Going solar is considered as a constructive step to alleviate environmental damage, at the same time enjoy some financial benefits.
The monetary advantages of solar energy have always been given secondary importance. This may make you wonder “Are solar panels worth it solely on the strength of their economic gains?”
As a homeowner, when you are thinking about switching to solar power, you may be interested only in the environmental benefits you may get out of the installation. Are you aware that by choosing clean energy you are strengthening the economy on various levels and aiding in the economic growth of the region?
Before taking the plunge, it is logical that you would like to know about the economics of a solar power installation. What are the economic impacts of solar energy?
This article endeavors to offer you an overview of the economic benefits of solar energy at multiple levels – as an energy consumer, as a landowner, for the job market, for utility companies, and even for the economy of the region.
The economic impacts of solar energy
1. Solar is no longer a luxury
Numerous factors are contributing to the popularity of solar power. Global warming and consequent climate change is forcing the hands of countries to set ambitious zero-emission targets. Solar power features prominently in the net-zero carbon emissions plans.
In the 80s and 90s, the cost of home solar installations was so high that it remained out of reach for average households. In the last decade alone, the price of solar panels and solar batteries has come down drastically.
More than a million households across the US are benefiting from solar panel systems. So can you.
2. Incentives from federal, state, and local governments
Even at a reduced cost, a home solar system may not be easy to afford for many. To get more people on board, homeowners are being offered a variety of financial incentives like solar tax credits. The prominent among them are the federal investment tax credit (ITC), production tax credit (PTC). state tax credits, and cash rebates.
Federal tax credit or ITC was introduced in 2006 with the aim of boosting solar energy installations by individuals and businesses. It was meant as a short-term measure and is expected to be phased out after achieving the goal. However, due to popular demand, Congress has been extending the eligibility period of the incentive.
As of now, it is available until the end-of-year 2023, though the rate itself has been coming down from 30% until 2019 to 26% for 2020-2022, and 22% in 2023. So, if you are thinking of going solar, don’t delay it too much.
3. Lock in your electricity rate
It is not a figment of your imagination. Your electricity bill is going up because the rates are going up at a steady pace. Maybe your consumption has something to do with it as well. However, the fact remains that the utility rates have gone up by 15% in the last decade alone. And, this trend is expected to continue.
You can save yourself from the escalating bills by going solar. The lifespan of solar systems is 20-25 years. And most of its cost comes from the upfront capital cost. As solar installation doesn’t have any moving parts, its cost of maintenance is very low or negligible. This means, once you install the system, you are virtually locking the energy rates for its lifespan.
4. Avoid Time-of-Use (TOU) rates
Some states offer consumers the choice of Time-of-Use or TOU rates, while for Arizona consumers, this is not a choice. These are variable utility rates based on the time of the day. Lower rates for non-peak hours and higher rates for peak hours. Peak hours mean when the demand is the most, usually in the evenings when everyone is home.
For you, most of your consumption will be during the evening hours and this means you will be paying more for the energy consumed. With a solar installation coupled with a solar battery, you can avoid paying higher utility rates for your peak usage. The solar battery can store the solar energy generated by the system during the daytime and you can draw from this during peak evening hours, eliminating the need to use grid energy.
5. Advantage of net metering
Most states offer energy consumers the choice to opt-in for a net-metering arrangement. This involves remaining connected to the grid even when you have a solar installation through a bidirectional meter.
This allows you to use solar energy when it is available and draw from the grid when the solar system is unable to meet your energy demand. On the other hand, when your solar system is generating more than your energy use, you are allowed to export the excess energy generated to the grid and receive credits or cash as compensation.
With proper planning, Net Energy Metering (NEM) customers can end up with zero utility bills. However, the NEM policies vary across states and solar companies can help you with the details.
6. Offers income for landowners
Landowners with medium to large tracts of land can take to solar energy for generating additional income by hosting solar farms on their land. This is especially helpful when the land is rendered infertile for growing crops by extreme weather conditions or due to lack of capital to put the land to better use.
Leasing out the land to solar farms can assure a fixed income for landowners. The size of the property, availability of solar resources, and local climate are all factors determining the compensation. On average, landowners can expect to earn a revenue of $2300/acre, which compares well with other land-based economic activities.
7. Solar panels are long-term assets
The average lifespan of solar panels is 25 years. With proper care and good maintenance, you can expect it to provide you with clean and renewable energy for a long time.
The ROI or return on investment also known as the payback period for solar panels is approximately 8 years. This means you can recuperate the amount you invested in them through utility bill savings in ~8 years. This also implies that for the remaining lifespan of a solar panel, the renewable energy it generates comes free of cost.
Most reputed manufacturers offer performance warranties for their solar panels. By choosing a certified solar installer you can ensure that you get the best out of your solar panels.
8. Raises your home value
Having a solar installation is considered a value addition in the real estate market. If you are planning to sell your home, having an existing solar panel installation can help you sell it faster and fetch you a much higher price over and above the investment cost.
Most studies in the real estate market indicate home buyers are willing to pay a premium for a solar home. The reason is simple. Getting a solar panel system installed is not so easy. For enjoying the benefits of solar without hassles, home buyers are ready to pay extra. Market studies indicate that solar installation raises the home value by ~4%.
9. Creates jobs and helps the economy
The benefits of you going solar are not restricted to you alone. When you choose to install a solar energy system, you are indirectly creating jobs in the solar industry. The American solar industry has grown at a phenomenal pace in the last decade and offers direct and indirect employment to almost 230,000 people.
Though COVID-19 has setback the solar job market marginally, over the past decade, the economic growth has been higher than other sectors, including traditional energy sectors like oil and gas.
As the effects of climate change are becoming more and more pronounced, the importance and reliance on the solar industry are expected to grow at a much faster pace. This growth trend in the solar job market is so robust that the US Bureau of Labor Statistics is predicting solar panel installers among the top 3 jobs in the country.
10. Neutralizes the costs incurred by climate change
Global warming and climate change is wreaking havoc with economies worldwide. Extreme weather events are racking up billions in damage to property and lives. Flooding, hurricanes, and similar natural disasters are becoming too frequent in recent years. The cost incurred by the economy to overcome these challenges is too big to ignore.
This is in addition to the health hazards posed by increased air pollution and carbon emissions. Switching to clean and renewable energy like solar can bring down the expenditure incurred by the economy due to climate change as well as for providing health care to millions affected by pollution.
11. Fuel for solar systems is free of cost
Unlike fossil fuels like coal or oil, sunlight is abundant and costs nothing. To meet the energy demand, the nation is forced to import fossil fuels, which is a huge drain on the economy besides the compromises and concessions. Replacing fossil fuels with solar power means significant savings for the economy.
On the other hand, sunlight is available almost everywhere free of cost. Not only can solar power help the economy shake off its dependence on imported oil and thereby restrict the drain in the economy, but it also has the potential to help the nation become self-sufficient in the energy sector.
Moreover, unlike fossil fuels, sunlight lasts forever.
Solar energy is a cost-effective and environmentally friendly way to produce clean energy. It offers many direct and indirect economic benefits on both a micro and macro level, including creating jobs, reducing our reliance on foreign oil, and helping to stabilize energy prices.
As the cost of solar panels has come down due to improved energy technologies, increased production, and financial incentives amid mounting environmental concerns, the direct cost implication of solar for consumers has decreased.
If you are planning to go solar, now is the time.
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