Thinking of going solar? More and more homeowners are doing it. We all know it’s good for the environment, but is it a good economic decision?
The difference, financially speaking, of installing a solar energy system for your home, is whether you pay now or later. To purchase a system and have it installed, you have to come up with the money now. You’ll save on your electric bill going forward, and eventually you’ll break even. After that, you just have free electricity, except for the occasional maintenance of your solar system.
The break even time varies. You have to go through the process of estimating for your specific home. There are online tools that will help you determine how big a system you’ll need, how much it will cost and how much electricity it will generate. Be sure to factor in the incentives available.
Once you know the cost, you can figure out how much you’ll save each year on electricity. If you’re getting a system that’s big enough to supply all of your home’s power needs, take a look at how much you paid to the power company last year. You’ll save at least that much going forward. You might choose to get a smaller system at a lower cost. In that case, figure out how much you expect your electric bills to be. If your power company buys excess power from you, you might be able to get checks from them! That would reduce the amount of time to reach the break even point.
So let’s say that you’ve crunched the numbers and you know that it will take 10 years to break even. What now? Do you go for it? For now, let’s assume that the price of solar panels is going to remain steady. (More on that later.)
If you invest in solar energy now, you can start the 10 year break even period now. If you invest in solar next year, you’ll pay for one more year’s worth of electric bills and then start the 10 year break even period. It would seem to make sense to take the plunge sooner rather than later.
Let’s revisit the price issue. Prices of solar panels have been coming down, and it may not have reached bottom yet, but it’s close. When consumers jump on the bandwagon in large numbers, prices will stabilize or even increase. More consumers are investing in solar energy than ever before. When will the floodgates really open? Maybe when the economy improves and people have the money to spend. Maybe when and if the government offers an incentive that’s just too good to pass up. (Remember Cash for Clunkers?)
Speaking of incentives, currently there are incentives being offered by the federal government and by many states. Will there be incentives in the years to come? Will they be the same as they are now? Better? Not as good? It’s anyone’s guess, but until the floodgates open and consumers buy solar panels in droves, I suspect that the incentives will continue.
What about the cost of money? Unless you have the money sitting in the bank today, you may need to borrow the cost of your solar energy system. That means interest. Many people are finding that they can get a loan and the payments will be about what their electric bill was. That’s a pretty painless way to go. You just keeping on paying the same amount until suddenly the expense goes away. The other option is to save up the money. Think about it this way. For every year you delay, you’ll pay one year’s worth of electric bills. Can you save up enough money in a year to make that worthwhile? Here again, this depends on your situation. If you are in a position to refinance your house (at the current low, low rates!), that’s pretty inexpensive money.
If prices and incentives stay the same, and you can borrow money at a good interest rate, sooner is better. However, you can gamble one year’s worth of electric bills if you think that prices will go down and/or incentives will go up in the next year.
Author Resource:
Coleen Smith manages a website with information about solar panels at http://www.solarpanelsforsalecheap.com She has also written several articles on the topic. http://ezinearticles.com/?Pros-and-Cons-of-Residential-Solar-Systems&id=3195082
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