Purchasing solar panels for your home is a valuable investment. We are all familiar with the costs, but what about the benefits? Here are three financial benefits to consider as you determine if a solar investment is right for you.
1. Generate your own energy, save money on your energy bill
The energy that you generate from solar panels means you will purchase less energy from your local utility. Each kilowatt hour generated is money that you save. An 8.5 kilowatt solar array will generate around 10,748 kilowatt hours (kWh) per year. At a standard cost of electricity (around 11.5 cents), that’s around $1,236 saved in year one. And with energy costs continuing to rise, the value of your savings will increase over time.
2. 26% Federal Tax Credit
The federal government provides tax incentives for the purchase of solar and other renewable energy assets. Upon installation of a solar array on your home, you will be eligible for the federal Residential Energy Tax Credit which is equal to 26% of the cost of systems installed by December 31, 2020. If you install an 8.5 kilowatt system through the Solarize program (estimated price $22,780), then you are eligible for a tax credit of $5,923.
3. SRECs, a state based credit system
Most states provide some additional credit for solar investments. In Ohio, public utilities must purchase a small percentage of solar for each kW of energy they sell to customers. Solar Renewable Energy Credits (SRECs) represent one mega-watt hour of electricity (1,000 kWh). For each mega-watt hour (MWh) that your system creates, you can sell the renewable attribute of the energy on the market. Due to changes adopted by Ohio earlier this year, the value of SRECs has declined. However, the current market will pay around $8 per SREC. As in the above example, an 8.5 kilowatt system could generate 10 SRECs or $80 per year.
How much do Solar Panels REALLY cost?
Here is the example above in more detail:
- We purchase an 8.5 kilowatt solar PV system ($25,000)
- We leverage the Solarize discount of around 10% to bring down the purchase price ($22,780)
- Plus, we receive the federal renewable energy tax credit ($5,923)
- We spend less on energy because we created our own ($1,236 in the first year or $40,610 over 25 years)
So, in the above example, the system we purchased generates $40,610 in utility bill savings, $5,923 from federal tax credits, and $2,220 from the Solarize discount. That’s $48,753 in benefits which puts an estimated $23,753 back into your pocket.
Here are some more examples of how much you might save by installing Solar:
1. Pricing reflects a basic installation using a standard panel. Complex installations may require additional charges.
2. Based on an $0.115 per kWh base rate with a 2.99% annual escalation in the cost of electricity (US EIA projection).
3. Net savings does not include income received from SRECs due to the volatility of the market.