Rooftop Solar Panels are Worth It and this is Why

Sunlight is clean, renewable, and free.

Homeowners when you install solar panels on your roof, you are making the world a better place, saving money on electricity, and increasing your home’s value. What could be better?

I know. That may sound like a grandiose statement but think about it.

You already know that burning fossil fuels is causing global warming and endangering our planet and the people living on it. You probably also know that the majority of electricity generated in the United States is produced by burning fossil fuels (63% in 2017). Hopefully, you agree that switching to clean renewable energy sources like the sun is a good idea and that we need to accomplish it sooner rather than later.

Every time a homeowner installs solar panels on their roof (or anyone installs solar panels on any roof), our society moves that much closer to getting off fossil fuels and that makes the world a better place for you, the people you love, and everyone else.

Unlike fossil fuel companies, the sun shares its energy free to everyone and it will continue to do so for another four or five billion years. To capture the sun’s energy and convert it into electricity you need a solar panel system and that is not free. Fortunately, nowadays, there are numerous options available to you, from paying cash for solar panels to renting your roof and paying a discounted rate for electricity.

In 2017, the California Regional Multiple Listing Service added fields to its system so realtors can enter solar power information for their listings in a consistent manner making it easier for homebuyers to compare homes. You can read more about this in the post You Can Increase Your Home’s Value with Owned Solar Panels.

I am grateful for the people who had the foresight to install rooftop solar panels decades ago. These early adopters created a demand for solar panels and along with early manufacturers and installers, they got the solar industry off the ground and worked through the technical and operational issues that often accompany a new product.

Five years ago, my spouse and I decided to join the rooftop solar revolution made possible by these solar pioneers.

Owning a Rooftop Solar Panel System

On March 8, 2018, the mini wall calendar that hangs by my desk informed me that on this day five years ago our new rooftop solar system generated its first kWh of electricity from the sun.

Since I am a data-loving kind of gal, the five-year mark seemed an ideal time to do a review of our system and electric bills. I thought it would be fun to attempt to answer the question, “Is solar worth it?” from a financial perspective because there seems to be a fixation on “Show me the money.” by the media, solar installers, and potential customers.

Solar Panel Character Grasping 100 Dollar Bills
Photo Credit – iStock/Talaj

At the time, I was working on our 2017 income taxes and thinking that a tax refund would make an excellent down payment for a rooftop solar system (hint, hint). In preparation for this post, I emailed Glen at A.M. Sun Solar (the company that did our installation) to ask him what our system would cost today.

Background

We moved to the Central California Coast from Southern California in 2007. The climate here is cool and sunny with average temperatures ranging from 55° in the winter to 65° in the summer although, in the last couple of years, days over 80° have increased.

Other than opening windows, we do not have air conditioning and our heating system runs on natural gas (ugh, another future project) so our electricity use is not as high as it would be in a hotter climate where more people have window air conditioners or central air conditioning. My spouse and I both work from home so we are home all day using electricity.

Before we installed solar panels, our average annual electricity cost was $1,742.

Purchasing Solar Panels versus Leasing

Our children, your children, and everyone else’s was our main motivation for installing solar panels on our roof. It was a way for us to be for something, to do our part in building a nationwide clean renewable energy network. Free electricity in the future was a bonus.

After deciding to install solar panels, we needed to figure out how we were going to pay for them.

Buying solar panels would require a significant cash outlay upfront; however, we knew that at some point we would recoup the system’s cost and that electricity would be virtually free indefinitely (at the end of the 20-30 year warranty period, solar panels may be less efficient but they do not stop working). On the other hand, a lease would have little or no initial cost and we would immediately be paying less for electricity.

We intend to live in our home for many years to come and we did have some money saved in our rainy day fund so we determined that purchasing a rooftop solar system was the right choice for us. The 30% federal tax incentive for renewable energy projects probably influenced us (a little bit). If we had not had the money, we likely would have pursued a home equity or solar loan.

Solar Panel System Cost and Electric Bills

We selected a locally owned solar installation company so we could support a small business in our community and we purchased equipment made in the United States to support American workers.

Danny from A.M. Sun Solar Beginning Our Rooftop Solar Installation
Danny from A.M. Sun Solar Beginning Our Rooftop Solar Installation in 2013.

Our system started out with 16 solar panels in 2013 and we added 6 more panels in 2014 after receiving a tax refund as a result of claiming the 30% federal tax incentive on our 2013 income tax return. We reported our second purchase on our 2014 income tax return lowering our tax liability.

The net cost of our 22-panel 5.34 kW solar system was $14,767.

