Rising energy prices and new tax incentives for green home improvements this year are fueling interest in solar power.
Experts say now is a good time for many homeowners to go solar. While solar energy may not work for every home, it can dramatically reduce home heating costs and reduce the environmental damage caused by burning fossil fuels. Although installing a solar power system is still not cheap, initial costs have come down significantly over the last 10 years.
The price of solar panels
- 1 The price of solar panels
- 2 Subscribe to Kiplinger’s Personal Finance
- 3 Sign up for Kiplinger’s Free E-Newsletters
- 4 Should you buy a solar panel battery?
- 5 Things to consider when buying solar panels
- 6 Other reasons to go to the sun
- 7 Should you wait for new solar panel technology?
- 8 Is the sun right for you?
Costs vary from state to state and depend on things like the size and quality of the solar array. According to EnergySage.com (opens in new tab), an information website for alternative residential energy, the national average cost of a residential photovoltaic system is about $20,000 after 30% of federal tax credits.
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Nick Liberati, communications manager at EnergySage, shares: The national average for a 10-kilowatt system is $2.86 per watt, costing $28,600. The federal tax credit allows 30% of the cost of installing solar panels to be deducted from federal taxes (or in this case $8,580 total), bringing the cost to $20,020.
On average, it takes 8.7 years to dismantle – that is, to save enough energy to recover the cost of the solar panels. After that, your solar power is free until the equipment wears out. Solar panels are usually guaranteed for 20-25 years, although the system’s inverter is usually guaranteed for 10 years. An inverter converts the DC electricity generated by the solar panels into AC electricity used in your home.
Should you buy a solar panel battery?
The above average solar panel cost does not include storage. Depending on size and other features, a battery can add up to more than $9,000 on average after the federal tax credit. Specifically, Liberati says the national average cost of a battery in the 10- to 12-kilowatt-hour size range is about $13,000. Starting in 2023, all residential batteries above 3 kWh will be eligible for the full 30% tax credit. So you’ll be able to deduct $3,900 on your taxes, with an after-tax credit price of $9,100 for the battery.
Although batteries are becoming increasingly popular, most solar homes do not have them. Instead, most consumers send their excess energy as a credit to their utility when the panels don’t accumulate enough, such as for nighttime energy use.
Without batteries, if your utility loses power, your home loses power, even if it’s sunny. “The main reason for this is safety,” says Liberati. “If your solar panel system is still generating electricity and sending it to the grid during an outage, these live wires present a serious safety hazard to any utility workers trying to restore power to the grid.
If you have a battery with “islanding capability”, this will not be a problem. Islanding is a technology that allows your home to support itself. “You can continue to generate solar energy and feed it into the battery because an islanded system will no longer push electricity into the grid without risking line workers,” explains Liberati. He notes that not all solar panels are automatically labeled as energy harvesting. If you buy a battery, you need to make sure your installer gives you the right equipment to run this technology.
Things to consider when buying solar panels
With thousands of dollars up front, going solar can be intimidating for many people, notes Vikram Aggarwal, CEO and founder of EnergySage.
Aggarwal urges comparison shopping and checking out any claims — such as that your utility or the government will give you solar power for free. EnergySage, he says, helps with that and connects consumers with reputable contractors. The site also has information on incentives offered by various states.
Another factor to consider is how your utility company will credit you for the solar energy they charge you, especially if you don’t have a battery and depend on the utility to run your home if your panels don’t accumulate enough.
Michael Ware (opens in new tab), chief solar specialist at consulting firm EcoMotion, says there’s tension over how utilities issue credit to customers for solar. Utilities ask for a rebate just like how they pay for other forms of energy they sell to consumers. But solar advocates want utilities to credit customers the full amount they pay for electricity, known as net metering.
Sherri Shields, director of communications and marketing for the Florida Solar Energy Center at the University of Central Florida, said people installing solar should check with their insurance companies to see if they cover the panels or if you need to buy additional insurance.
