In addition to significant environmental benefits, solar energy provides a remarkably reliable investment opportunity with an attractive financial return on investment (ROI). Most solar systems average about a 20% ROI per year and pay for themselves within five years. With a guaranteed life expectancy of 25 years (covered by warranty), solar delivers decades of predictable savings.
Though the price tag of solar energy systems may appear steep at first glance, it begs the question—when compared to the cost of doing nothing, how expensive is solar, really?
Looking at the numbers
Let’s take a look at the numbers. If your electricity bill totals $200 per month, that means you’re spending $2,400 a year on your annual energy. Over 25 years (the warrantied life expectancy of a solar system) you’ll have spent $60,000 for the energy that powers your home.
Though a solar system most likely won’t offset the entirety of a common energy bill, most systems pay for themselves in savings within a few years.
Inaction, on the other hand, doesn’t provide any ROI. Does $60,000 sound steep? Then let’s talk utility rates.
The calculations above don’t factor in rising utility costs. These rates are steadily on the rise– increasing roughly 4% per year on average. Assuming this steady rise in utility rates continues over the next 25 years, that figure of $60,000 balloons into nearly $100,000 by your 25th year. This figure doesn’t even factor in inflation.
Curious what’s behind these rising utility rates? Read more in our past feature.
Additionally, as federal governments and state municipalities begin to recognize the potential and importance of renewable energy in rebuilding infrastructure and mitigating climate change, they put incentives into place to encourage its development. The most broadly available incentive is the solar tax credit, which offers a 26% credit directly to the amount of income tax you owe. Therefore, if you are a W-2 employee, this usually comes in the form of a large tax season refund.
However, in 2023 the credit will diminish to 22% before being phased out in 2024 (for residential customers). Even for the most budget-friendly PV systems, this 26% credit can offset well over $5,000 of its final cost—far outweighing the potential benefit of waiting for solar costs to drop further.
The Bottom Line
Though solar can seem daunting, the cost of doing nothing is far greater. With the 26% tax credit, record low costs, and steadily rising utility rates, there has never been a better time to invest in solar.