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Category: Return on Investment

Net Metering Guide: How the Utility Credits You For Solar Power

Net Metering Guide: How the Utility Credits You For Solar Power

Net Metering: A Quick Summary

Grid-tie solar system owners receive credit for sending electricity into the public utility grid. They use those credits to offset their energy bill. This agreement is outlined by your utility’s net metering policy, which sets the rates at which interconnected solar customers buy and sell electricity.

When you go solar, you need a way to store the energy generated by your panels. The easiest method is to hook into the utility grid to store energy and save it for later use.

But to do that, you’ll need to agree to terms with the utility company that outline how you are credited and billed for power. These policies are referred to as net metering (or net energy metering) agreements.

Under a net metering agreement, the grid acts as energy storage for the solar homeowner, banking the power they generate so they can use it later. The utility tracks your meter to record your net energy usage (energy consumed minus energy sent to the grid) so they can bill or credit your account based on overall usage.

Net metering agreements benefit both parties. The homeowner has a way to store solar power for later use, and the utility benefits because the extra supply of electricity smooths the power demand curve and prevents outages.

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Each utility company has different terms and conditions, so it’s important to contact them before going solar to figure out how the connection process works. This article covers some of the most common agreements so you know what to expect.

Types of Net Metering Agreements

What is Net Metering?

In broad terms, net metering is an agreement with the utility company that allows you to get credit for solar energy sent into the grid. The utility gives you a credit for the solar electricity you generate, and you can use those credits at any time to draw power from the grid.

The utility monitors the meter on your property to track how much energy you use. If you withdraw more than you produce, you pay the utility for any extra usage.

If you produce more power than you use in a given month, any excess production is credited to your account and rolled over to future months. These credits can be “banked” for periods of low production, meaning credits you earn in August can be used in December when the days are shorter and the weather is worse.

Under most net metering agreements, the utility will reimburse you for excess generation, either through a check or energy credits toward your future bill. However, most utilities pay reimbursements at a wholesale rate (vs. awarding credits at retail rates), so most folks choose to take the credit.

What is a Feed-In Tariff?

Most net metering agreements use one meter to track net energy consumption (energy used minus energy generated from solar) and bill everything at a uniform rate.

Under a feed-in tariff, the utility installs two meters: one for the power you use, one for the power you generate. Each meter is billed at a different rate.

Feed-in Tariffs incentivize solar adoption by making the utility pay higher rates for solar energy sent into the grid.

Feed-in tariffs are typically implemented by local governments to incentivize people to switch to renewable energy sources; the utility pays a premium rate to encourage solar adoption. For example, you might buy power at $0.12/kWh, but sell excess power to the utility at $0.25/kWh.

What is Net Purchase and Sale?

This is essentially the opposite of the feed-in tariff structure. The utility still installs two meters, but they charge electricity at retail rates and buy it from you at reduced wholesale rates.

Under this billing structure, the utility only pays their “avoided cost” for anything you feed into the grid—the cost they would have paid to generate that electricity.

This is not as good a deal for the consumer as the regulated feed-in tariffs, but it’s still decent because you can receive payment for surplus generation.

What is Aggregate Net Metering?

Aggregate net metering allows for multiple meters on a property to be offset by a single solar system.

Let’s say you live on a ranch property with your home, a barn, and a workshop, each with separate meters. Under this agreement, all three meters are counted toward the total net energy use on the property.

This works the same as ‘standard’ net metering. The only difference is that it allows you to track more than one meter on a property.

What is Virtual Net Metering / Community Solar?

Aggregate net metering allows a single customer to offset multiple meters on his or her property.

Virtual net metering differs in that it allows multiple customers to participate in net metering with a shared solar energy system.

Under this policy, shared residences like apartment buildings can build a centralized solar system, with individual tenants metered and billed under their own account.

Similarly, neighborhood residents can build a community solar farm to supply power to multiple homes in the neighborhood. Those who choose to buy into the community solar program receive an ownership stake in the shared system. They would be entitled to credits and/or reimbursement in proportion to their ownership stake in the system.

What are Time-of-Use Rates?

Lastly, your net metering policy may be affected by time-of-use (TOU) rates. Under a TOU policy, the utility charges more for electricity during peak demand periods, when people are home from school and work in the evening.

Where applicable, net metering calculations are affected by TOU rates. Solar generates energy during off-peak hours (when the sun is out during the day), so that production is credited at a lower rate. When you flip on lights in the evening, you are billed a higher rate for usage during peak periods.

The result is that you can generate enough energy to cover your usage and still end up paying a bill, because you pay a higher rate to use energy in the evenings than the rate you are credited for producing during the day.

To counteract this, you can invest in an energy storage system that allows for TOU offset. A small battery bank can store daytime production for use during peak periods. By drawing power from your battery bank (instead of the grid) in the evening, you avoid paying higher rates during peak usage periods and maximize the value of your solar production.

Net Metering Caps and Restrictions

Some utilities have restrictions and caps on their net metering policies. These restrictions are in place to level out supply and demand, and to prevent people from taking advantage of the policies purely for profit motive (since you can make money by selling off surplus energy).

These restrictions may include:

  • System size caps: either a concrete limit (systems up to 1 MW) or a percentage (125% of consumption)
  • Technology restrictions: outdated or inefficient technologies may not be eligible
  • Credit rollover limits: credits can expire and be surrendered to the utility if not used within a certain timeframe
  • Property type: residential, commercial and industrial properties may have different policies
  • Renewable energy source: Aside from solar, net metering policies may apply to wind, hydro, fuel cells, biomass, geothermal, and other renewable energy sources.

Next Step: Understand Your Local Net Metering Policy

Thinking of going solar? Contact your local utility a call and ask about their net metering policies. Many have their policies published online.

They’ll explain how they credit you for solar energy produced, which is important to understand if you want to get the most out of your system.

For more help on permitting and interconnection with the utility, grab a copy of our free solar permitting guide!

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Solar in the Shadow of the Frozen Tundra [Guest Post]

Solar in the Shadow of the Frozen Tundra [Guest Post]

Editor’s note: Dave and his wife Sher worked with Wholesale Solar to build their 6 kW solar system back in 2014. Five years later, he contacted us to share his reflections on going solar in a freezing cold climate. The report below was originally produced for the Clean Water Action Council and is reprinted here with permission.

Living in a region famous for the “Frozen Tundra” of Lambeau Field, does it make sense to buy a photovoltaic solar system?  Solar PV has been in the news since the 1980s, forever promising lower cost.  We know now that they make sense in sunny California, but what about here in northeast Wisconsin?

We live south of De Pere and built a system in late 2014.  It is producing about 8,000 kilowatt-hours of electricity per year thus far, despite our less than ideal climate. The output varies by month, but so does our consumption.

The green bar chart below shows just how much more power is produced in summer versus winter.  It is our experience that the system produces more energy than we consume from February through June, holds its own July through October, but fails to deliver enough power during the short, cloudy days of November, December, and January.

We sized our system to provide 90% of our electrical needs.  So far it is producing over 93%.  We still heat our potable water electrically.  A natural gas water heater would mean we could make more electricity than we consume, but our old log home doesn’t lend itself to adding a chimney or side venting.

The solar system only produces its maximum instantaneous output during a week or so around the Spring Equinox.  The angle of the panels is nearly perfect then, and the air is clear.  You might expect the Fall Equinox to match the Spring, but it does not, as by Fall the air is thick with debris from the agricultural harvests, and alive with all manner of seeds, spores and insects that scatter the sunlight reducing its intensity.

So, that is the big picture.  The average US home is 2,700 sq. ft. in size and uses 867 kilowatt-hours of electricity monthly.  Your home is probably smaller and uses a bit less.  You can examine your own utility bills and find out just how much you do consume right from your monthly bills.

Our system is a grid-tied array of 20 panels operating as two strings, or circuits, of ten panels.  Each 295-watt panel has its own Optimizer/Safety Disconnect built by SolarEdge to reduce energy loss due to shadows or other issues.  The 6000-watt inverter is connected to the local utility on a net billing basis.  We live in the country and have enough land to have built our system on a ground mount.  Good thing, too, as it allows for easy maintenance.  By which I mostly mean snow removal.

Our mid-winter days only last nine hours.  The sunlight is weak as a result of the low arc the sun cuts across the sky.   Weather bureau data confirms the generally cloudy conditions.  Frequent “Alberta Clippers” dust the panels with snow.  The sun will melt the snow and ice off of the panels, but at the cost of hours, maybe many hours, of production.  That is where the maintenance part happens. 

We chose a fixed angle ground mounting for the panels because it is cheaper to build and panels have become so inexpensive.  A moveable mount that tracks the sun’s position in the sky would collect more sunlight and produce more electricity.  But such a moveable array that can take a 90 mph wind load and a 40 pound snow load is expensive to build and requires maintenance.  A simple to construct fixed angle mount easily meets code requirements.  So for overall cost, it is cheaper to add more more panels than to build a moveable, sun-tracking mount.

