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.
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.
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.
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.
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.
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
- ENERGY: Overdevelopment and the Delusion of Endless Growth – Book Review
- Go Solar with Home Rooftop Photovoltaics – We Did
- Reinventing Fire – Book Review
- Renewable Energy – Home Rooftop Solar Photovoltaics
- Rooftop Solar Costs Less than You Think
- Shrink Your Carbon Footprint with a Smart Thermostat
- Why You Should Read Your Energy Bills – Electric
- Why You Should Read Your Energy Bills – Natural Gas
- You Can Increase Your Home’s Value with Owned Solar Panels
- What the Heck is Fracking?
- A solar panel on every roof in the US? Here are the numbers – by Scott K. Johnson, Ars Technica, 02/16/18
- Average Price of Electricity to Ultimate Customers by End-Use Sector – U.S. Energy Information Administration (periodically updated)
- California Climate Credit – California Public Utilities Commission
- Electricity Explained: Electricity in the United States – U.S. Energy Information Administration (periodically updated)
- How Much Do Solar Panels Cost in the U.S. in 2018? – by Sara Matasci, EnergySage, 04/22/18
- How much do solar panels cost to install in 2018? – by Andrew Sendy, SolarReviews, 02/18/18
- New Bipartisan Legislation Could Overturn Trump’s 30% Solar Import Tariff, Upset Washington Apple Cart – by Joshua S. Hill, CleanTechnica, 04/23/18
- PG&E Electric Rates (current and historical rates)
- Residential Renewable Energy Tax Credit – DSIRE (Database of State Incentives for Renewable Energy) Website
- Solar panel tariffs threaten to increase customer cost and slow growth, but the industry remains optimistic – by Ivan Penn, Los Angeles Times, 01/23/18
- Utilities fighting against rooftop solar are only hastening their own doom – by David Roberts, Vox, 07/07/17