There is a major drive in the United States to encourage the national power grid, and individual homeowners, to adopt solar power. While the power of the sun is often referred to by proponents as free, renewable energy, the installation of solar panels is anything but free. If you've considered the addition of solar panels to your home, you are aware of the potential costs. It’s always prudent to weigh both the cost of the product and the benefits you receive from the investment before making a decision.
The true cost of solar panels depends on how you choose to pay for the product and installation. Between payment methods, tax credits and other incentives offered for solar panel installation, the upfront cost is sometimes very little.
Payment Method 1: Lease
The quickest option to pay for solar panels is to reach a lease deal with an installer. Under this arrangement, you make monthly payments on your solar panels much in the way that drivers lease a vehicle.
Many homeowners hope to save money through low lease payments and lowered electric bills. But you could end up with smaller savings and larger payments as the installer looks to maximize the space on your roof. On top of that, you don't get to use rebates and tax credits when you lease a system.
Payment Method 2: Loan
You could use a home equity line of credit or other private loans to pay for your solar system. From the installer's standpoint, your solar panels are paid for in full and you can take advantage of rebates and tax credits to lower the overall cost of your system. You'll enjoy full benefits of cost savings on your utility bills as well. But you will still have monthly payments to make on the loan.
Payment Method 3: Cash
If you have a healthy savings account, the most prudent option would be to pay for your solar panels in full with cash. There's no loan payment to make every month, you can take advantage of rebates and tax credits and you will enjoy the benefits of lower monthly bills for your power utilities.
True Costs and Savings
The true total cost of solar panels depends on the system you install, but most costs range from $20,000 (panels, inverters, parts, labor) to $29,000. If you pay with a loan or cash, you can potentially access the following savings through rebates and tax credits:
- $1,000 state tax credits
- $2,000 rebate is available in some states and from some utilities
- $5,400 federal tax credits
Benefit #1: Free Power
Solar panels have the ability to generate free power for you in the future. Energysage.com notes the average homeowner pays $1,200 in electric bills each month. Over the course of 20 years, that's more than $25,000. After that, you'll be paying nothing in monthly bills because your solar panels are paid off and you aren't paying the utility provider monthly fees.
Benefit #2: SERCs
Known as solar energy renewable credits, SERCs is a program that allows you to sell additional power back to your utility company. This means you're not only saving money each month on utility bills, but you are also generating passive income from your additional power production.
Benefit #3: Increased Home Values
Assuming you pay for your solar panels upfront, the installation of a solar system can increase the value of your home. Studies have shown that homes with solar panels tend to sell faster and go for a higher premium. That premium often offsets the initial cost to install solar panels in the first place.
There are many good reasons to install solar panels on your home. Once you weigh the potential costs against the benefits of installing a new system on your home, you’ll see that solar is perfect for any home.