Rising energy prices and new tax incentives for green retrofits this year have fueled interest in solar energy.
Experts say now is the time for many homeowners to make the switch to solar energy. While solar energy doesn't work in every home, when it does, it can drastically reduce heating bills and reduce the environmental damage caused by burning fossil fuels. And while it's still cheap to install a solar power system, the initial cost has dropped dramatically over the past decade.
The cost of solar panels
Costs vary from state to state and depend on factors such as the size and quality of the solar panels. According to EnergySage.com (opens in a new tab) , an information site about alternative residential energy sources, the average residential PV system nationwide costs about $20,000 after the 30% federal tax is deducted.
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Nick Liberati, EnergySage communications director, broke it down: The national average for a 10-kilowatt system with an average cost of $2.86 per watt is $28,600. The federal tax credit allows you to deduct 30% of the cost of installing solar panels from federal taxes (in the case of a total of $8,580), resulting in a cost of $20,020.
On average, it takes 8.7 years to break even, which means you save enough energy to recoup the cost of your solar panels. After that, your solar energy is available to you free of charge until the devices wear out. Solar panels are typically guaranteed for 20 to 25 years, although an inverter warranty on a system is typically 10 years. An inverter converts the electricity generated by the solar panels into alternating current for use in your home.
Should you buy a solar panel?
The average cost of solar panels given above does not include storage. Depending on size and other characteristics, a battery can cost more than $9,000 on average after federal tax credits are deducted. Specifically, according to Liberati, the national average cost for a 10- to 12-kilowatt-hour battery is about $13,000. From 2023, all household batteries will be subject to the full 30% tax if their capacity exceeds 3 kWh. So you can deduct $3,900 from your taxes, leaving you with an after-tax credit of $9,100 on the battery.
Although batteries are being used more and more, most solar powered homes are not. Instead, most customers send excess energy back to their utility as an energy credit when the panels aren't collecting enough energy, e.g. B. at night.
If your grid goes down without batteries, your home will lose power too, even if it's sunny. "The main reason for this is security," says Liberati. “If your solar system is still generating and sending power back to the grid during a power outage, those live wires pose a serious safety threat to any utility attempting to return power to the grid.
This wouldn't be a problem if you had a battery powered island. Islanding is a technology that enables your home to be self-sufficient. "You can continue to generate solar and battery power during an outage without endangering grid workers because an isolated system doesn't shunt excess power back to the grid," says Liberati. He points out that not all solar storage systems can isolate themselves. If you get a battery, you need to make sure the installer gives you the right hardware to enable this technology.
What you should consider when buying solar modules
With thousands of dollars required upfront, the switch to solar can be daunting for many, notes Vikram Agarwal, CEO and founder of EnergySage.
Agarwal asks you to compare and verify any claims – for example, that your energy company or government is providing you with solar energy for free. He said EnergySage is helping with that, connecting consumers with reputable contractors. The website also provides information on incentives offered by different countries.
Another factor to consider is how your utility bills you for the solar power it gets from you, especially if you don't have a battery and your home is dependent on the utility when there aren't enough panels.
Michael Ware, chief solar specialist at consultancy EcoMotion (opens in new tab) , says there is tension over how utilities honor customers for solar power. Energy suppliers want a discount that matches what they pay for other types of energy that they sell to consumers. But solar advocates want utilities to loan customers the full amount they have to pay for their electricity, known as net metering.
People installing solar power should check with their insurance companies to determine if they will cover the panels or if they need additional insurance, said Sherry Shields, director of communications and marketing for the University of Central Florida's Florida Solar Energy Center.
More reasons to get out in the sun
Saving money is one of the reasons people are turning to solar energy, says Robert Stoner, associate director of science and technology at MIT's Energy Initiative (opens in a new tab) . "I think most people who invest in residential rooftop solar just want to be part of the transformation and be seen as a part of it on a smaller scale," he says. "There's nothing wrong with that... There are some, like me, who have homes -- my cabin is at the end of a five-mile seawall -- that they can't afford off-grid power." Stoner says his solar system, the one string of lead-acid batteries, provides all of its power: "And that brings me so much joy! Partly because of the sense of independence I feel and partly because of the wonders of solar electricity."
Rotraut Boxthaler, 86, of Sarasota, Fla., and her husband installed 26 solar panels and a Tesla battery in November 2016. The solar panels cost just under $28,000 to install and earned her about $8,400 in tax credit. It costs about $19,600. The battery cost about $8,400 to purchase and they took a tax credit of about $2,500 for a net cost of about $5,900. "We are very committed to the cause of climate change and want to help reverse this trend," says Boxtaler. Switching to solar energy "was one of the most positive decisions we've made for our Florida lifestyle. We've saved money, helped fight climate change, and had the pleasure of having power whenever there was a power outage."
The move to solar doesn't always completely disconnect you from the utility company. When the system was first installed, Boxtaler said her electricity needs dropped dramatically, and her utility bills dropped to about $40 to $60 a month. With energy costs rising, it's now more than $100 a month. But in addition to the savings on utility bills, she counts the money saved on food that doesn't spoil and hotel rooms that didn't need to be rented when the power went out.
If they regret it, she says, it's because they didn't have a broader system. "We think the board count decision we made was very conservative and should have included more battery-powered circuitry," she says.
Should we wait for new solar technology?
Another reason you may be reluctant to switch to solar power is that the technology could evolve to offer more efficient and/or cost-effective options. It is true that new technologies are always emerging. For example, some companies offer roof tiles that act as a solar panel. In addition, standard solar panels are becoming more and more efficient, cheaper and more beautiful.
If you wait, do you have a chance to get something better?
Solar panels are getting a little better every year, Agarwal says, but not enough to expect a drastic change. Ten years ago, he said, each record was producing maybe 240 or 245 watts. Now each of them produces 400 or 420 watts of power. This allows you to extract more energy from a system covering the same area. The boards, he said, were once light blue with silver edges. Now they're all black and "look good," he says. And they are more durable.
He says that solar roof tiles are not yet ready for large-scale use. Agarwal says the roofing company plans to launch an "interesting product" along these lines this year. But solar roof tiles are still less efficient and more expensive than traditional solar panels. However, if you plan to redo the roof, solar panels can be worthwhile.
Weir said he expects battery prices to fall over the next five to 10 years as companies explore different battery technologies. Currently, the most popular battery technology is lithium-ion, which can cause fires in some cases and requires outdoor installation in some jurisdictions.
Is Solar Energy Right For You?
Some homes are not suitable for solar energy:
- For example, if you have an old roof that will need to be replaced in a few years, it makes sense to wait because removing and reinstalling solar panels can cost thousands of dollars.
- If your roof faces north or is in the shade, you're probably not a good candidate for the sun.
- It's also more difficult and expensive to install solar panels on clay tile roofs, says Liberati.
There is another option for people who cannot afford to install solar panels on their roofs.
The solar community includes many solar panels in which people can purchase a share. Individuals who participate in Community Solar typically receive a credit from their utility company for the energy generated by their share of the project. For information on municipal solar projects near you (Opens in a new tab) , visit the EnergySage website.
Note: This article first appeared in The Kiplinger Retirement Report, our popular monthly publication that highlights the top concerns of older wealthy Americans who are retiring or nearing retirement. Login here (Opens in a new tab) if you need pension advice that's value for money.
