Cost and Savings of Solar Panels

 A Deep Dive into the Cost of Solar and Why it Saves Money. 

Have a question that isn’t answered below? Contact us! There should never be any unanswered questions when you choose to go solar. We are here to share our expertise and help you understand all the costs that solar panels for your home entail.

Cost per Watt

Residential Solar Savings

Wholesale vs Installer

Solar Requirements

Commercial Solar

 Western U.S. Solar Panel Cost Per Watt

A lot goes into the price of solar. However, most in the western U.S. focus on the cost per watt metric.  

Cost per watt is the combined soft costs, install labor, hardware, inverter and solar panel costs divided by the wattage of the array. The average cost per watt in each state varies. 

In its Oct. 2019 Edition of Tracking the Sun, Berkeley's National Laboratory found that a residential solar array was $3.70 per watt in Nevada, $3.80 per watt in Utah, and $3.50 per watt in Texas. The average cost per watt for a 5-kilowatt array throughout the United States was $3.80.  

Why Cost per Watt is Used

Cost per watt is the common metric used for solar pricing because it allows customers to see the price per unit. A solar array that costs less overall may not cost less per unit of electricity.

The History of Solar Pricing and Predictions

Historically the price of solar has gone down significantly. The price decreases of the past were due to solar panel technology improvement. While technology is still improving, cost decreases are now more highly impacted by soft cost decreases, like improving solar permitting processes.  

Determining the Cost of Solar

While this is the average cost per watt for a 5-kilowatt array, different factors may mean the home needs a larger system or a more expensive installation type. Figuring out these factors will determine the overall cost of the array.

Energy Offset 

One of the factors that determine the size of a system is the energy offset that the customer wants. While 100 percent offset of the customer's previous electricity bill would be ideal, sometimes outside factors prevent a homeowner from reaching 100 percent offset or make over-production valuable.

Claiming Incentives - the ITC

Whether a homeowner can claim the federal incentive is another factor to consider. As of 2020, this incentive covers 26 percent of the total cost of solar. Those who can't qualify for this incentive end up paying more, which is why our solar agents advise these individuals against purchasing solar. The federal incentive requires taxable income from the homeowner. If you're retired, you may still qualify for the solar ITC through an investment portfolio or other types of passive income.

Current Electricity Usage

How much energy a home uses is one of the largest factors for determining the size of a solar array, and therefore total costs and savings. Solar companies often ask for monthly usage over a year to help them determine the size of the system necessary to cover solar energy needs.

Home Location

The location of the house can also make a difference. Some areas have lower sun hours, which means these homes need more solar panels to produce the same amount of power. Aside from the general geography of where the home is, the placement of the panels on the roof of the home also determines production.

Quality of Materials 

Cheaply made solar panels or inverters don't last as long as ones that use quality products and manufacturing processes. Determining the type of solar panel and accompanying equipment helps customers find the price bracket of their system. 

Installation Type 

Another factor that many don't think about is the type of installation. While most homeowners have on-roof solar installations, not everyone does. Certain roof types require different solar installations, and some homeowners prefer the look of different installs to others. For instance, if homeowners do not like the aesthetic of panels on their roofs, backyard solar panels (ground mounts) may be an option.

Solar Cost Estimates

While the cost per watt is the metric most commonly used for solar costs, solar estimates take into consideration the comparative cost of solar. These costs include the total cost of the system and the predicted savings, which come from the current cost of electricity and rate increases through the local utility over the expected life of the solar array.

The Cost of Going Off-grid With Solar

Homeowners who want to go off-grid have different cost considerations. While every solar home should look into energy storage, powering a home long-term requires several home batteries, which costs quite a bit more than a grid-tied solar home that only needs backup power during an outage.  

The Savings Associated with Solar Power for Homes

When looking at the cost of home solar, it's wise to look at the savings associated with it. Some items are worth more because they save more.

While per-watt electricity is relatively inexpensive, it adds up fast. Every watt saved represents the hundreds and thousands of dollars in utility bills the homeowner no longer has. While solar is a large-ticket item, the savings associated with it make it worth the purchase, as is the case with most wise investments.

For residential solar, these savings come from solar's return on investment (ROI), financing options, and incentives.

The ROI of Solar 

The ROI of solar is one of the largest influences of solar purchases in the United States. Those who invest in residential solar have low risk and high rewards.

How to Reduce Solar's Payback Period 

Most solar homeowners break even in about eight years, which is great because solar is a 25-year warrantied product with the potential for an even longer life span (40+ years). Homeowners with solar typically have 17 plus years without solar payments. However, those who want to decrease this payback period can do so by making extra payments or paying in cash. 

The Impact of Net Metering on Solar ROI 

Net metering pays solar customers for their excess solar energy, so they can use the grid as their energy backup option without losing money. Utility companies that don't support net metering have anti-solar metering policies, like low solar-payback rates. While these policies make using the grid as a backup solution less cost-effective, homes that use battery backup don't need to worry, because they don't rely on the power grid for backup power. 

Solar's Impact on Home Value 

The return on solar installs increases when homeowners purchase their solar array. This value increase comes from the value owned solar adds to homes. Zillow found that, on average, homes with solar panels increase in value by about 4.1 percent. 

The impact of Financing on Solar Savings 

The financing of a solar array plays a large role in the savings of the system. To make a well-informed decision, homeowners need to know the potential savings of their financing choice.

