ECONOMICS OF A SOLAR INVESTMENT IN BERWYN
Since the creation of utilities as regulated monopolies in the early 1900s we’ve had no option other than to buy electricity from our utility every month, paying prices set by the utility and our state public utility commission. In 2021, the average customer in PECO and PPL territory paid $1,300 per year for electricity. In 2022, that electricity cost skyrocketed to nearly $1,700 as those utilities raised their rates by 34% and 66% respectively.
At the current electricity prices, the average household will pay their utility more than $55,000 over 25 years for electricity. And that’s assuming that electricity costs increase at only 2% per year from here on out.
Home solar panels provide an alternative to buying electricity every month from your utility. They enable you to free yourself from paying whatever price your utility charges and lock in your cost of electricity by generating some or all of your own electricity for 25 years or more.
How much do solar panels cost?
Unlike the cost of electricity from your utility, the cost of solar has fallen nearly 90% in the last two decades and is projected to continue to decline. Today, an average home solar investment costs between $20,000 to $30,000 before any rebates or incentives are applied. However, the cost of home solar will vary significantly by home and homeowner.
Here’s why: Every home and homeowner are unique so every home solar system should be customized to a particular home and its owner’s energy needs and goals. Variations in the number of solar panels, the complexity of installing them and many other factors will determine how much your specific home solar system will cost.
What rebates and incentives are available for solar panels?
Solar panels and the cost of their installation are eligible for a 30% Federal Tax Credit that reduces the amount of federal tax you owe on a dollar for dollar basis. Always consult your tax professional to determine how much your tax credit would be.
Home solar systems are also eligible to participate in Pennsylvania’s Solar Renewable Energy Certificate (SREC) program that compensates system owners for every 1,000 kWh of solar energy generated. SREC prices, based on market supply and demand, increased steadily in 2022 from $38 to $46, though could increase or decline in the future.
A typical home solar system in PA will produce between 8,000 to 10,000 kWh of solar energy per year (8-10 SRECs), translating into $370 to $460 of SREC income at today’s prices. And that’s in addition to your electricity savings!
Well-designed home solar systems with good sun exposure can pay for themselves in 8-10 years and then deliver tens of thousands of dollars in savings and income over the remaining 25-year lifetime of the system.
How much you save will depend on:
- Your current and future electricity cost. As your electricity cost continues to increase, your savings from producing your own electricity will increase too.
- The specific design of your home and home solar system. The more space you have, the more solar panels you can install. The more sunlight the solar panels receive, the more energy they’ll produce and the more you’ll save.
- How you finance your solar purchase. Cash purchases don’t incur any fees or interest, increasing your savings. Home equity loan or line of credit purchases have lower fees and interest than solar loans. Even with fees and interest, financing your purchase with a solar loan can still make sense.
Solar Investment Example
We understand that home solar is a significant investment – it may be the biggest investment you make in your home. But whether you purchase home solar with cash, home equity or loan financing, home solar can save you money. Here’s an example to help you better understand the economics of a home solar investment.
20 panels | 7.4 kW
Southern facing roof | Minimal shading
Electricity produced by solar | 95%
Cash or Home Equity Purchase
Stay with your utility | Switch to solar | |
|---|---|---|
Solar investment | $n/a | $27,084 |
Federal tax credit | $n/a | -$8,125 |
Net solar investment | $n/a | $18,959 |
Monthly electricity bill | $142 | $12 |
25 year electricity cost** | $55,147 | $19,002 |
**Assuming that utility prices only increase at 2% per year
†Utility electricity cost after solar + net solar investment – SREC income
What's the best way to finance a solar purchase?
If you don’t have access to cash or home equity, solar loans can be a good way to finance a solar purchase. Solar loans don’t require any down payment and interest rates are subject to your credit score. Loan terms are available anywhere from 7 to 25 years and with no prepayment penalties you can pay off your loan sooner than the loan term.
If you’re considering a solar loan, you’ll want to understand how much your home solar system will save you on a monthly basis versus how much your monthly payment will be.
In many cases, your monthly loan payment can be equal to or less than your solar savings. This means that your home solar system is paying for itself with money you otherwise would have paid your utility. Once your solar loan is paid off, you keep the savings for the remaining lifetime of your home solar system.
Using the same example system, here are the economics of home solar if you were to finance the purchase with a solar loan.
Zero Down | 15 Year | 6.99% Loan Financing
Stay with your utility | Switch to solar | |
|---|---|---|
Monthly electricity bill | $142 | $12 |
Monthly solar loan payment* | $0 | $144 |
Monthly SREC income ($46 per SREC) | $0 | -$39 |
Total monthly electricity expense | $142 | $117 |
Change in monthly cash flow | $0 | +$25 |
25 year electricity cost** | $55,147 | $46,169† |
*After applying solar tax credit to principal and reamortizing loan. Initial monthly payment will be higher.
**Assuming that utility prices only increase at 2% per year
†Utility electricity cost after solar + total solar loan payments – SREC income
Contact our expert team today to get started on a quote, or to answer any additional questions that you may have.