Our system ties into PG&E’s electric grid so during the day when our solar panels are generating more electricity than we are using we send the excess to the grid to share with the community and we pull electricity from the grid at night or on exceedingly cloudy days.

We pay PG&E a monthly minimum fee of about $10.00 (it started out at $4.50). If we draw more electricity from the grid over a 12-month period than we send to it, we pay extra money to PG&E. If we send more electricity to the grid than we use, PG&E issues us a credit that we can use to pay our monthly fee until it runs out.

Twice a year (April and October), California residents receive a California Climate Credit on their electric bill funded by fees paid by power plants and other large industries that emit greenhouse gases. In 2018, the credit is $39.42 times two.

From March 2013 through March 2018, we paid PG&E a total of $644.

If you are interested in learning about our solar panel installation experience and how to make your own installation go smoothly, or how solar net energy metering works, I covered these topics in the posts Go Solar with Home Rooftop Photovoltaics – We Did and Rooftop Solar Costs Less than You Think.

Payback Period

A payback period is the length of time it takes an investment to recover its initial cost either in profits or savings. For a homeowner with owned rooftop solar panels, the payback period is however long it takes electricity savings to equal the cost of the system.

If you did not take into account rising electricity rates or any of the many variables that affect electric bills, and assuming that we did not pay another dime to PG&E our payback period would have been: $14,767 system cost divided $1,742 average annual electricity cost before solar = 8 years and 6 months.

After looking at five years of net energy metering bills, 21 PG&E rate schedules, and our system’s energy production data, I realized I would need a supercomputer to calculate accurately what we would have paid for electricity if we did not have solar panels.

Undaunted I decided to take a stab at a payback period anyway. Electricity price increases, a torrential downpour, and additional work-at-home occupants affected our payback period, which at this point, I estimate to be about 7 years so we are already 71% of the way there.

More details about how I estimated our payback timeframe are available by clicking on Rooftop Solar Payback Period Example.

Tax Incentives and Tariffs

Earlier in the post, I mentioned asking Glen from A.M. Sun Solar what a system similar to ours would cost now. His response was $17,586 a reduction of $3,510 (a whopping 16.6%). With the 30% tax incentive of $5,276, the net cost for the system would decrease even more to $12,310.

After December 31, 2019, the tax incentive decreases and then phases out at the end of 2021. Visit the DSIRE (Database of State Incentives for Renewable Energy) website to learn more.

Oh, but wait. Have you seen in the news that the Trump Administration implemented a tariff on solar components in February this year? It starts at 30% for 2018. This could affect the cost of your installation, but even if it does, the tax incentive would probably cover it and then some.

Homes with Rooftop Solar Panels in Austin, TX Neighborhood
Homes with Rooftop Solar Panels in Austin, TX Neighborhood – Photo Credit iStock/Roschetzky

Electricity prices continue to rise (along with greenhouse gases) and solar panel prices have come down even with tariffs so now is a good time for you to seriously consider rooftop solar panels for your home.

Solar Panels Add Value to Your Life

While I was looking at data and doing calculations for the payback period, it occurred to me, that many if not most home improvements do not even have an expectation of a payback period.

For instance, what is the payback period on a $15,000 bathroom remodel or a $50,000 kitchen renovation? At what point do you recover the cost of a $10,000 roof replacement? There is no answer. Even when you sell your home, it is unlikely that you will recoup anywhere near the cost (if you doubt me, google it).

I can hear you saying, “But, I enjoy taking showers in my remodeled bathroom, I love cooking dinner in my renovated kitchen, or I am thankful my new roof is keeping the elements outside where they belong.” What you are really saying is “This adds value to my life.”

Let us return to the question, “Is solar worth it?” You know where I am going with this, right.

Solar panels add value to my life. To me, they are worth it.

Every time I look at the solar panels on our roof or pay my PG&E bill, I feel happy knowing that by generating renewable energy to run our home we are doing something positive that is good for the planet and the people we love. I admit contemplating free electricity in less than two years brings a smile to my face, too.

Perhaps rooftop solar panels could add value to your life.

If you call a solar installer today, you could have a solar panel system installed before the hottest part of the summer. What could be better?

Featured Image at Top: Pair of Hands Catching Sunbeams – Photo Credit iStock/ipopba

Related Posts

Resources

Shrink Your Carbon Footprint with a Smart Thermostat

Make saving energy easy and fun.

You can stay warm (or cool) in your home, use less energy, and save money by replacing your old thermostat with an easy to use learning (smart) thermostat. The operative word here is easy.

With a little training from you, a smart thermostat will learn your household’s temperature preferences, adjust to changes in your schedules, and suggest settings to save energy.

