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Solar Power: Weighing the Benefits Against the Cost

By: Mike Thomas

In many locations, the cost of electricity has continued to rise since the beginning of the new century. At the very same time, the cost of solar panels has decreased and their efficiency has increased. By "efficiency," we mean the amount of electricity gleaned from a given amount of sunlight.

As a result, more electricity is produced for every dollar invested in solar panels than ever before. As rates rise, the value of the electricity generated by solar panels continues to go up.

Many homeowners will be attracted to solar because they want to reduce their carbon footprint and to promote a more sustainable environment. However, the ultimate question for most is: "Will I save money?" For an increasing number of homeowners, the answer is a resounding, "Yes!" Especially in sunnier climates, a full return-on-investment (ROI) in just four to six-years has become increasingly common.

Reliability A Strong Point

Solar panels have also become more reliable. This is reflected in the fact that many manufacturers now warranty their panels for 20 to 25 years. Such warranties not only cover malfunctions; They cover output levels as well. Therefore, the homeowner has protection against any decreased performance by the solar panels over time as well. The reliability of solar energy systems is enhanced by the fact that there are very few, if any, moving parts to wear out.

Utilities Buy Excess Electricity Generated

Also, in many jurisdictions, utilities are required to "buy back" any excess electricity that your system might generate. This means that when your solar panels create more electricity then you need, your electric meter will actually run backwards as the excess power flows back onto the utility's electric grid. Solar panels typically generate the most power mid-day when utilities often experience peak power demands. Financial Incentives Can Be Substantial

Many homeowners have opted for solar panels thanks to excellent government incentives. Both tax credits and tax rebates have been offered by various governments. In some municipalities, there is a commitment to not raise a property valuation because of a solar installation. This keeps property taxes from going up. Also, the utilities themselves have frequently offered rebates as they try to minimize the future need for new power plants.

Solar Energy Storage Advances

Another developing advantage with solar energy is the improvement in energy storage systems. In the past homeowners benefited from solar only by using the energy or selling it back to the utility at a given time of day. Now, with ever more efficient lithium-ion batteries availble to store the electricity, it can be generated during the day and then used in the evening when families usually need it the most.

Solutions To High Initial Costs

The major drawback to solar energy installations has been the initial cost. Even with an ROI of only four to six-years, it is still a daunting prospect for many homeowners to lay out thousands of dollars for the initial system installation. However, current low interest rates have made home-equity loans, obtained for the purpose of installing a system, much more attractive and cost-effective.

Also, in some areas, leasing has become yet another option. In this scenario, a company finances the cost of the installation and you merely lease the system from them, typically for a period of about 15-years. With leasing, it is possible to acquire a solar energy system with little or no initial cash outlay.

Once a solar energy system is installed, there are ways to maximize its effectiveness:

  • Reduce the use of standby power by turning off appliances when possible
  • Run your hot water system at a lower temperature
  • Go with energy-efficient LED light bulbs wherever possible
  • Purchase the most energy-efficient appliances
  • Restrict the use of heat and air-conditioning in rooms that are little-used
  • In the summer, use insulated window shades to reduce the "greenhouse effect" in your home.
A Positive Impact Beyond Money Saved

Many families discover that once the commitment to renewable energy is made, an awareness of energy usage habits around that home becomes more acute. Family members might begin to curtail the length of their showers, for example, to reduce hot water usage. Or, there might be an increased willingness to reduce the thermostat setting a couple of degrees, thus minimizing heating costs.

Therefore, the installation of a solar energy system often involves more than hardware. A more sustainable lifestyle often evolves. Overall, a family will often feel very positive about simultaneously saving money and reducing its carbon footprint.

  

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†Average repair and replacement costs as reported in a nationwide survey: A Study of Homeowners Appliance and Home System Service Experiences Decision Analyst (2011) and reprinted with their written permission.

Home protection plans are subject to exclusions and limitations including repairs or replacements of covered home system components and appliances. See contract for details.