The cost of electricity from traditional sources has been rising over the years. Today, installing solar panels seems like a no brainer for most homeowners as the average cost of solar panels seems to decline by the day. However, the true cost of solar panels and whether they can help you save money depends on several factors. Before you make the leap, you need to study your electricity bills, location, and the available government incentives on solar systems. Here are some ways you can save money with solar energy:
Savings on Energy Bills
The installation cost of a solar photovoltaic (PV) system ranges between $5,000 and $8,000. This can help you save more than 2,500 pounds of carbon emissions. If you generate more than you can consume, you can receive between $500 and $1,000 through Feed-in Tariff. Moreover, solar thermal heating installations can typically save you around $80 from the energy bill.
Solar panels will save you money on energy costs as long as you stay in the same home long enough to recoup the installation costs. You will make savings through:
- Reduced power consumption from grid – With solar power, you will significantly reduce the amount of electricity you draw from the grid.
- Price of electricity – Electricity prices continue to rise every year, so the more you generate your own power from solar panels, the more you’ll be saving on electricity bills.
- Stored power – Solar systems allow you to store excess power generated during the day for later use. This is especially helpful during peak hours when electricity tariffs are higher.
- Feed-in tariffs – You can feed back any excess energy your system generates into the grid to countervail your electricity bills. The payment or rebate you receive by feeding back excess power is calculated based on the feed-in tariff. Depending on your retailer, you can choose a plan with a corresponding rebate level that suits your individual needs and make even more savings.
- Property values and rental yields – Solar systems can help you save money and earn back the cost of installation by incorporating it in your property’s market value. If you choose to sell your property, buyers will be willing to pay more, especially now that electricity prices continue to rise. If you’re a landlord, tenants would be willing to pay more in rent if the property has solar power as they’ll save more on electricity bills.
Homeowners get significant incentives from the government for installing solar panels as alternative sources of energy. For instance, ITC tax credit allows taxpayers to claim up to 30 percent of installation costs for systems commissioned by December 31, 2019. The credit will then fall back to 26 percent in 2020 and 22 percent in 2021 and eventually expire on December 31, 2021. The ITC works for both commercial and residential solar systems, and there is no cap on this value. On average, you could save up to $9,000 on the cost of installing solar power as a result of the ITC.
So, as long as you own a solar energy system, you are eligible to apply for the solar investment tax credit. However, if you don’t have adequate tax liability to claim the whole credit in a single year, you can “roll over” the balance into the subsequent years as long as the tax credit is still in effect. Remember that if you sign a PPA or lease with a solar installer, you are not considered the owner of the solar system and you don’t qualify for the tax credit.
Factors that Affect Savings on Solar Energy
The amount of saving you’ll make with solar energy will depend on your consumption pattern, feed-in tariff, and location. A solar power system will generate electricity during daylight hours and the excess power fed back to the grid. If you consume more electricity during the day, you might not make much savings. Again, different utility companies offer varying feed-in tariffs per kWh. Check with your power company on what tariff rates they offer and calculate how much savings you’ll make. Finally, different geographical regions experience varying exposure to sunlight. If solar radiation is stronger in your area for a better part of the day, you can make more savings.
Installing solar system in your home will help you save money in the long run. You only need to stay in the house long enough to recoup the installation costs. However, you could still recover your investment if you choose to sell your home after a couple of years. The key factors to consider before installing solar panels include your consumption habits and patterns, feed-in tariffs, and your location.