For instance, during the winter a smart thermostat will learn what time to turn your furnace down at night while your household is sleeping. On a hot day, a smart thermostat will learn when to turn on your air conditioning so that your home cools down before your kids get home from school or you arrive home from work. If you sign up for an account and download the app, you can control your thermostat using your smartphone and get detailed information about your home heating and cooling energy use.

A smart thermostat is likely to cost you between $150-$250, plus sales tax and possibly shipping if you buy it online. You may be able to install it yourself or with the help of a friend, but if not, hiring an installer will add to the cost. Most manufacturers claim that a smart thermostat could reduce your home heating and cooling energy use by at least 10-15% and that the thermostat will pay for itself in energy savings in two years or less.

2015 Residential Energy Use Pie Chart
2015 Residential Energy Use Pie Chart – Source The National Academies of Sciences, Engineering, and Medicine based on data from the U.S. Energy Information Administration

There are probably 100 million thermostats hanging out in hallways across the United States. Imagine if every household had a smart thermostat. We could be comfortable in our homes, save some money, and most importantly decrease our reliance on burning fossil fuels to heat and cool our homes. When millions of people make even a small change, it can really add up to make a significant positive impact.

That all sounds wonderful so smart thermostats should be flying off store shelves, right?

I am highly motivated to curtail my energy use and yet it took me five years to decide to buy a smart thermostat because I was evaluating the purchase using outdated cost/benefit thinking.

Is a Smart Thermostat a Good Investment?

I have been eyeing smart thermostats since 2012 when I wrote about them in the post Use Your Thermostat to Save Energy and Money. At that time, I did the math and decided that replacing our old thermostat with a smart thermostat did not pencil out, meaning it did not seem like a good investment.

My spouse and I both work out of our home office so since we are home during the workday we use energy all day. However, we live in a temperate climate where the average winter temperature during the day is in the 50s and we do not have air conditioning. If we managed to save 10% a year on our natural gas bill, I estimated it would take at least four years or more for the energy savings to equal the cost of the smart thermostat.

So, what changed my mind?

First, I had to admit to myself that I was never going to learn how to use our existing programmable thermostat and that manually turning it on and off and adjusting the temperature when I thought about it was not an energy saving practice.

Programmable Thermostat Inner Workings
The Incomprehensible Inner Workings of Our Old Programmable Thermostat

Once or twice during the ten years, we have lived in our current home, I opened the thermostat cover and looked inside with the intent of learning how to program it. The inner workings seemed complicated and difficult to use. I sighed and closed the cover feeling defeated. I know I could have tried to find the instruction guide online, but I never did.

Then there was the argument that our current thermostat was operational so it would be wasteful to get rid of it. Eventually, I realized that using more natural gas than we need to is much more wasteful especially considering that extracting, processing, and burning fossil fuels is harming people and the planet. We need to get off burning fossil fuels sooner rather than later and decreasing our own use is a step in the right direction.

The seemingly long payback period made me hesitant to spend $200 on a new thermostat. My only excuse for that holding me back is that I spent a couple of decades working in corporate America where every product purchase was evaluated based on how long it would take to pay for itself in either sales revenue or cost savings. Every decision was made with an eye on the financial bottom line.

My narrow thinking kept me from buying a smart thermostat until near the end of last year when I was researching and then writing about why you should learn to read your natural gas and electricity bills. My purpose was to empower readers to understand their own energy use and be responsible for decreasing their fossil fuel use. While I was editing my posts, I realized that I could and should do more than I was doing to reduce our household energy use by purchasing a smart thermostat.

Smart Thermostat Installation

Fortunately, my spouse agreed that we should move the dial forward on our goal to reduce our home energy use by purchasing a smart thermostat.

Of course, there are many different makes and models of smart thermostats on the market in a variety of price ranges. We opted for a Nest Thermostat E for $169 because it has a cool looking design and seemed easy to install and to use (it was and it is).

The picture at the top of the post shows what comes in the box accompanied by an easy to follow instruction guide. My spouse installed the new thermostat, however, even though I am not mechanically inclined I think I could have done it.

An optional rectangular piece of plastic comes in the box so you can cover up the outline and screw holes left on your wall from your old thermostat. My spouse is very handy, so we decided to spackle and paint over the wall.

Sure, replacing our old thermostat with a smarter version is a small change but imagine if everyone did it. If we want to have a habitable planet to live on in the future, we had better expand our vision of what constitutes a good investment.

Reader Note: When I mention a specific product in a post, it is because I think you and other readers may find the information useful. I do not accept product review solicitations and I do not receive compensation of any kind for mentioning a product in a post.

Featured Image at Top: Nest Thermostat What Comes in the Box – Photo Credit Nest Corporation

Related Posts

Resources