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Investing in solar panels for your home is not only beneficial for the environment, but it can also save you money in the long run. However, determining whether solar panels are a worthwhile investment depends on various factors, including your location, the cost of retail electricity, and the available financial incentives.
In this article, we will explore how to calculate the potential cost savings of solar panels over an average lifespan of 25 years.
@joinrayven INCREASE 📈 your home value and SAVE 💰 on your energy bill #solarpower #solarenergy #sustainableliving #sustainablehome ♬ original sound – Rayven
Calculating Electricity Costs
To determine the cost of electricity, you can refer to your utility bills. Divide the amount you paid for electricity in a year by the total number of kilowatt-hours (kWh) consumed. On average, the utility rate in the United States from May 2015 to May 2016 was 12.64 cents/kWh. However, this rate may vary depending on your location.
Calculating the Cost of Solar Panels
Calculating the cost of solar panels involves determining the amount of electricity they can generate over 25 years and dividing it by the cost of the panels, including any financing expenses.
This calculation is known as the ‘levelized cost’ of solar electricity. You can use various calculators, such as Sunmetrix Discover, to simplify this process.
Let’s consider a homeowner in Chicago, Illinois, who is interested in purchasing a 5 kW solar system. Assuming the average cost of solar panels in the U.S. is $4 per watt, the total cost of the system would be $20,000.
However, with a 30% federal tax credit, the cost is reduced to $14,000. Additionally, factoring in operation and maintenance costs, which are typically around 10% of the purchasing cost, the total cost would be approximately $16,000.
With the estimated cost and average electricity consumption of 6,530 kWh per year, this homeowner’s levelized cost of solar electricity would be around 10 cents/kWh. Considering that the average retail electricity cost in Illinois was 12.6 cents/kWh, it is evident that switching to solar energy would result in long-term savings.
Considerations and Changes in Regulations
It is essential to note recent changes in regulatory policies that affect the profitability of solar energy. Some states now compensate homeowners for excess electricity at the wholesale rate, which is lower than the retail rate.
This can impact the savings if you produce more solar electricity during the day but consume more from the utility in the evening. Therefore, it is crucial to consult with solar professionals and your utility provider to understand the specifics of your situation.
As the cost of solar energy continues to decrease, investing in solar panels for your home becomes an increasingly attractive option. By conducting thorough research and consulting with professionals, you can ensure that solar panels are a worthwhile long-term investment. Not only will you contribute to a cleaner environment, but you can also enjoy significant savings on your electricity bills.