Economic Benefits of Solar Energy
The Economics of Residential Solar
Though the initial investment is large, and the payback is long-term, installing a PV system makes good financial sense for homeowners.
Assume you are able to install your system for about $3 per watt, and you plan to install a 9 kW system (9,000 watts). Your cost will be $27,000. Subtract the 30% federal tax credit – and your net cost for the system will be closer to $18,900. Bear in mind that solar panels are typically warranted for 25 years.
The Bureau of Labor Statistics published that the average price of electricity in the Cleveland area in June of 2014 was 14.2 cents per kWh. Using these numbers we find…
- 14.2 cents x 10,900 kWh = $1,533.60 electric cost avoided each year
- $18,900 cost of the system after tax credit / $1,533.60 = 12 years, 4 months to pay for the system
Bear in mind that these estimates are very, very rough – but show that, assuming the system lasts 25 years (very likely) and assuming that there is no increase in the price of electricity over the next 25 years (very unlikely), the cost of a PV system is half the cost of buying your power from the electric company over the next 25 years.
To overcome the challenges of the large upfront cost, several different agencies and banks are offering financing for solar installations. For a comprehensive list of loan programs and other incentives visit the Database of State Incentives for Renewables and Efficiency here: www.dsireusa.org.