While it’s well known that solar is clean and helps the environment, what has opened up solar to vastly more people, and led it to become the fastest growing new electricity source in the United States. Solar is now the least expensive source of electricity on the planet.
Wait, what? Let’s repeat it, to be clear: Solar is the least expensive source of electricity on the planet.
What that means is that the economics of solar electricity is an impressive opportunity. Not only is solar electric equipment incredibly inexpensive, but it is extremely reliable. By making the upfront investment to go solar, you gain a system that produces electricity (worth money!) for decades, with little to no maintenance required.
Start “paying” yourself for electricity. People are surprised to learn that in Maine, New Hampshire, or Massachusetts, the economics of solar energy outperform traditional investment products. Sound crazy? It’s true!
Compare solar to an annuity, for instance. An annuity works by offering you a monthly payment for a fixed period of time, based on a pre-determined interest rate, around 2% right now. A solar electric system also requires an up-front investment, and offers a monthly “payment,” so to speak, in the form of reduced utility bills for the life of the system.
However, the solar electric investment is pegged to a commodity – electricity – which increases in the order of 2.5-3% each year.
Consider a $15,000 investment:
Whether you pay for your solar in cash upfront, or finance through a solar loan, your system will generate fruitful returns in the years it generates clean solar energy and savings.
Every solar project we design includes graphs like the following, which compare (Left) the cost of doing nothing versus investing in a solar array, and (Right) the relative cash flow of an upfront cash purchase versus the ROI in terms of energy savings over time.
Paying for a solar system upfront grants you long term savings over time, even with the larger upfront payment.
The exact Internal Rate of Return (or IRR) of a solar investment will vary based on a number of conditions, including a site’s solar access, the local rate for electricity, and available state incentives. However, most solar investors see a 25-year IRR of 8-12%, vastly superior to any other risk-free investment. See our profile of a customer who ‘did the math’ for his Falmouth, ME installation to see this modeling backed up with real data. Interested in solar for your home? Check out our solar calculator and see about how much you can save by going solar.
For businesses and institutions, the math is a little different, as the incentive structures are a bit different, and larger electricity consumers are usually billed on-demand profiles rather than a fixed rate for kilowatt-hour consumption. However, the business case is quite solid and especially with financing solar is an excellent choice for businesses who are keen to reduce their long-term operating expenditures.
One of the biggest reasons to choose to finance a solar array (beyond simply wanting to have solar on your roof) is to enjoy the peace-of-mind and security of a fixed payment for electricity that will not fluctuate with local electricity prices.
Buying solar using a loan product makes for a slightly different decision-making process. For those who are choosing to finance, usually it is a way to go solar earlier than would be possible if an upfront cash purchase was required.
Here is a simulation of the economics of solar electricity through a loan package:
The graph above simulates the economics of a solar project financed by a loan. There is a small premium (vs current electric bill) paid in the 1st 12 years, but once the loan is paid off there is quick payback and overall vast savings. Compare this to a solar lease where you would continue paying for the system for a full 20 years. Learn more on our financing and solar loan page.
One of the lesser-known reasons for installing solar panels is that it increases the value of your home. This will come in handy if you are looking to sell or rent your property. As residential solar gains momentum, it is becoming increasingly easier to sell your solar powered home. In New England, a solar photovoltaic installation will on average raise the value of the home roughly $20,000 (based on a 4-5kw solar electric system).
As solar has become mainstream, a number of recent studies have sought to help homeowners, appraisers, and real estate professionals through the process of assessing the appropriate value for a solar energy system on a home in the event of a sale. Here are some take aways from their findings:
We appreciate that market research proves what to us seems obvious: solar is an excellent investment, whether you are staying in the home long-term or need to sell. Solar provides a powerful suite of benefits not seen in any other home improvement:
While the actual dollar value of solar improvements is still an area of study, what is more easily observed is how solar helps sell homes more quickly. In addition to findings in the Colorado report (with realtors reporting feedback like “PV was a major marketing factor,” “Sold very fast,” and “Listing agent liked the system so much, he had it installed in his own personal home after this sale”).
Solar on your roof is definitly an eye catcher, but even if you don't have an ideal roof for installing panels you can still enjoy the benefits of solar (property value and other). Thanks to the versatility of its technology and installation, solar can work for you on your roof, in you backyard, or in a field far away.