Solar – Is It Worth It?
Several of our clients have asked about this, and one who decided to do it has offered to share her research on vendors. Costs vary a lot apparently, but her home will cost a net of about $7,000, and frankly, will probably get that back in resale.
There are many considerations when thinking about purchasing solar panels. For example, do you plan to buy outright, finance, or lease your product? You can often pay less buying outright, but that’s not always an option. Financing allows you to still own the product, once it is paid off. However, leasing the solar panels does not create added value because when it is time to sell, the buyer either has to take over the current lease, or the seller will have to buy out the remainder of the lease. Not every buyer is looking to take over a lease on solar panels. However, if the panels are already established and paid for, this will be seen as an added value to the home, especially in an environmentally-conscious state like Colorado. The US Department of Energy surveyed 4,000 homeowners with solar power and discovered that buyers were willing to pay roughly $15,000 more for a house that included an average-size system.
What is your reason for contemplating solar panels? Do you want to protect the environment? Save on electricity? This may help determine which type of system is right for you. The next step is to consider your current average monthly usage and current rates in your area. In cities with higher electricity rates, people may see a dramatic savings with solar panels. If you live in a city with very low rates already, your savings will probably not be as much. Do you have central A/C? A rechargeable hybrid or electric car? A hot tub? These items are heavy electric consumers, and solar energy would help offset the cost of these items. This is important because unless you are only buying solar panels for environmental reasons, you will want to make sure you are actually going to save money.
A major incentive of purchasing solar panels is the rebates associated with them. For example, the government offers a 30% federal tax credit on solar panels, thus decreasing your overall cost. Another incentive are energy rebates through your local electric company. Colorado Springs Utilities offers a $0.25 per kw rebate on renewable energy. Essentially, CSU takes the estimated output of your system (AC Watts) and multiplies it by the rebate ($0.25) and send this to you as a check each month. In addition to these incentives, the Sales and Use Tax Exemption for Renewable Energy Equipment means there is no sales tax on the purchase of a solar system. The Property Tax Exemption for Residential Renewable Energy Equipment keeps homeowners for having to pay any additional taxes on the increased value of their home. Both of these help offset the cost of the system!
Speaking of savings, another major benefit is the concept of net metering with solar panels! Net metering is one of the keys to successful solar policy, and Colorado may just have the best net metering laws in the country. In short, net metering makes sure that you get credit, either in energy or in cash, for every bit of energy you produce. Your utility will track how much solar power you produce and how much you use, and the utility will ‘store” any extra power your solar system produces. At night or on cloudy days, the utility credits your surplus power back to you.
Let’s talk pricing! The average cost of installing residential solar panels in Colorado Springs in 2018 is $3.56 per watt. The average system size in the US is 6 kilowatts, which means the average price of a solar system in the Springs is $17,800 (before claiming 30% tax credit and other rebates). Below you can see the potential savings with buying the system outright vs financing or leasing.
Here are some pricing examples for different systems AFTER tax credit.
3kw — $8,148 cash purchase, $8,800 financed
4kw — $10,556 cash purchase, $11,400 financed
5kw — $12,810 cash purchase, $13,835 financed
6kw — $14,952 cash purchase, $16,148 financed
These are just a few examples, but systems go all the way up to 10kw. The biggest thing to consider is how many kw you currently use per month, and which size solar panel you will need to generate that kind of energy. For example, a 7.9 kw solar system will generate 11,666 kw- hours per year.
Next, you need to see exactly how much you will be saving each month and then determine how long it will take you to recoup your investment cost. This will vary based upon usage and size of system being purchased, but can take anywhere from 5-9 years to recoup investment costs. However, savings over a 25 year period can be up to $30,000. Take a look at the photo below! Although you will have a payment (on financed systems), eventually that payment will go away and you will be left with just a fraction of a normal electric bill. You can continue to pay higher electric bills long-term, or cut your bill in a fraction knowing that the payment on the system will go away and leave you with a considerably smaller electric bill in the long run.
After all of these considerations, it’s important to ask yourself, is solar right for me? Will I be able to recoup my investment? How much will I save each month? Can I purchase it outright or finance, or only lease the system? Am I going to sell in the near future and will this add value to my home?
Here’s a list of good references about solar energy that you may find useful: