The Benefits of Residential Solar Power

At this point, everyone knows installing residential solar power is good for the environment. What you hear less about are the financial benefits that installing solar presents, not only in the form of savings but also in tax credits and added home value.  To understand the full extent of the benefits of solar, we have compiled a list of the top seven economic benefits of solar power.

One of the initial benefits of solar energy is that homeowners who install are able to take advantage of the Federal Solar Tax Credit, or Solar Investment Tax Credit (ITC), which allows homeowners to deduct 30% of their solar installation cost from their federal tax liability. The Solar ITC was in enacted in 2005 through the Energy Policy Act and was intended to provide a boost to the solar industry so that it could have a solid base to grow upon. It has been extended several times but will be phased out over three years after 2019.

The Solar ITC can save homeowners a substantial amount of money, between $5,000-$12,000 on average, by allowing them to subtract 30% of their installation cost from what they owe on their federal taxes. This is a great deal for people who are business owners or independent contractors, as these occupations typically come with a heavy tax burden. If the homeowner doesn’t have enough tax liability in the year they install, they can roll it over to the next year or even the year after. The Solar ITC can also be applied to commercial installations as well.

Home and business owners who hope to take advantage of the Federal Solar Tax Credit should go solar as soon as possible to get the most amount of credit. The incremental phase-out will begin after 2019, dropping from 30% to 26% credit in 2020, then 22% in 2021, and then after 2022 only commercial systems will qualify and only for 10% credit. So to get the best deal on solar energy, homeowners should install before 2020.

One of the main benefits of solar powered renewable energy is the electric bill savings.  Homeowners who install solar are producing their own power from the sun, which means they need to buy less power from the utility. By decreasing the amount of power they are buying, homeowners can greatly reduce or completely eliminate their electric bill, which, depending on their usage, can lead to huge savings. 

The accounting process by which solar homeowners can reduce their electric bill is called Net Metering. Net metering allows homeowners to sell extra power they produce from their solar, or power they aren’t using at the time it’s produced, back to the power company for credits on their electric bill. When the house is using more power than the solar panels are producing, the house buys power back from the utility, using those credits it accrued when it was producing more than it was using. By balancing this production / crediting during the day and usage / buying back process at night, homeowners can completely eliminate their electric bill.  

SDGE recently enacted changes to Net Metering such that homeowners in San Diego who go solar are put on a different electric rate structure than normal homeowners.  Solar homeowners now are entered into a “Time-Of-Use” rate structure, the standard structure called “DR-SES,” where electricity costs different amounts and is therefore credited at different amounts, at different times of the day. During the day, when most people are using less electricity, power costs less and is therefore credited for less.  In the evening hours, between 4-9pm, power costs more, almost double the cost of power during the day.  

Fortunately, there are alternative rate structures homeowners can choose to make the difference between the cost of power during the night less dramatic. San Diego homeowners can choose “TOU-DR” instead of “DR-SES”, which flattens out rates so that the difference between daytime and evening time rates isn’t so much. Adding a few more panels so that more power and credits are accrued during the day, and choosing this rate structure guarantees that full offset will still be possible.

Another one of the benefits of solar panels at home is that homeowners who install will no longer be subject to utility rate increases in the future. Electric rates will always go up in the future. For example, SDGE recently proposed a 28% rate increase over the next four years. That’s a huge increase and can translate to thousands of dollars a year for many homeowners.

When homeowners go solar, whether they finance, lease, or pay cash, they no longer are subject to electric rate increases. When homeowners finance, they will be making a monthly payment that is less than their original power bill and will be putting that money towards owning their solar instead of paying the power company. When homeowners lease their system, they will be paying a monthly payment for the power their panels produce that will be less than their power bill and will never increase. In both situations, the homeowner is no longer having to buy their power, which is becoming more expensive all the time, from the utility.

It should be noted that this untethering from the power company means that savings compound over time. While homeowners may be able to accurately estimate their savings one year, the next year they may increase dramatically, based on how much the utility decides to raise rates. That’s why it’s hard to predict just how much homeowners will save with solar, but it’s ok to be fairly liberal with the number as the rates are guaranteed to go up. If the pattern of increases continues as it has, the increase will probably be more than we can currently predict. That’s part of the reason solar is so great, while homeowners without solar will be outraged at the prospect of rate increases, the solar homeowner will have no worries.

Homeowners who plan on making additions to their home can offset the future usage increases by switching to solar. Some homeowners, in anticipation of adding a granny flat or a hot tub, will get enough solar installed at the beginning such that they will be producing enough power to offset the demand that these additions will yield when they are added. The key to these preemptive offsets is adding the anticipated usage the addition will bring into the initial calculation of how much power the solar will need to create to fully offset power bills.

Much like the home additions, some homeowners will install solar to pre-emptively offset future usage increases caused by other factors. This can be in anticipation of adding another person to the household, or even just the desire to use more A/C in the future. By planning for these increases when getting a solar quote, homeowners can factor in the offset and the savings that it brings.

Many homeowners who install solar pair it with an electric car to save even more money. By installing solar and utilizing it to power their home, and then by purchasing an electric car and charging it at home, homeowners can power their car with the sun.  That translates to a big reduction in their gas consumption, which can result in huge savings, especially for those homeowners that commute.

Taking into account rising gas prices means the savings compound over time.  Gas prices are already 24% higher than just a year ago, and no doubt will get more expensive over time. Powering an electric car with solar means homeowners will no longer have to worry about politics and global events causing gas price increases, and that as time goes on and prices increase, they will be saving even more money on gas that they didn’t have to buy.

Solar has been shown to add a ton of value to homes, and can also increase its appeal to potential home buyers. Realtors are just now beginning to understand how to appraise homes with solar systems, but it has been found in recent studies that solar adds an average value of $4 per watt of installed solar to the home, which averages out to around $20,000 for the average system. For homeowners who are looking to sell their home in the future, going solar can serve a dual purpose of making the home more valuable and more appealing.

Installing solar panels increases the value of the home. It does not increase the assessed value of the home, however. This can be a concern for some homeowners at the start of the process, but they can rest easy that they won’t see any increase in property taxes due to the solar panel installation. So as far as adding value to a home, it’s a win-win situation.

So, it's clear that the real benefit of solar is really the independence it brings homeowners. By installing solar and zeroing out their electric bill, homeowners are no longer dependent on the power company and are therefore no longer subject to their rate increases. Adding an electric car to the mix then makes them no longer dependent on the oil companies, and no longer subject to gas prices increases. This concept of energy independence - powering everything with electricity that is produced by the home - is extremely gratifying, and not just financially. The feeling of independence from the powerful corporations that provide power and gasoline, and the self-reliance it implies, is almost as rewarding as the savings it yields.

So when looking at the benefits of residential solar power, there are many, from the Federal Tax Credit to the raw savings every month. The number of benefits are so numerous that they clearly outweigh any objections that homeowners have to installing.  Reduced electric bills, lowered tax liability, freedom from rate increases, energy independence; the list of positives is so staggering the real question to ask homeowners who haven’t gone solar is: “What are you waiting for?” There is nothing to lose, except for savings. Contact us today to get your free solar quote, and learn how much you could be saving.