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April 8, 2020

Are Solar Panels Cost Effective?

Are Solar Panels Cost Effective?

Cutting down on energy bills can be brutal.

Leaving the heat off during a Montana winter? Terrible. Not touching the AC during a Georgia summer? Forget about it. What if there were a way to fully power your house and not pay monthly bills? What if the sun could power your house for free? Sounds too good to be true right?

And it is. But there’s a case to be made that provided you have the cash for them upfront, solar panels can be cost effective over the long haul. Here’s a breakdown on how.

How much do you spend on power?
The first consideration is how much you spend annually on power. The cost of electricity and usage vary from state to state, but they average out to about $0.13/kWh (1). The average household uses about 867kWh per month, so the average annual cost for power comes out to be around $1,352 (2). Over a 25 year period that adds up to roughly $33,800.

What’s the total cost of installation?
Power is expensive. But so are solar panels. The average cost for a solar panel system is between $15,000 and $25,000 (3). And let’s assume hiring a contractor for installation would run you about $6,300 (though self-installation is possible). Your total costs could be between $21,300 and $31,300 dollars. Part replacement is also worth keeping in mind. Panels are typically warranted for 25 years, but individual parts might have shorter warranty periods (4).

Tax Incentives
One of the big perks of going solar is tax incentives. Right now, the federal government allows citizens to claim 26% of the cost for solar panels installed by Dec. 31, 2020. That gets reduced in 2020 to 22% and vanishes entirely on Dec. 31, 2021 (5). That could make a big difference in your total long-run savings.

Total Savings
So let’s assume you spend $20,000 on a solar panel system and pay $6,300 on installation and claim the 26% tax incentive. That brings your total to $19,462. That’s $14,338 less than you would have originally spent on power!

There are several factors to consider before you go out and install solar panels. Remember that all these numbers will vary depending on your state and region. Daily hours of sunshine will affect your panels’ efficiency. Do research on costs in your area and consult with professionals before you make any big decisions!

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