Now, adding even more panels would produce more electricity than we use every month, but taking financial payback into account, that would have been a poor decision.  As built, our system has a 7.5 year payback.  Much better than the stock market, as electric rates never go down.  And as the system has a twenty-five year warranty, it will last longer than I anticipate living here.  Thus it will still have value when we sell our place, and taking its residual value and sale price into account when we do sell reduces our payback time even more.

We considered a stand alone system with batteries instead of a grid-tied system but decided batteries were not ready for prime time.  That is changing.  Battery prices for homes, automotive, and utility use are dropping rapidly.  Soon enough, batteries and balance of system components will make sense.  Very soon, within three years, battery electric cars will be cheaper to buy than gasoline powered vehicles.  And the home charger that will come with such cars can utilize the car’s battery pack to provide storage for solar power and backup power to your home during a power outage.  Electric cars today have enough batteries to run a household for days at a time.

If you haven’t given solar much thought, it is time to reconsider.  They are a better investment than any annuity, and they provide you a means of personal action against the crisis of climate change.

Dave Verhagen lives with his wife Sher in De Pere, WI. He serves on the Board of the Clean Water Action Council of Northeast Wisconsin.

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Do Solar Panels Increase Home Value?

Do Solar Panels Increase Home Value?

Do Solar Panels Increase Property Value?

A recent study by the Lawrence Berkeley National Laboratory concludes that solar panels increase home value by $14,329 on average. Homes equipped with solar power systems sell for 3.74% more than comparable non-solar properties.

One of the strongest arguments for solar energy is that it’s an investment that pays for itself. Any upfront costs are paid back in the reduction (or elimination) of energy bills, and solar customers can reasonably expect to see a return of at least 2-3 times their initial investment over the life of the system.

But those numbers assume you live in the same house for the full duration of the warranty – which often isn’t the case. And one of the reservations holding a lot of people back switching to solar is the fear that they might not live in their house long enough for the significant up-front investment to pay off.

If you own your home, this research should assuage those fears. Outfitting your home with a grid-tied solar energy system drives up property values and offers an enticing selling point for real estate agents to market a listing.

To figure out how much you could save by going solar, check out our guide to calculating the ROI of your solar electric system in our resource center.

Even if you don’t live in your home long enough to break even on energy costs, the premium that home buyers are willing to pay to move into your solar-ready home will be more than enough to cover the investment.

Solar Homes Sell For $14,329 More On Average

The study evaluated the sale price of 22,822 homes across 6 states to determine what effect solar power systems have on home resale value. The study compares the sale price of 3,951 PV Homes (homes equipped with photovoltaic systems – a.k.a., solar-powered homes) to 18,871 Non-PV Homes.

The research finds that, on average, solar panels increase home value by $14,329 – or 3.74% more than their non-PV counterparts.

Since the average system costs $10,000-$18,000 in materials, homeowners can reasonably expect to recoup the cost of the hardware when they choose to sell their home. That’s on top of the expected savings from reduced energy bills and tax incentives, which can already pay for the system 2-3 times over the life of the warranty.

As a bonus incentive, some states don’t count PV systems toward the value of your home when calculating property taxes. Adding a $15,000 kitchen will raise your property taxes, but a $15,000 PV system might be exempt. This comes down to local regulations, though, and certainly isn’t true everywhere in the U.S.

Digging Deeper Into the Data

Of course, real estate is a complex market, with countless factors influencing the valuation of a property. National averages will never tell the whole story. So let’s take a closer look at the data and see if we can uncover some more specific information.

Diminishing Returns on Larger PV Systems

One conclusion the authors of the study draw is the existence of a “green cachet” for homes equipped with PV systems. Solar-equipped homes sell at a significant premium, regardless of the wattage output of the system. The sale price of homes with more powerful PV systems did not increase proportionally to the installation cost of the system.

This suggests that homebuyers are prepared to pay more for the distinction of owning a “solar home,” regardless of the efficiency of the system, or its ability to fully cover their expected energy usage. They will pay marginally more for larger systems, but not in proportion to what the system is actually worth.

For sellers, that means it might make sense to install a modest grid tie system that relies on stored solar energy most of the year, but pulls from the electric grid during heavier usage periods, like when the A/C runs on full blast during the dog days of summer.

This may afford you the flexibility of marketing your listing as a solar home, while keeping installation costs down and turning a profit on the system when the sale goes through.

Of course, taking on an extra project like this adds time, labor costs and risk to the sale process. It may not be worth the investment, especially because…

Solar Homes May Take Longer to Sell

The study also found that, on average, solar-equipped homes take slightly longer to sell than their counterparts. Solar homes spend an extra 8 days on the market before they sell, as demonstrated by the chart below.

Solar homes spend slightly longer on the market before they sell. Source (p. 29)

Note that there is quite a bit of fluctuation in the data on a state by state basis. This could be attributed to a couple factors:

Small sample size in some states

The data from CA is much more robust than other states in this study, which may explain why its numbers come closest to the national average.

Incentives vary by state

Some states offer stronger incentives for buying a solar home, while others offer nothing at all. Solar homes may languish on the market for much longer when there is no incentive for owning a solar-enabled home. For example, some states offer a break on property taxes if you own a solar home. It might be more enticing to buy a solar home in those areas.

We strongly recommend exploring our guide to State Solar Incentives if you’re in the market to understand how the dynamics might change based on your location.

Local perception of solar

Solar power has been more broadly adopted in places like CA and FL, where sunshine is plentiful and there are strong tax benefits for going solar. Other states lag behind in adoption and education on the topic.

In areas with lower electricity costs and poor benefits for solar adoption, the awareness of solar as an viable energy source tends to be quite low. Buyers may hesitate to buy a solar-powered home because they aren’t convinced the system is reliable. They also may not understand the long-term benefits, making solar homes a harder sell.

Solar education in lower adoption states can be a major stumbling block. In many cases, buyers don’t understand the difference between grid-tie and off-grid systems. They tend to assume all solar energy systems are off-grid, which rely on panels to generate 100% of their energy and run entirely on a battery storage system. The fear is that they’ll be stuck without power if the solar array goes out and they don’t know how to fix it.

In reality, most systems are grid-tied. They generate their own energy, but still hook into the public utility grid. The solar panels don’t need to generate 100% of your home’s electricity — the grid can pick up the slack in periods of heavy usage. And if the power goes out, it’s on public utility workers to fix the issue and get things back up and running as soon as possible.

In areas where solar energy is less popular, a little education may be necessary to convince buyers that a PV system is a reliable way to power their home.

Learn more about the difference between off-grid and grid tied systems with our Getting Started Guide.

Newer Systems Are Worth More

Okay, this one should be common sense – but just to be thorough, it’s worth pointing out that the data backs this up.

Newer PV systems are made from more efficient materials, have more years left on their warranty, and are less likely to be due for replacement parts (like a new inverter, which you can expect to replace about halfway through the life of a system). As PV systems age, their value depreciates, and they tend to be worth less when you put your home on the market.

Pretty simple – newer installations are a greater boon to property values, as you would reasonably expect.

Leased vs. Owned Systems

Finally, the premium only applies to homes with host-owned PV systems. If you agreed to a solar lease or PPA (Power Purchasing Agreement) with the developer who installed the system, you likely won’t see much—if any—of the higher sale price returned to you as profits. In these cases, buyers will request the previous owner pays off their lease or PPA agreement, which offsets the additional value built into the final sale price of the home.

The extra cash from the sale only goes into your pocket if you have purchased your PV system outright. That’s one of the reasons we strongly recommend buying your system instead of leasing it.

Related Article: Should You Buy, Lease or Loan Your Solar System?

A Few Caveats

As with all research studies, it’s important to pay close attention to the methodology used to make sure we’re drawing the proper conclusions. Here are some important pieces of information about how this study was conducted:

The data spans home sales from 2002-2013.

The LBNL study only evaluates homes sold between 2002 and 2013. But more recent advancements in solar technology have made installations quite a bit cheaper since then, which may have an impact on their appraisal value in more recent home sales.

The most recent report on the cost of PV systems from the NREL (National Renewable Energy Laboratory) shows that in 2017, the cost to install a residential PV system in the U.S. is less than half of what it was in 2010. In fact, solar prices seem to have leveled off right around 2013 – the last year data was collected for the LBNL study.

As PV systems become more efficient to install, that may translate to a smaller impact on home resale values in the future. But since the premium on sale prices will likely shrink at the same rate as the installation costs, we still expect sellers to recoup the hardware cost of their system when they go to sell their home.

The research was conducted in 6 states: California, Oregon, Florida, Maryland, North Carolina, and Pennsylvania.

According to this ranking of the solar-friendliness of all 50 states, 3 of these 6 states ranked among the top 12 in the nation, and the worst was still close to average – Florida, at #28. With that in mind, the data skews heavily toward states with higher-than-average solar adoption. The impact of solar panels on home resale value will certainly be a bit lower for states lower down the list. You may see a smaller impact on property values if you live in a less solar-friendly state.

It’s hard to say for sure – the research is still limited, and we don’t yet have reliable country-wide data to draw from.

The study examines homes much more expensive than the national average.

The mean sale price of homes examined for this study was $431,964, which more than doubles the median home value in the US. The highest-selling home it appraised went for $899,000.

It’s hard to say whether solar readiness remains a strong purchase motivator once you get into the territory of high-end homes. We can’t think of a reason these trends wouldn’t hold true for million-dollar homes, but the LBNL doesn’t cover that market segment in their study, so it’s worthwhile to consider the dynamics may change for high-value properties.

For more modest homes, the data is much clearer. Smaller properties need smaller systems to cover their electricity usage. As you spend more on a PV system, the premium on home resale value doesn’t scale to match the investment. Smaller systems for more modest homes ($150K-$300k) actually return a much higher margin on the investment when the home hits the real estate market.

The premium buyers are willing to pay for a solar-equipped home shrinks for increasingly large PV systems. Source (p. 29)

Final Thoughts

Any way you slice it, solar is a sound investment.

If you live in your home for the duration of the warranty, you can expect a grid tie system to pay for itself 2-3 times or more in tax breaks and energy savings.

Even if you decide to move before the warranty is up, you still come out ahead. The value of the system translates directly into a higher sale price when your home hits the market. And that premium is typically enough to cover the cost of the hardware, which means homeowners break even on their solar investment right from the start.

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So When Does Solar Pay Off?

So When Does Solar Pay Off?

We’ve already discussed maximizing the ROI on your grid-tied solar power system, but when does solar truly start to pay for itself?

At first glance, pricing your solar array and determining  cost-offsets, payback period, and overall ROI might seem like a complex formula, but we’re here to help simplify the process. After reading this article, you should have a clear understanding of how much to spend and when you should expect it to pay off.

To figure out when your solar power system will begin to pay for itself, there are a few things you must consider:

  • Gross cost of purchasing the solar panels and all equipment (racking, power center, inverter, battery bank, etc). This is the “up front” price.
  • Tax incentives and rebates which can save you money once you install a solar power system. These can save you a significant amount on the back-end, at state, local, and federal levels.
  • Your monthly wattage use. You should know this right away, using our solar power cost calculator online you can predict how much electricity you’ll need to produce with your solar array, based on the electronics you use in your home and your average power consumption per month. The higher your electricity bill, the shorter your overall payback time if you’re able to zero that bill out on a grid-tied solar system.
  • Average electricity generation is another important factor – it’s often beneficial not just to provide enough power to keep the lights on at home, but also providing over the amount you need. With grid-tied systems, over-production can be paid back to the utility company, which can yield credit paid to you. With off-grid systems that have a battery-backup, this can give your home extra power on-hand should an outage or mechanical failure occur, or provide some extra juice for unexpectedly high usage (say, having guests over).

These are the basic factors to consider when buying any solar power system, but now we’ll delve into the differences in payoff period between different types of solar. Grid-tied and off-grid systems both pay off in different ways and over a different time period, so understanding the specifics of your situation.

This helpful chart from Understand Solar visualizes all of this data into a helpful chart on a state-by-state basis. As you can see, ROI on a solar system is at its absolute peak in Hawaii due to the state’s extreme cost for utilities. If you’re planning a solar installation on your home, this chart can provide a very helpful at-a-glance analysis.

average solar ROI per state

As a rule of thumb – the higher the price of electricity in your area, the quicker your payoff period as you offset the cost of the monthly utility bill.

For more information on getting the best ROI for your solar array, Wholesale Solar has a dedicated information page to assist you. 

Grid-Tied Solar:

Most solar customers in residential areas choose grid-tied solar, for obvious reasons! With a return on investment of only 4-6 years, your grid-tied systems start paying for themselves in very short order. If you’re producing more electricity than you need and paying it back to the power company, you can pay back your investment even faster. Government incentives pay up to 30% back, so your barrier to entry is comparatively low, and you will start seeing the difference in your power bills almost immediately.

With grid-tied power systems, this short payoff period means a much greater boon for you long-term. Power companies’ prices are only getting higher, and since most panels and inverters have 10 to 25-year warranties, you’ll be living off essentially “free” electricity for the majority of that period.

Off-Grid System:

Off-Grid solar is a very different investment from grid-tied. Generally more expensive than their grid-tied counterparts, off-grid systems give you nearly double the investment, however, as they start paying off immediately – having no connection to the grid at all and providing 100% of the power for your home (with the slight downside that the system can’t be backed up by the local grid if it fails for some reason). This minor downside is of course compensated by having a battery bank to store excess power and keep the lights on even if something goes wrong with the main system.

Installing an off-grid array using a DIY solar power kit helps you save even more money – no need to pay for an electrician or professional installer when doing it yourself. You’ll still need to file for permitting your solar array, but beyond that it’s all up to you to purchase and install.

One of the main reasons off-grid solar yields such a high ROI is the cost of wiring. If you wanted to get grid-tied solar in an extremely rural area, the price to install wiring alone can cost upwards of $50,000 – an added expense you definitely don’t want! By going off-grid, you save yourself a bit of time and a ton of money. 

The More You Know

So there you have it, the lowdown on getting the best return on your solar investement. Remember, the higher your utility costs without solar, the quicker your new array will pay for itself as it cancels those costs out once installed.

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The Simple Math Behind Saving Big On Solar

The Simple Math Behind Saving Big On Solar

Solar Payoff: It’s Simpler Than it Seems

Let’s face the facts: we all need electricity.  It’s a necessity that we pay for every month.  The idea here is to pay off your solar system with what you would normally spend on your utility bill.  Month after month and year after year you’re spending money on power with no end in site.  Why not spend that money on a solar system instead with the goal in mind to never pay for power ever again!

You’ve probably heard talking points like payoff period, ROI and many other money-saving terms when it comes to buying solar.  The payoff period is how long it takes to pay off the cost of your solar system with the money you would have spent on your utility bill.  The money you save on your utility bill over X amount of years will play a key role in figuring out your payoff period, so knowing how many years that will take could be the deciding factor for a lot of people looking to convert to solar. Once the payoff period has been reached, every cent saved afterwards is pure ROI – return on investment.

The Basic Formula

To figure out when your solar power system will begin to pay for itself, there are a few things you must consider:

  • Gross cost is the sum of your solar system and additional contractor work.  This includes components like Solar Panels, Racking, Charge Controller, Inverter, Battery Bank, etc. This is the “upfront” price.  (Note: Always talk with a Solar Technician before building your system.  They’ll be able to help you with designing a highly efficient solar system tailored for your location.)  Hiring someone to help with part of the install is totally fine and often recommended when it comes to hooking up some of the electrical components to your house.
  • Tax incentives and rebates can save you money once you have installed your solar power system. These will save you a significant amount on the back-end.  You can cash in on these incentives at the federal, state and local levels.  That’s an opportunity to 3X your savings.  Now, combine that with the HUGE discount you get with a DIY solar system, and watch your path to savings quickly accelerate!
    1. 30% of the cost of your Solar Electric System and installation can be deducted from your federal tax bill.
    2. Selected states have their own additional incentives.
    3. Regional or local districts can also have additional incentives.  Be sure to do a quick Google search to find out.
    4. The DSIRE database shows both state and local incentive programs. Utility providers will have info on their website if they offer an incentive. For example, Google: “PG&E solar incentives,” or whoever your utility company is.
  • Your monthly power usage can be found in your monthly utility power bill. Ideally, you’re going to want to enter that into our solar power cost calculator.   This should help you to figure out what kind of solar power system you’ll need to power your home.   If you don’t have your monthly power usage, you can select the option to use your average monthly utility cost.
  • Average electricity generation: Under Net Metering, power produced by a Grid-Tied PV system is sent into the household load panel, where it powers appliances. Any excess power feeds into the grid, turning the utility meter backwards and applying a credit towards your bill for every kWh generated.  The utility will take a look at your usage, typically once annually, to determine if you over-produced or under-produced. If you under-produced, they send a bill. If you over-produced they offer to roll over credit to next year or pay you for the credit. But they only pay a small amount for extra power — for example, if you buy power at $.12/kWh, they may only pay $.06/kWh.  With Off-Grid Systems the approach is different.  Off-Grid Systems are eliminating the dependence on the utility grid and going completely independent.  Basically, you become your own power plant.  Off-Grid Systems require a Battery Bank to store energy for night time use and when the sun isn’t as efficient. We also recommend a Backup Generator for recharging during long periods of overcast weather and as a backup power source. These are additional costs that you must consider when using an Off-Grid Solar System, and therefore a longer wait until it’s paid off.  Usually, the goal of an Off-Grid system isn’t directly tied to long-term payback.  Normally people go Off-Grid because there is no utility power source close enough to power their home and it’s much cheaper to use solar than to run cables from the grid.
  • Additional Cost:  Before you get your Solar System, you’re going to need to get a solar permit.  Getting a permit is often accompanied by some lightweight fees that your local authorities will add on.  But, there’s good news.  We have a free Downloadable Solar Permitting Cheat Sheet that is a great asset for anyone trying to save time with getting their permit.  Time is money, so considered this a way to off-set any permitting fees.

