Solar energy solutions for the residential energy market has seen a turnaround in the past couple of years. Most people install solar PV energy systems for electricity. The electricity is generated from free solar energy so people expect they will save money.
The number of energy-efficient household appliances has increased, and the prices of solar technology and solar battery storage have reduced. In the last ten years there has been an increased public awareness of energy pricing.
Some householders are shifting towards finding solar energy solutions that solve their issues of concern. Householders are being motivated to install solar energy systems to reduce their energy bills. Of course there is a flow-on benefit for the environment in reduced greenhouse gas emissions, which installers are quick to point out.
Let’s understand the psyche of the householder who is considering the option of renewable energy by using solar energy solutions. There will be financial aspects, such as up-front capital costs for the system, solar system maintenance costs and the length of payback period being near the top of the list. There will also be the savings on energy bills, tax credits and subsidy, feed-in tariff value and improved resale value for the home, aided by the positive physiological factor of safisfying any environmental concerns.
Why Go Solar?
The main reason that you might consider going solar could be the amount of money you can save on power bills. The amount of money that can be saved by using solar energy solutions will depend upon several key factors.
They include the amount of electricity consumed by the household, and the amount of energy generated by the solar system. The value of savings 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 you pay are set by the utility in the area as is the feed-in tariff paid by it to the householder for extra electricity their solar panels put into the grid. There is another way for any excess solar energy sent to the grid that involves selling to neighbours directly. 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 have fallen by half over the ten years and are expected to drop down further in the future even as efficiencies improve.
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 power of an average householder owning a solar system.
Financial considerations of initial set-up costs, and the net savings on energy bills are part of the 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 paid to the householder per kilowatt-hour is generally less per unit than the amount paid by the householder for his electricity on the Utility company's 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 get the benefits from rebates and tax breaks. Only those householders who purchase their solar system outright 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 usually expected by the property owner is there will be an 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% to 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 solution.
Another study revealed that looking at sales of equivalent homes, the one with operating solar panels sold faster than homes not supported by solar panels investments.
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
However, householders can save a considerable amount of money from their electric bill by using renewable energy and switching to solar energy solutions.
The initial cost can be funded through an increase in the size of the home mortgage. 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 for solar energy upgrades are similar to most home improvement loans that are provided for a home upgrade or house renovation project. The loans for the solar system are offered by banks through finance brokers who provide evidence to prudent solar installers of the extra income savings available for this type of improvement. They work together to encourage the home owner to invest in solar panels being installed for energy generation.
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. They might make suggestions for energy conservation as a great first step to saving money.
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 their situation.
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 Centre at N.C. State University. DSIRE gives a comprehensive list of the rebates and tax credits that are available to the householder at their zip code.
There is an increased awareness among the householders regarding the environmental benefits of solar energy solutions.
For some people, the environmental cost is on par in importance 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. It might be the deciding factor in a marginally financial benefit to cost situation.
A solar system reduces the GHG and carbon pollutants in the air. Many solar power system owners are able to recognise their contribution to lowering the greenhouse gas emissions from solar electricity generation. Their environment benefits from having cleaner air arise from using eco-green solar PV and solar thermal energy.
Householders who are aware of this benefit and want to reduce their carbon footprint tend to commit to a solar powered electricity generation or a solar thermal water heating system if it is also providing a small financial benefit. Homeowners who install a solar system may feel that they are adding positively to their community.
The Right Time To Go Solar
Solar credits offered by the government will be ending in 2022, so it's the perfect time to invest in solar energy solutions.
The panel and hardware prices for solar components are at an all-time low but recent tariffs on imported panels have caused the demand for them to waiver. However, we are still benefiting from the better solar panel technology that have come with improvements in the solar material and manufacturing technology.
More innovative financing options are becoming available to householders for home energy solutions and plenty come using discounted home interest sized 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 tariff rates for up to 10 years from the date of entering into their contract. An newly installed solar system lasts for many years past the guarantee, so make your home solar purchase decision based on your expected needs and getting sufficient positive financial returns to have a good payback period.
Now is a perfect time to start thinking of buying a solar investment. Click here to check out one of the many solar panel kits available on Amazon that will save you money on your electricity bills.