5 Financial Reasons to Go Solar Now

by Shawn | 5 Comments

Many people are under the false impression that you have to be an environmentalist to have interest in installing solar. Paying the upfront cost to install a solar electric system is something only a “green” person would do. Well, that’s not true anymore. Here are 5 financial reasons to go solar now!

1.    Utility rebates are decreasing as more people decide to install solar.

The California Solar Initiative (CSI) program will provide more than $3 billion in incentives for solar-energy projects in California. However, the amount of the incentive is scheduled to decrease in 10 steps over the duration of the program.  Residential Solar Rebate ChartPacific Gas and Electric (PG&E) and San Diego Gas & Electric (SDG&E) are already in step 5 for residential projects, while Southern California Edison (SCE) recently dropped into step 4.

The difference between step 4 and 5 for an average size, 4 kW, solar electric system, is approximately $1,000 in your pocket.  The longer you wait, the more rebate money you lose!


2.    Expect electricity rates to go up.

Since 1980, residential electricity rates for PG&E, SDG&E, and SCE have increased an average of 3%.  From 1970 to 2005 the average electric cost in California increased 6.7% annually. Installing a solar electric system hedges against these increases by reducing the amount of electricity you consume from the utility company. You literally have a power station installed on your house. After the upfront cost, solar electricity is essentially free for at least the next 25 years.

CA Historic Electric Rate Chart

3.    Loan interest rates are at an all-time low.

Not everyone has the cash on hand to afford the high upfront cost of a solar system. For those of us who would need to take out a loan, 30-year fixed loan interest rates have plummeted to as low as 4.5-5.5%. With rates these low, the amount you’ll pay over the lifetime of the loan will be significantly less than the amount you’ll pay for electricity over the same period.

Annual Solar Cost Chart

4.    You own your home; why rent your electricity?

Let’s see how financially rational you are. You have two options – Option 1: pay $2,400 every year for the rest of your life at an increasing rate of 3% (rent electricity). Option 2: pay $34,000 right now and $30 every year at an annual 3% increase (own electricity with solar). Which do you choose?

Let me help you out with the numbers. If you choose option 1, after 25 years you will have paid $87,626 to the utility company. If you choose option 2, you will pay $1,094 to the utility company over 25 years plus the initial $34,000 to the solar installation company, which totals $35,094. Even with a 30-year loan at 7% interest, you will have paid $18,034 less than if you hadn’t installed a solar electric system.  Starting to sound like a good financial decision yet?

Savings Comparison Chart

5.    Your property value is expected to increase $20 for every $1 you save in annual electricity bills.

According to an in-depth study published in the Appraisal Journal, homes with renewable energy measures that reduced electricity costs saw an increase on average of 20-to-1 for every dollar annually saved.  This means installing a solar system will not only reduce your monthly electricity bill by $100/month, but also increase your property value $24,000.  The more you reduce your bill, the more your home value goes up.

Environmentalists aren’t the only ones with reason to go solar anymore. Thanks to our governments investing in renewable energy technologies, solar is now a financially intelligent decision.  Hopefully, as we take advantage of these rebates and tax incentives, the solar industry will further reduce costs and ultimately bring the cost of solar in parity with traditional sources of energy.

  • You’ve done a wonderful job with your charts and explanations on your posts to make solar power easy to understand. I was so impressed I put a page on my web site featuring yours!

  • In the graph in #3 what is the 7K bump in year 15. Balloon payment or end of lease buy out?

    • Great question. The bump is the cost to replace the inverter. Most inverters will need to be replaced in 10-15 years, and the average cost is around $4,500 for a 4-5 kW solar array. The panels will last more than 25 years, but the inverter(s) won’t.

  • Wally

    Do these solar systems use batteries to store the energy for night time use, if not, do you use the utilities power at night, if you do need batteries, how long do they last?

  • Ryan

    Wally, for most folks it does not make sense to put in battery back-up. Your solar system will rely on your utility interconnection, so you can import energy from the grid at night when the sun is gone. You will export energy to the grid mid-day when the sun is out. Battery systems are relatively expensive, and they may only last 5-10 years while well-built PV modules will last more than 20 years.