How do you equate an accurate payback timeline so that you can mark on your calendar the day you don’t have to pay for power anymore? Simple! We’ll show you:

Easy Math, Big Savings

Now that we have all the components, we can begin to see how long it will take pay off your solar system investment. let’s run an example:

A typical equation might look something like this: 17,900 – 5,370 = 12,530 / 2,100 = 5.97 years till solar system is paid and you’ll never pay for power again.

Based on 1,500 kWh per month usage / package #1890923 / price of $.12/kWh for power.


  • Exp: DIY Solar System $16,000
  • Exp: Electrician costs: $1500
  • Exp: Permit Costs $400

Total Expenses: $17,900


  • Save: 30% Federal tax rebate $5,370 ($17,900 x 0.30)

Total Upfront Savings: $5,370

Annual Utility Savings $2100/yr ($175 x 12)

Total Expenses (minus) Total Upfront Savings (divided) Yearly Savings = Payoff Period In Years

or based on our example: 17,900 – 5,370 = 12,530 / 2100 = 5.97 years

If you’ve ever considered solar, you should grab our free Downloadable Solar Permitting Cheat Sheet.  It can save you hours of time when you’re ready to invest in solar.

Return on Investment With Your Grid-Tied System

Return on Investment With Your Grid-Tied System

Switching to Solar: It Just Makes Sense

One of the main reasons people switch to solar power is to save money. A grid-tied system can help offset monthly power bills or zero them out completely – utility companies may even afford a homeowner credits on their power bill for the surplus power produced. Getting the best return on investment is important for many people, so calculating that ahead of time, before you install your grid-tied solar power system, is essential.

It may seem a straightforward math equation — how long before my energy cost savings surpasses what I paid for the system? — but it’s not quite as simple as that. That’s why we’ve put together this guide to calculating the true return on investment (ROI) for solar, so you can be sure it’s the right choice for you.

How Does Solar Compare to Other Financial Investments?

First, let’s talk strictly in terms of financial investment. In a quarter of states, the solar energy return on investment surpasses the ROI for the S&P 500 stock index. In other words, your money gets a better average return on solar than the stock market. In two-thirds of all states, your solar ROI surpasses the average ROI on 30-year treasury bonds. And in 86 percent of states, your typical solar ROI beats that of 5-year certificates of deposit.

Solar Energy ROI surpasses that of the S&P 500 stock index.

These are all pretty good odds, just from a straight investment-risk perspective.

In fact, there’s only one state in the nation — Mississippi — where your investment in solar energy won’t earn you money right away, but even there you’ll eventually save money, because the average solar system produces energy for 10 to 40 years depending on what type of system you install. Your cost savings will ultimately surpass what you spend.

And how much will you spend on a solar energy system? It all depends on the following:

  • The size of your system
  • The equipment you’ll need
  • Your method of financing
  • Whether you’ll install it yourself

Much of this can be determined using our Solar Cost Calculator online, which can help you predict your wattage needs in order to power your home entirely, offset your power grid costs, or zero out your power bill entirely.

According to the Solar Energy Industry Association, the average U.S. home solar energy system cost $3.57 per watt in 2015. Using figures for the average home system, which is 5 kilowatts, that system would cost $17,850. But after federal investment tax credits, which reduce your total price by 30 percent, your final price would be $12,495.

Avg Price per watt

Keep in mind, this is just the cost of the system itself. There may be other costs associated with installation, though if you are willing to do the installation yourself, the cost of installation lowers considerably.

If you had nearly $18,000 to invest and you were assured of getting 30 percent back right off the bat, it already would seem appealing, right? And that doesn’t take into account your likelihood of making your money back quickly and ultimately making money off your investment, which research shows is quite high.

Based on those factors, a solar investment simply makes sense.

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Things to Factor Into Your ROI:

When it comes to determining your solar energy return on investment, here’s the simple formula we use:

Total cost of system ÷ Value of electricity generated ÷ Your annual electricity usage = Payback time

So let’s look at each part of this equation:

  1. Total cost of your system: Determining the cost of your system depends on your needs. We’ve provided a Solar Cost Calculator you can use to figure out what size system you need, but we roughly estimate it costs about $2/kW for a system before fees and incentives are figured in.
  2. Value of electricity generated: The average cost per kilowatt hour for solar in the U.S. is $.12.
  3. Annual electricity usage: The average number of kilowatt hours used in your household each year. The average U.S. home uses 10,812 kWh per year.

This means that a $10,000 solar energy system would pay back your investment in 7.62 years. This is about on par with the national average of 7.5 years. The average American solar user sees an ROI of 10 to 30 percent each year.

