From tax exemptions to lower energy bills, solar energy could bring big benefits to your wallet and the environment.
Rising energy costs and climate change are good reasons for homeowners to switch to solar energy. But some might wonder if it’s worth the hassle and upfront cost. However, between tax credits and renewable energy certificates, there are also many financial incentives to switch. And while it may seem expensive to install, the long-term savings in energy usage can justify the initial cost.
In determining the numbers, some of the most important factors would include your location, installation costs, current energy use, local utility grid energy costs, and any discounts or incentives available in your city or state. Below you can learn more about how solar panels work, how much they cost and how you can benefit from the switch.
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How do solar panels work?
Photovoltaic (PV) modules, better known as “solar panels”, absorb energy from sunlight and convert it into electricity that can be used immediately or stored in batteries for later use. The DC power generated by solar panels flows through an inverter to produce AC power, which can power your home appliances. Additional energy not consumed by you is fed into the mains or into an electric battery bank if available.
How much does it cost to install solar panels?
The cost of installing solar panels depends on how many panels you need, how efficient the panels are, how much sun your home gets, how much energy your family uses, local energy tariffs, and the solar service provider you choose. After forbesFor example, the average cost of residential solar panels is $16,000, but costs range from $3,500 to $35,000 depending on type and model.
To get a quote for your home, you can use the Energysage online marketplace to find competitive solar rates in your area. To determine your final cost, an installation company will measure your roof and recommend panels based on the size of your roof and your usage requirements. You also need to make sure your roof is in good condition before installing the panels as it will be more difficult to attach later. Therefore, it is best to schedule the installation of the solar panels to coincide with the completion of the roof repair or replacement.
Can you get free solar panels from the government?
If you’ve thought about solar energy, you may have heard a rumor that the government is offering free solar panels. Unfortunately, this information was lost in translation. The government does not offer free solar panels, but certain solar suppliers or installers can offer solar panels with no installation cost. In many of these cases, however, you are not the actual owner of the panels. Instead, you will lease them from the company. This doesn’t entitle you to any tax credits or government incentives, and while you don’t owe money up front for the installation, you still have to pay for the electricity you use. In addition, the extra energy generated by the panels belongs to the company and does not benefit your household.
Although free solar power still sounds too good to be true, there are certain federal and state incentives for installing solar power in your home.
Incentives and Tax Credits
The most valuable government incentive is the Solar Investment Tax Credit (ITC), which was extended by 30 percent for another 10 years by the Inflation Reduction Act (IRA). Rooftop solar system owners can obtain the credit by filing IRS Form 5695 with their tax office to deduct 30 percent of the value of the solar system from their federal taxes. This is a one-time credit that can be carried over to the next year if it cannot be claimed in the same year.
Incentives also vary by state. California, Texas, and Massachusetts tend to be more solar-friendly, while states like Alaska and North Dakota offer less incentive. You can visit the State Renewable Energy and Efficiency Incentives Database to learn more about the incentives, loans, and tax credits available in your state.
If you install solar in your home, you can also benefit from Solar Renewable Energy Certificates (SRECs), provided you live in a state with an SREC market. As a homeowner, you can earn an SREC for every megawatt hour of electricity your solar array produces. You can then sell these SRECs back to the SREC market for additional revenue.
For non-homeowners and homeowners, some states like Hawaii and New York now offer Community Solar, which allows people to get involved in a solar project or solar farm. Energy is fed into the grid and distributed to customers by the energy company. It is the ideal solution for renters, short-term owners and low-income families who want to enjoy clean energy without the upfront cost of installing solar panels.
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Savings on solar panels
How much you save by installing solar panels depends on the time it takes you to pay off your solar panel installments. This timeframe is typically referred to as the “payback period.” The calculation is based on the initial cost minus any tax credits or incentives divided by your average annual energy costs. If you don’t supply your house with 100 percent solar energy, you also have to calculate annual tariff increases for the public utility company. For example, an initial investment of $15,000 divided by annual usage of $1,500 results in a payback of 10 years. Since solar panels typically last around 20 to 25 years, that’s not a bad return on your investment if you plan on living in the house for 30 years. If you were planning on moving to a new home in 5 years, then solar panels probably aren’t for you. You can use online calculators like energysage or ecowatch to estimate the cost and payback time.
Given their long lifespan, low maintenance and repair requirements, environmental benefits, and long-term savings on your energy bills, solar panels can be well worth the upfront cost. New technologies and more government incentives will also make solar energy more affordable, accessible and efficient in the future.
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