"Do solar panels on my roof make financial sense?" I get asked that question a lot. Well, unfortunately, the answer is, "It depends..." Below are a few things to consider when going solar.
How Solar Power Works
When you go solar you stay connected to the electric company via a two-way meter the solar company installs. That lets you buy electricity as needed. When panels produce excess wattage, it goes back into the grid, and you or the solar company are credited for the amount. The typical residential installation yields 75% to 90% of the household’s power needs. What makes the solar math work is a combination of high electric rates and financial incentives from your state and utility.
How to Pay For It
Cash: A solar power system costs $10,000 to $30,000 after the federal tax credit—depending in part on the size of the system required. That investment yields monthly electric savings of $100 to $200. So you should recoup your investment in five to 10 years. If you have the cash and plan to stay put, this gives the best return on investment.
Lease: A solar lease is an alternative that requires little or no money upfront. You pay the solar company a monthly fee or preset discount price for the power the panels generate. Though you can’t claim the tax break or any rebates, you’ll still save 10% to 20% on electric costs, typically $10 to $40 a month. Also, most leases include a maintenance contract in the price.
Finance: The newer option of a solar loan offers the perks of leasing—no cash upfront, sometimes a maintenance contract—with greater savings for most people. Interest rates range from 3% to 6.5% for 10- to 20-year loans. After factoring in loan payments, you’ll cut your electric bill by 40% to 60%, about $40 to $120 a month, assuming you put the tax credit toward your loan. You’ll reap even more once the loan is paid off, and panels typically last 25 years.
However you pay, install panels only on a fairly new roof, so they won’t have to come down for roof repairs—and make sure to do it before the write-off expires.