attend church at LCBC.