For millions of American homeowners, particularly in states with higher electricity rates, installing solar panels for home is on their wish list but the question is whether the argument to install residential solar panels on their home in 2018 is compelling enough to make them act now.
There are some very strong reasons why you may want to make solar your very next home improvement project.
What factors are making residential solar panel for homes so affordable now?
There are three factors that make the investment to buy solar panels for your home in 2018 compelling. Solar panels are now cheap but their costs have stabilized.
Firstly, the cost of residential solar panels has fallen to the point where the investment return is generally more than the investment return you can get from many traditional investments like shares or property, particularly in states with high power prices. An internal rate of return on the cost of installation of solar panels on your homecan be 15%. The security of your investment is also guaranteed by the fact that you will continue to use power into the future rather than events that may be beyond your control as is the case with most other investments.
How much do residential solar panels cost?
The average cost of a residential solar system in 2018 is 3.08 per watt for cash purchased systems before the 30% tax credit. So for a 6kw solar system (which is the average size of a residential solar system) this is $18,480 before the solar tax credit and $12,936 after claiming the credit back on your taxes. Here is average residential solar panels cost for different cities and system sizes.
This sounds like a lot of money but there are now many really competitive solar loans including may with zero down offers. It is often possible now to buy solar panels for your home with a zero down finance package where the monthly repayment is less than the electricity savings you get from the system.
I can't think of what argument someone could use to not buy solar panels for their house in this situation because you are making no investment and receiving a monthly profit. This monthly profit will also most likely grow over time as power prices increase and increase substantially once the solar loan is paid off.
Will the cost of residential solar power systems for homes fall further over 2019?
The announcement in January 2018 of new import tariffs on solar panels and solar cells by the Trump administration will have an inflationary effect on the price of solar panels. However solar companies knew that this tariff was coming (although they didn't know the percentage) and so most of them imported 3-6 months worth of solar panels before the announcement. This means if anything solar panels for homes will get more expensive later in 2018 rather than cheaper.
Even without these tariffs the rate of price deflation in solar panels had slowed significantly. SolarReviews research shows that over the course of 2017 solar panels cost fell by less than 6%, this was the first year this decade where the cost reduction had been less than 7%.
To put it simply the price of solar panels at the wholesale level is now little more than the cost of silicon, glass and aluminium from which they are made. Silicon, glass and aluminium are commodities and so there seems little room left for further falls in prices. This is not to say there will not be any reductions at all in solar panels cost, but they will be incremental reductions rather than larger falls but these slight reductions will be absorbed by the increased import duties imposed in America.
Should I still put off buying a solar power system for my home until solar panels get cheaper?
It is no longer worthwhile to put off buying solar panels for your home in 2018 because future price falls are not likely to be significant
So if for example you are spending $200 per month on electricity a solar system would have to fall more than $2400 in a year (after allowing for the 30% tax credit) for you to break even on that decision. This means the gross cost of systems would have to fall by $3428 or almost 19%.
I hate to disappoint those waiting to install solar panels on their home but solar panels are not going to fall anywhere near 19% in 2018. If you were to wait two years you would need them to fall 38% just to bring you back to break even because of the extra electricity bills you will pay in that two year period to the utility company.
Is solar panel installation feasible on my house?
Unfortunately not every home suits solar. You can use the solar savings and payback period calculator to calculate your likely savings from installing solar on your home. Alternatively here is a list of some of the factors that will determine how suitable your house is for installing a solar power system. Things such as the shading of your roof, the direction of your roof and of course the roof size can influence the solar potential of your property.
What financing options are available to avoid the upfront cost of buying residential solar panels?
Even with lower cost of solar panel installation the cost of installing the right size system for your home can still be significant. A few years ago the only zero down solar offers were power purchase agreements but now solar loans are available with terms up to 25 years and APR interest rates of as little at 2.49%.
In addition solar specific loans we have long argued that HELOC loans are the most efficient way to finance solar. If you are going to the trouble of getting a HELOC loan it may be convenient for you to borrow enough money to fund two or more of your home renovation objectives at once rather than do paperwork for each project separately.
How is buying a solar power system for your home different to doing other home improvement projects?
Firstly solar is one of the only home improvement projects that has an income attached to it. The income from a solar project comes in the form of savings on utility bills. Solar savings are amounts of money that you would otherwise have had to pay to the utility company if you did not have solar on your roof.
This investment return varies from location to location based on how expensive your electricity is from your utility company. You can calculate your solar savings for yourself online taking into account your location, the number of solar panels you need and the cost of power from your utility. In states like California, Massachusetts, Connecticut, New Jersey and parts of New York it can be possible for a solar system to pay for itself in as little as 5 years. Given solar panels last 30 years this is 20 years or more of living with free electricity even after the solar payback period
Should I buy a solar battery if I install solar energy panels on my house?
In short, NO it is not necessary to install a solar battery because even though they have become a lot better and a lot cheaper (The Tesla Powerwall is now only $5,500 plus installation) they still take almost 10 years to pay for themselves and given the warranty on a energy storage battery is only 10 years that doesn’t seem like a good deal. Whilst it is nice to have backup power the the upfront cost of the until plus the installation cost makes it uneconomic in the 35 states that have net metering.
Net metering allows you to economically sote the value of the power that renewable energy systems generate without paying for the upfront cost of a battery
What is the best way to get solar panel quotes for your home?
Marketplaces like solar-estimate have become the most common way to collect quotes for solar for your home. The beauty of this particular marketplace is that the solar companies looking at your job know that you will be receiving multiple bids and also localized average solar system pricing information online. This means they know you are an educated consumer and so they are more likely to offer you real value. It also means you have an estimate of system size and the
Solar-estimate allows you to control the number of solar companies your details are shared with. You can elect to only get one installer to look at your house if you wish. Some other marketplaces have been known to sell your details to many solar companies leading to far too many annoying sales calls.