COLORADO SPRINGS, CO – October 21, 2022
Solar panels are becoming a more frequent sight atop the roofs of residential homes. As climate change brings higher temperatures, more folks are looking towards renewable energy—and a decrease in energy bills. Solar panels offer both, and are now more affordable than they’ve ever been.
Photovoltaic (PV) solar panels use radiation from the sun’s rays to create electricity for your home. You will see the cost of your electric use go down, possibly even to $0, though the savings depends on how much energy you use and the type of system you install. Even with solar panels, you will still need to be connected to the city’s electric grid. If you use more energy than your solar system can produce/store, then your traditional electric system will kick in and you will see a charge from your electric company for the energy use. If you use less energy you will often see a credit toward your next bill based on the amount of unused energy.
How do you determine if solar is right for you and your home? There are many factors to consider, such as your location, size and angle of your roof, and the amount of direct sunlight your home receives. Most importantly, how much are your current electric use and costs?
Knowing Your Electric Bill
The best place to start is to look at your electric bills. Your electric company charges you an amount based on kilowatt-hours (kWh) used. What is a kWh? Glad you asked. Essentially, it is the amount of energy needed to power 1,000 Watts for one hour. According to the U.S. Energy Information Administration, Coloradans are being charged about 14 cents per kWh as of July 2022. That is up by 1.25 cents from the rate last year. As we use up traditional finite resources to produce energy, like coal and other fossil fuels, rates will only increase.
What’s My Roof Got to Do with It?
Your roof is a big consideration in determining your solar potential. How big is your roof? Which direction does it face? How much sun exposure does it get? What is the angle, or pitch, of your roof? These factors will help you determine how viable solar energy will be for your home. The more shade your location has, the less solar energy your panels will produce. This ultimately determines how much you can offset your energy bill with solar.
What Size System Do I Need?
PV solar systems are measured in kilowatts (kW). The system size and number of panels you need depends on how much energy you use on average. Your utility bill will help you determine that. You’ll need to know how many kWhs you use and divide that by 1,000 to determine how many kWs your system will need to be. Luckily, your solar installer can do that math for you.
How Much Do Solar Panels Cost?
Solar panels are priced by Watts (W). In Colorado Springs, the average is $3.53/W as of October 2022. The site energysage estimates the average Coloradan home needs a 7.2 kW (7,200 W) system to offset 100% of their energy usage. To find the cost of such a system, we will multiply the cost per Watt ($3.53) by the number of kilowatts (7.2) and divide by a thousand.
It will take about 12 years for the system in our example to recoup its cost. However, the savings in energy costs for the consumer over 20 years exceeds $17,000! That’s a lot of savings!
To help off-set the cost of solar panels, there are several tax credits and incentives available to homeowners. The Database of State Incentives for Renewables and Efficiency (DSIRE) lists many such programs, and the federal solar tax credit of 26% remains in place for systems installed by December 31, 2022. This means 26% of the cost of your solar system can be deducted from your taxes for that year. This percent drops to 22% in 2023. Unless renewed by Congress, this incentive will expire in 2024.
Ways to Pay for Solar Panels
PV solar panels can be paid for in a few different ways, and even leased. Obviously, cash is one path you can take. Paying in cash gives you the best return on your money: you get the full financial savings benefit on your energy and you won’t owe anything when it comes time to sell your home. However, your bank account might feel some hurt paying for your solar panels up front. Thankfully there are state and federal rebates that can lessen that pain.
Solar loans are available if you don’t have the money to pay out-of-pocket. As with any loan, there will be a down-payment, loan terms, and interest rate to consider. Another consideration is a $0-down loan. You won’t have a down-payment, but your monthly bills will be higher because of it. Even with a loan your monthly payment will most often be less than your current energy bill, but the return investment is off-set a little by the loan payment. You will still be eligible for the incentives and rebates that come with installing a solar system with a loan.
Solar leases and power purchase agreements (PPAs) also exist. With these options you save the most on cost, but you do not own the solar system. Instead, the installation company owns and maintains the system while charging you a fixed monthly payment (lease) or fixed price per kWh (PPA). This option provides the most savings in cost for the system, but the least return on investment. These rates may also escalate yearly depending on what the company decides to charge. Pre-paid leases and PPAs exist, and generally cost less than buying a system outright, but still require a significant up-front cost in order to eliminate a monthly bill for the duration of the lease or contract. Additionally, the company that owns your system will reap the benefits of tax and rebate incentives, not you.
How Does a Solar System Effect My Property Value?
You can expect your property value to increase by 3-4% over time with the addition of a solar system. You can also expect your home to sell 20% faster than similar homes without solar, as 80% of homebuyers are looking for energy efficiency upgrades as they compare homes. One thing to keep in mind when selling your solar powered home is how you acquired your solar panels. If you took out a loan, how much is still owed that will need to be paid once your home sells? If you aren’t wanting to pay the balance, can the loan be assumed by the buyer? Are your panels leased, and can the lease be transferred to the buyer? Remember, paid solar panels will net you more return on your home sale, while leased solar panels can be a turn-off to buyers looking for those energy upgrades.
Are You Interested in Selling Your Solar Home?
Lauren has recently earned her GREEN designation in real estate. She has comprehensive knowledge of the value of green features and how best to market them for her clients. Listing your green home with Lauren gives you more power in your hands. Contact us about selling your home.
This Old House: Do Solar Panels Increase Home Value? (2022 Guide)
nerdwallet: What Do Solar Panels Cost and Are They Worth It?