Solar energy solutions for the residential energy market has seen a turnaround in the past couple of years.
There has been an influx of energy-efficient household appliances, reduction in the solar battery storage prices and increased awareness.
The householders are shifting rapidly towards solar energy solutions. The householders are being motivated to install solar energy systems that have the capacity to reduce their energy bills. A flow on benefit for the environment is reduced greenhouse gas emissions.
Let’s understand the psyche of the householder who is considering the option of renewable energy through solar energy solutions.
Financial aspects such as up-front capital costs for the system, the savings on energy bills, solar system maintenance costs, tax credits and the payback period form near the top of the list.
These considerations are also aided by physiological factors such as environmental concerns.
Why Go Solar?
The amount of money that can be saved by a householder using solar energy solutions depends upon several key factors.
They include the amount of electricity consumed by the household, and the amount of energy generated by the solar system. It also depends on whether the solar system has been purchased or is on a lease. The amount of energy generated depends upon factors like the size and efficiency of the solar energy system, the angle of the roof, the amount of sunlight received, and the orientation of the solar panels.
The electricity rates are set by the utility in the area and the compensation tariff paid by it to the householder for any excess solar energy sent to the grid. Feed-in tariffs contribute income to the householder and become a part of the savings. Several cities are already benefiting from the cost competitiveness between solar power and the electricity sold by the local grid.
Costs for solar energy solutions has been dropping every year considerably since 2009. The prices for components of a solar system for a household are expected to drop down further in the future. The main component contributing to the price drop savings will be the drop in the prices of solar panels. As more solar systems connect it will lead to the soft costs (like permitting and inspection) to come down proportionately.
The government also appears to lean towards improving the affordability for an average householder of owning a solar system.
Financial considerations of initial set-up costs, and the net savings on energy bills enable calculation of the payback period. Householders have an option to buy their solar electricity generating system or enter some leasing arrangement. The lease is entered into as a contract or agreement (Power Purchase Agreement or PPA) with an energy service provider.
Solar leases involve a fixed monthly payment calculated on the basis of the amount of electricity the solar system is expected to generate. This amount is generally less than the amount paid by the householder in his electricity bill.
The PPAs require that the consumer buys back the electricity generated by their rooftop system from the installer, at a fixed rate per kilowatt-hour. The householder may avoid the heavy initial set-up cost by leasing but they don’t benefits from rebates and tax breaks. Only those householders who purchase their solar system have access to government incentives. Entering into a lease agreement is feasible where the householder cannot raise funds for the initial set up costs, does not want to incur the maintenance costs, and /or is not eligible for the federal tax credits.
Benefits of Solar Energy Solutions
The payback period for a home with energy-efficient appliances and well designed system is expected to be around 3 years for small systems and 4 years for larger ones.
A payback period for an investment in solar PV plus battery storage is generally a little longer. The payback period for a solar system depends on three basic inputs. They include the capital cost after deducting the incentives and rebates, the financing option selecting the cost of capital and the energy production forecast based on past data.
Another benefit expected by the property owner is the increase in the property value after the installation of the solar energy system.
US-based studies have found that solar PV investments created property value increases in the range of 3.5-5.4%. Studies show that home buyers are willing to pay a premium of about $15,000 for a home equipped with an average-sized working solar energy solutions.
Another study revealed that homes with operating solar panels sold faster than homes not supported by solar panels investment.
The property prices increased for houses whether the solar system was purchased or a leased solar system. A popular tool that helps the householders in estimating the rise in their property value with the addition of a solar system is the PV Value tool. By getting to know the energy production value of one’s PV system, it can be factored into the calculations of property value. This system is compliant with Uniform Standards of Progressional Appraisal Practice.
Set Up of Solar Energy Solutions
Substantial setup costs are initially the biggest deterrent for the householders going for a solar energy system.
However, householders can save a considerable amount of money by switching to solar energy solutions.
The initial cost can be funded through an increase in the size of the home loan. The savings made from the solar electricity generated from the system are set-off against the additional cost of the loan. Those loans invested in solar panels can give the householders savings that are anywhere from 40% to 70%, over the lifetime of the system. These loans are very similar to most home improvement loans that are provided for an upgrade or renovation of a house. The loans for the solar system are offered by banks plus finance brokers who provide extra income to prudent solar installers.
First of all, calculations are made for assessing the average daily energy consumption of the household. These are based on a number of factors including the number of people in the household, the level of off-peak use, and the number of high-energy appliances it uses.
For instance, consider that the estimated size of the solar energy system required by a household is assessed at 0.90% of the monthly usage. Now an average household that consumes 950.5 kWh of energy per month would require a 9-10kW solar system. The capital cost for that system would be approximately $13,000.
If the monthly loan repayment of the householder is smaller than his average energy bill, then the difference between the two constitutes a saving. New homeowners can add solar during construction and make savings from the start. The loan for solar energy solutions can be a part of their mortgage of the home’s purchase price.
The video below talks briefly about the savings made from installing a household solar system.
Tax Credits On Solar
Householders installing small solar energy systems are eligible for a 30% federal tax credit (Solar Investment Tax Credit or ITC) through 2019. The tax credit reduces to 26% in 2020, then to 22% in 2021, and expires on December 31, 2022. It is only available if the solar system is purchased by the householder. It is not available for a householder's system on a lease. The householder can contact a solar installer to know all about the tax credits available to him.
You can also visit the website of DSIRE to know more about the incentives and policies that are applicable to solar energy solutions in the United States.
This website is U.S government funded and is run by N.C. Clean Energy Technology Center at N.C. State University. DSIRE gives a comprehensive list of the rebates and tax credits that are available to the householder as per his zip code.
There is an increased awareness among the householders regarding the environmental benefits of solar energy solutions.
For many people, the environmental cost is on par with the financial aspect of putting up a solar system. The environmental aspect of installing a solar system in a household doesn’t get measured in monetary terms. That does not mean that its positive impact on the environment is not noteworthy.
A solar system reduces the GHG and carbon pollutants in the air. Many solar power system owners recognise their contribution to lowering the greenhouse gas emissions from electricity generation. The environment benefits from cleaner air.
Householders who are aware of this benefit and want to reduce their carbon footprint tend to commit to a solar powered generation system. Installing a solar system makes the homeowners feel that they are adding positively to the community.
The Right Time To Go Solar
With solar credits offered by the government ending in 2022, now is the perfect time to invest in solar energy solutions. The panel and hardware prices for solar components are at an all-time low because of the increased demand for them. Along with reduced costs we are benefiting from even better solar panel technology, with improvements in the solar material technology.
More financing options are available to householders and plenty come using discounted rates for the solar system investment. In some areas, homeowners will also earn green energy credits and feed-in tariffs for the excess energy generated by their solar system.
Many utility customers have an option of locking in their credit return rates for up to 10 years from the date of entering into the contract. An newly installed solar system lasts for several years past the guarantee, so make your decision based on expected needs and positive financial returns. Now is the perfect time to get started buying a solar investment.