Getting a Solar Lease (PPA) for Zero Down

Two common financing options are leases and power purchase agreements (PPA). Both of these financing options are solar renting options.

A solar lease gives customers a lower monthly payment for solar over a set amount of time, while a PPA charges solar customers a discounted fixed rate for the solar power they use.

While these options cost less per month and save hundreds of dollars on electricity bills, renting solar doesn't save as much as purchased solar panels. Because this financing option gives ownership of the array to the solar company, homeowners who want to sell or refinance their home also have more difficulty.

Zero Down Solar Loan

Through a solar loan, homeowners who can't afford to pay in cash can still own their solar arrays. This option saves homeowners more money because they can take advantage of all the solar incentives and can sell their home, when the time comes, without any issues.

Incentives for Paying Cash 

Homeowners who can pay cash save the most because they don't have any interest. Some solar companies also offer discounts to customers who pay in cash.

Western U.S. Incentives for Going Solar 

There are many incentives and rebates to help homeowners afford solar. While not every state supports solar, the ones that do often have state incentives on top of the solar ITC (federal tax credit). Each state that Go Solar Group serves has solar incentives to help encourage people to invest in rooftop solar.

Solar Panel Cost Calculators

While some solar calculators give the general cost of solar, other solar calculators offer the possible savings that a certain company can offer. While Google's solar calculator can help people determine a baseline, it doesn't help them compare bids. The best way to compare bids to gather quotes, but a company based solar savings calculator will help people who aren't sure about solar. 

Go Solar Group offers a variety of solar calculators for its customers. Some of these calculators help business owners, and others are for residential customers. All of our calculator calibrations take into account the regions we serve and the products we offer.  

Find out why our system components stand out among the rest.

Wholesale Solar vs Solar Installation: Is it Worth the Cost?

When considering the cost, individuals often turn toward DIY solar projects. While it is possible to get solar at the wholesale cost, these dealers do not install the array or submit any of the necessary permitting. 

Before a solar panel installation, there is a process of paperwork and approvals each array has to go through. Every solar home must receive approval before installed and pass a city inspection before homeowners can use the system. 

While some are willing to put in the work and have the expertise to install a solar array on their own, this is less than 1% of the population. Choosing to use a solar company to install the array help mitigate potential problems and stress for the homeowner. 

Call to Speak with a Go Solar Group Representative

Requirements for Installing Residential Solar 

While the cost of solar is worth considering, if the home doesn't qualify for solar, it doesn't matter. To qualify for solar, homeowners must meet several requirements.

First and foremost, the individual applying for solar needs to be the homeowner. Or the renter has to work with the homeowner to have solar installed.

Owning the home, however, isn't the only thing needed. Homes also need a certain amount of non-shaded space and financing figured out.

Space Required for Solar 

A typical residential solar panel requires 65 inches by 39 inches, which means the average solar panel needs about 15 square feet per panel. The amount of solar panels needed depends on the usage of the home, which is another qualifying factor for solar.

Home Usage Needed to Qualify

Each solar company has a certain threshold, which is determined by the profit it will give the company, and the savings it offers the customer. Go Solar Group's minimum usage requirement is 6,000 kWh per year, which equals an average of 500 kWh per month. 

Homes that don't use enough energy don't save as much with solar. However, if a homeowner is planning on adding energy-consuming upgrades, solar is a good way to decrease the cost of running them. 

The Impact of Shade on Solar Panels 

Shaded roofs are useless to solar panels. Solar panels need sunlight to produce electricity and do best in full sun, which means homes shaded by trees either need the trees trimmed or the homeowner needs to consider a ground mount

Financing Solar

The type of financing determines savings and whether a credit score is important. Financing is also determined by whether the homeowner qualifies for the Federal Tax Credit (ITC).

Credit Score

Credit tells lenders whether the person they are investing in is a safe bet. Credit plays a large role in the homeowner's ability to get residential solar.  

Unless the homeowner is paying in cash, the solar company will ask for a credit score to determine if the homeowner can qualify for their financing program. Go Solar Group requires a credit score of 650 or above. 

Tax Credits

The 2020 Federal tax credit incentive for solar is 26 percent of the solar array. Because this credit deducts from federal taxes owed, those who don't owe federal taxes don't qualify for this incentive.

While not qualifying for this credit doesn't mean an individual can't have solar, the credit accounts for a significant amount of the total cost of solar, which is why homeowners who don't qualify for this tax credit are advised against purchasing solar. 

 

Learn more about our company and team.

Commercial Solar Reduced Cost With Incentives

While solar power works similarly whether it is for commercial or residential use, there are some key differences. The type of installation, amount of un-shaded space that can be allotted, and financing options determine the cost of commercial solar just like residential solar.

However, unlike residential solar, commercial solar has a couple more incentives to help make it affordable. Commerical installs can qualify for the federal tax credit along with business incentives like MACRS. Businesses who own their buildings can also write off 100% of their solar expenses, and this is a nationwide benefit.

Federal Tax Credit 

The 2020 federal tax credit for commercial installs is at 26 percent. While this incentive is decreasing, the good news for commercial installations is this incentive will cap at 10 percent.

Businesses Using MACRS to Offset Solar Costs

The Modified Accelerated Cost Recovery System (MACRS) allows businesses to recover some of the cost of its depreciating equipment. A commercial array can have 85 percent of its costs covered over five years through MACRS federal tax deductions. 

Check Out Our Commercial Solar Page.

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