How to Determine if Solar Power Is Worth It for Your Home
With electricity costs on the rise, more and more Americans are looking to solar power as a way to reduce not just their monthly expenses but also create a more eco-friendly lifestyle.
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Review Your Electricity Bill
The U.S. Energy Information Administration (EIA) reports a 10% increase in electricity costs over just a 10-year period.
The EIA shows that the average price of electricity for states greatly varies, too. While states like Iowa, Kansas, and Missouri average $11.22, the price jumps to $21.08 in New England and $27.64 for Alaska and Hawaii.
Where you live is an enormous factor when determining whether solar power is right for your home. Some states like California and Arizona receive far more sunlight than other states like New York and Washington.
Evaluate Your Sunlight Exposure
The direction your home faces can have a lot to do with how much natural heat your home absorbs each day. Typically, southern-facing homes enjoy the sun for the majority of the day, creating a lot of warmth and light, while homes that face north are usually darker and, therefore, much cooler.
Direct sunlight can have an enormous effect on your heating and cooling bills, as can the size and angle of your roof.
Determine How Much Solar Panels Will Cost for Your Home
Few homeowners are able to pay upfront in cash, leaving many to rely on home improvement loans when possible. This makes it even more important that you find the right deal, because you may be paying off your loan for some time to come.
The cost of solar panels depends on how many watts you need to power your home. The more watts you need, the higher the cost to install your solar panels. The average household uses three to eight kilowatts, which can cost anywhere from $15,000 to $40,000, or about $6 to $8 per watt. These prices include things like parts, labor, and fees, which can all vary from vendor to vendor.
Shopping multiple companies is always a good idea, so you can compare quotes for the best price. With service and labor making up a significant portion of the bill, some companies may charge less than others. Just be sure to confirm the proper licensing of all vendors before committing to a contract.
Ultimately, where you live and the kind of home you have will determine your actual cost. There are other factors, too, that will impact the cost of your solar panels.
Look for Incentives
To reduce electricity usage and promote greener living, many federal, state, and local governments have incentivized the use of solar power in residential homes. You could benefit from exclusive tax breaks and savings simply for having solar panels in your home.
Some solar incentive programs pay one total sum, while others take a more drawn-out approach, offering tax credits over time based on your overall energy consumption.
Since 2006, homes with solar panels can claim the federal Solar Investment Tax Credit (ITC) on their annual taxes. This could mean a 26% credit toward the cost of your solar panels if you own, and live in, your home.
The reimbursement applies to eligible expenditures, such as on-site preparation, assembly, and installation. Piping and wiring used to connect the system to your home may also be included for the credit, as well.
Many states have enacted legislation similar to the federal ITC, offering their own state tax credit for their residents. Residents can enjoy personal tax incentives or a wide variety of property tax exemptions and credits.
Many state and local governments also offer special terms for loans related to renewable energy projects, commonly providing low or zero interest terms for 10-year loans. The property-assessed clean energy (PACE) program is another program that offers a loan based on a unique assessment of your home.
Local and municipal programs may offer special incentives, too. They may reduce or waive building permit fees for green building projects or offer special waivers for discounts on construction and installation costs.
Even better, these discounts are usually deducted from your total bill, with your installer or contractor being reimbursed directly by the government or program.
Stay Updated on Trade Policy
Your solar panels can be affected by trade tariffs, too.
According to Reuters, January 2020 brought new tariffs on imported solar panels, causing the price of solar panel projects to skyrocket in America and creating a sudden decline in large solar panel installation.
As of this writing, President Trump’s new trade tariff on imported solar panels imposes a 30% tax that is set to last for the next four years, with a deduction of 5% with each passing year. Many of the solar panels used in the U.S. were previously being manufactured in China, so these new tariffs serve to cripple this area of international trade.
The tariffs are designed to direct manufacturing efforts back home, and it’s working, too. With Chinese trade now wildly expensive, many companies are expanding their manufacturing and hiring efforts here on U.S. soil.
Reuters also reports that the 30% federal ITC on solar installation will also slowly disappear beginning this year.
The Truth About Solar Panels
At the end of the day, you just need to know one thing: are solar panels worth it?
The answer to that question is both a matter of timing and situation these days. With new tariffs affecting the entire industry, there will invariably be inventory shortages and wild inflation as the domestic market struggles to match China’s supply while meeting U.S. demand.
This doesn’t mean that solar panels are not cost-effective, however. Several federal, state, and local incentives can make an enormous difference in your annual expenditures, saving you money in both tax credits and total project deductions.
You just need to determine whether solar power is necessary for your home. The position of your home, the state you live in, and how much direct sunlight you receive will all help you decide whether you can substantially lower your energy expenses with solar panels.
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