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What Is The Cost Of Solar Electricity?

By Edited Jul 20, 2016 0 0

Contrary to popular belief, the cost of residential solar power has decreased substantially and smart homeowners have seen that they can’t afford not to do it. Thanks to a growth in demand, innovation in the engineering of solar power components and increased manufacturing resulting in better economies of scale the opportunity to go solar is now available to almost all home and business owners. In addition to the above mentioned items, probably the biggest driver in the adoption of solar energy is the introduction of large financial investment from companies like Google and Morgan Stanley leading to improved financing methods available to most homeowners. Most solar companies now offer some variety of solar financing so that buyers aren’t walloped with a huge upfront cost. In addition, numerous federal, state and local tax credits and other incentives are making the decision to “go solar” easier every day.

The initial cost of solar energy is determined by the power needs of the home in question. The best solar companies will analyze a user’s previous 12 months of electricity usage to determine the appropriate size of the system (measured in kilowatts) that will offset their homes electricity usage. Most areas will discourage homeowners from building their home solar systems larger than necessary. The exact cost of a solar system depends on numerous factors, including home size, local incentives and local power rates. While the initial cost might sound like a big number, one has to consider the money saved by not having an electricity bill, rising utility rates and recouped costs through incentives.

Homeowners have several options for purchasing a residential solar systems. The obvious method that is the easiest to understand is to buy the system outright. This incurs the greatest out-of-pocket cost, but also leads to a faster and ultimately larger return on investment. With this arrangement, the purchaser owns the system in full from day one. He or she is responsible for all upkeep and repairs. Fortunately, solar panels require little maintenance, and weather, such as rain, does an adequate job of keeping them clean. The minimal costs for maintenance lowers the cost of solar energy compared to most other alternatives. Another benefit of upfront purchase is that the homeowner can immediately claim all the tax credits and other incentives from investing in alternative energy. Federal tax credits amount to as much as 30% of the purchase cost.

Solar financing such as HELOC’s and home improvement loans, are available for those unable to come up with the initial investment. Interest charges apply to any financing deal, but likely your monthly payment towards your solar system will be less than what you were paying your previous electricity provider. A third option, which has become very popular for eco-conscious homeowners on a budget, is called a “power purchase agreement,” or PPA. With a PPA, the homeowner pays for the power produced by the system instead of the actual equipment that produces the power. They agree to let a third party install panels on their roof and then purchase the power at an agreed-upon rate for a term of usually 20 years. The price customers will pay for their solar power is much lower than the standard electricity rate they receive from their current utility. Because the third party company is considered the owner of the system they are expected to be responsible for all of the service and maintenance associated with the system. For about half of the cost to purchase a solar system, customers can also prepay their electricity rates for the term of the agreement and receive an even further discount on the price they pay for each unit of solar power produced by the system. On the downside, the homeowner cannot take advantage of any credits or incentives. However, a PPA is a good alternative for people looking to adopt solar for philosophical more so than economic reasons.

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