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Do Solar Panels Save Money? Yes How Are You Here

This story is part of Home Tips, ‘s collection of practical tips for making the most of your home, inside and out.

According to the Solar Energy Industries Association, more than 500,000 new residential solar panel systems were installed on rooftops last year. Despite growing uncertainty in the solar economy and industry in 2022, it is almost certain that solar panels will pay off in the long run. Buying panels optimized for maximum output from a renowned solar installer can save you even more over time. There is also a solar option for renters.

Residential solar installation costs vary by size, regional incentives, and regional costs, but the average installation cost is about $ 20,000, according to energy analyst Wood Mackenzie. (Wood Mackenzie uses an average installation size of 8 kilowatts and an average of $ 2.99 per watt. Many residential solar systems will be smaller.) Tax credits and financing options can make the cheaper solar energy.

With a little information and a little math, I’ll show you how to estimate the payback period of your solar panels and see when you’ll start saving money.

Are solar panels really worth it?

The payback period is the time it takes to recover the initial investment. Using solar panels can save you enough energy costs over time to offset the upfront costs. The amount you save each month will depend on the size of your solar system, the energy consumption of your home, and other factors.

The payback period calculation is situation specific because the initial cost and the difference in energy cost per location are different. However, here are some tips to help you estimate your break-even point:

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First, you need to estimate the amount of your initial investment. In addition to system costs, you should include potential installation and other costs as part of setting up the service. Get a quote for your area and go from there.

Homeowners can get a one-time tax credit on 26% of the purchase price of a solar system. If your initial investment in solar panels is typically around $ 20,000 in your area, your tax credit will be $ 5,200 on your next tax return.

Some utility companies also offer incentives and discounts for solar installations. Check with your local energy supplier to see if they offer incentives.

This estimate assumes that you will get all your energy from solar energy. Some households get 100% of their electricity from solar energy or can sell some of their excess energy to the grid, while others still have to pay their electricity bills to replenish their consumption. This varies greatly from house to house, depending on the number of solar panels installed, normal energy consumption, etc. Get more tools to calculate your home’s potential savings here.

Now that you have an idea of ​​how much energy you can save, log into your user account and calculate the average of your multiple electricity bills. If possible, wait at least six months, taking into account seasonal changes in temperature and other cost fluctuations. Let’s say you get 100% of your usage from your panels and you currently pay an average of $ 125 per month for electricity or $ 1,500 per year. You now have the information you need to estimate the payback period of your solar panels.

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First, multiply the cost of the solar panel by 0.26. This is a tax deduction you receive for installing your system. If you initially spent $ 20,000, your tax credit would be $ 5,200. This reduces your initial investment to $ 14,800.

Let us now consider energy savings. Divide your initial investment by the $ 1,500 you normally pay the power company annually. How long do your savings last for the amount you spend. Using the example above, dividing an initial investment of $ 14,800 by $ 1,500 results in a payback period of less than 10 years.

It may seem like a long time on the surface, but solar panels can easily last 25 years.

Renewable energy certificates or RECs can also be sold to reduce payback periods. It is measured in megawatt hours of electricity from renewable sources. Electricity companies have to buy some of their electricity from renewable sources. This means that you can save more by selling the energy generated by solar panels.

Another important thing to know about solar energy

Some factors can increase the recovery period. Before installing the solar panels, it is necessary to check the condition of the roof. The panels can last 25 years, so if your roof isn’t top of the line, it may need to be upgraded before installing the solar panels. If this is the case, you should add these costs to your initial investment.

In general, solar power can be an expensive proposition, especially with start-up costs. However, the long-term efficiencies it provides can offset the initial investment, translating into cost savings for years to come.

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