Other reasons to go to the sun
Saving money is one reason people are going solar, notes Robert Stoner, associate director of science and technology at the MIT Energy Initiative (opens in new tab). “I think most people investing in residential roofing just want to be part of the transition and less visible,” he said. “There’s nothing to it… Some people have houses like mine – my weekend house is at the end of a five-mile long barrier beach – just can’t afford to have electricity.” A solar system consisting of a series of lead-acid batteries provides all of his electricity, says Stoner: “And it brings me so much joy! “Part of it comes from the sense of independence I’ve gained, and part of it comes from experiencing the miracle of solar electricity.”
Rotraut Bockstahler, 86, of Sarasota, Florida, and her husband installed 26 solar panels and a Tesla battery in November 2016. The solar panels cost just under $28,000 to install, and they received a tax credit of about $8,400, leaving a net cost. about $19,600. It cost about $8,400 to get the battery, and they received about a $2,500 tax credit for a net cost of about $5,900. “We feel strongly about climate change and want to contribute to reversing this trend,” Bockstahler said. Going solar was “one of the most positive decisions we made to live in Florida. We saved money, contributed to the fight against climate change and were lucky enough to have electricity every time the grid went out.”
Going solar doesn’t always cut you off from the power company completely. When the system was first installed, Bockstahler says, their need for electricity from the utility was significantly reduced, and their electric bills dropped to about $40 to $60 a month. With rising energy costs, they are now over $100 a month. But in addition to the electricity savings, he counts the money saved on non-perishable food and hotel rooms they don’t have to buy when the power goes out.
If they regret it, he says, it’s that they didn’t get a bigger system. “We think the decision we made with the number of panels we had was maybe a little too conservative and should have included more circuits that could be powered by the battery,” he said.
Should you wait for new solar panel technology?
Another reason you might be hesitant to go solar is that technology will advance to offer more efficient and/or less expensive options. And it is true that different technologies continue to emerge. For example, some companies offer a roof that serves as a solar collector. Also, standard solar panels have become more efficient, cheaper and better looking.
If you wait, might you have a chance to get something better?
Aggarwal says solar panels are improving slightly every year, but not enough to justify expecting a dramatic change. Ten years ago, he said, the panels would produce maybe 240 or 245 watts each. Now each of them produces 400 or 420 watts of power. This means you can get more power from a system covering the same amount of roof space. The panels used to be bright blue with silver edges, he said. Now they’re all black, and he says it “looks great.” And they are more durable.
According to him, solar pebbles are not yet ready for widespread use. A roofing company plans to introduce an “exciting product” along those lines sometime this year, Aggarwal says. But solar panels are less efficient and more expensive than traditional solar panels. However, if you’re planning to replace your roof, he says solar shingles are worth considering.
Ware said he expects the cost of batteries to drop over the next five to 10 years as companies explore different battery technologies. Currently, the most popular battery technology is lithium-ion, which can pose a fire hazard in some cases and requires them to be installed outdoors in some jurisdictions.
Is the sun right for you?
Some homes are not suitable for solar energy:
For example, if you have an old roof that will need to be replaced in a few years, it doesn’t make sense to wait because it can cost thousands to remove and reinstall the solar panels. If your roof faces north or is in the shade, you probably aren’t. A good solar candidate. Installing solar on clay tile roofs is also more complicated and expensive, Liberati says.
There is another option for people who cannot put solar collectors on their roofs.
Community solar includes a number of solar panels that people may be interested in. People who participate in community solar generally receive a credit from their utility company for the energy they generate from their share of the project. You can find information about community solar projects in your area on the EnergySage website (opens in a new tab).
Note: This article first appeared in Kiplinger’s Retirement Report, our popular monthly periodical that covers the top concerns of affluent older Americans who are retiring or about to retire. If you want to get retirement money advice, subscribe here (opens in a new tab).