Solar Energy System Pay Back Period

Energy Returned on Energy Invested

In the early days of solar, it became popular to talk about how much more energy it took to actually make a solar panel than what it could generate in its lifetime. And in those early days decades ago, that may have been true. But make no mistake: Today, a solar panel will produce far more energy in its lifetime than it ever took to make that panel.

According to the U.S. Department of Energy, the production of solar panels and the production of fossil fuels, including mining and refining, are similar in terms of energy returned on invested energy — what’s expended to produce it versus what is generated from it. But solar power is cleaner and produces energy for a far longer period of time. The DOE says that the idea that solar systems cannot pay back their energy investment is “simply a myth.”

Bear in mind also that as technology advances, production methods improve in efficiency and lessen in cost.

Other Ways to Save Money on Solar Energy Systems

Purchasing a solar system outright is obviously the most expensive option for obtaining solar energy in your home, but it’s also the best way to take advantage of many benefits, including:

  • Tax breaks
  • Financial incentives
  • Solar renewable energy certificates

Homeowners can reduce their upfront costs by 30 or more through incentives, rebates and tax breaks. However, there are ways to mitigate that initial cost and still capitalize on the investment.

First, there are numerous ways to finance a solar power system. A solar loan may enable you to afford a solar energy system. You can begin reaping the rewards of energy savings right away, and though you will be paying the bank in installments for your loan, the interest is likely to be a tax deduction. You might even be able to find a grant to help cover your upfront solar costs. Consult the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy to search its extensive list of grant programs and their requirements.

Getting the Best Return on Investment for Solar

At the end of the day, calculating your return on investment for a solar energy system isn’t an easy matter. It involves much more than the costs of building the system and installing it at your home. You also have to take into account the ongoing energy savings you’ll reap, the tax and other benefits you’ll have available, the improvement to your home resale value and the many benefits you’ll create for the planet and the economy.


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Investing in Solar: Better Than the Stock Market?

Investing in Solar: Better Than the Stock Market?

A recent study found that in 46 of America’s 50 largest cities, home solar systems can be a better investment than the stock market.

The study, titled Going Solar in America: Ranking Solar’s Value to Consumers in America’s Largest Cities (PDF) was funded by the US Department of Energy and performed by the North Carolina Clean Energy Technology Center. It found that the majority of U.S. homeowners who invest in a typical 5-kilowatt solar photovoltaic (PV) system would be making a better investment than if they put their money into the stock market.

A primary goal of the study was to dispel a “clear information gap” between the perception and reality of solar affordability: “Solar is now not just an option for the rich, but a real opportunity for anyone looking to take greater control over their monthly utility bills and make a long-term, relatively low-risk investment,” it said.

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Solar panels are solid, recession proof investments.

Solar panels are solid, recession proof investments.

A Chinese proverb states that challenges offer us the greatest opportunity for innovation. Unless you have been living in a cave for the last couple of years, I’m sure you’ve noticed the ripple effects of the recession. Ultimately, we are all interconnected and depend on each other. Corporations have sold the business jet, home construction has come to a standstill, and families are getting creative in their efforts to save money. This leads us to questions like, “What are the most vital elements in our daily lives?”, “What are some positive ways of dealing with change?”, and “What is our relationship to sustainability?”.

Renewable energy is a term that has been in use since the early seventies. And it conjures up a wide range of ideas. From theories on free energy devices to real-world solar and wind power technology, we’ve come to realize that eventually every source of energy must be renewable. Solar power systems offer some of the most direct ways for individuals to play an instant role in directing their own energy consumption.

Every year solar panels achieve higher efficiencies, and drop in price. The main focus in the industry has been to make the technology more viable for the general public. Westinghouse introduced innovative ideas for the do-it-yourself market with the introduction of AC solar panels. These highly efficient solar panels incorporate built in inverters and racking hardware, making it easier than ever to install your own solar power system. New ways to link your solar panels to the national grid allow many folks to sell excess power back to their utility company, providing a much quicker return on investment. Advanced power management devices mean you can have the best of both worlds. You can be interconnected to the grid while also having a battery backup. With many new power centers, you can even monitor the productivity of your system on your smart phone web browser.

Generous Federal and state tax incentives are helping thousands switch to solar and wind power. Americans currently have more subsidies supporting renewable energy than ever, and in some states, you can save up to 80% of the total cost of a solar power system and installation. Legislators understand the need for less dependence on coal and oil for our energy needs, and we will see more incentives for renewable energy as the technology improves.

Humans are highly adaptive creatures, and we are extremely creative when it comes to problem solving. An optimistic approach to our economic troubles goes a long way in creating solutions. An investment in solar technology pays for itself, while offering guaranteed returns.

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