There are now over 1.6 million completed solar installations in the US — a number that is expected to more than double over the next 5 years. Residential solar is an alternative energy option that is more widely accessible than ever before, and homeowners are becoming more educated on the financial and environmental benefits available to them.
If you’re considering switching to cleaner energy, you may want to know how it actually lowers your electric bill, how the system is installed, and how the panels produce electricity for your home. There could also be financial incentives available to you depending on the state you live in, making it even more affordable to install solar panels on your roof or property. There are several key components in determining your eligibility, which you’ll want to fully understand before prior to making a decision.
How Do You Qualify?
Roughly 74 million single-family American homes have solar potential, yet only 2% have completed system installations*. Qualification and savings are determined by multiple factors including:
- Owning Your Home: Solar companies offer installation services to homeowners only. If you are a renter, your landlord will have to determine if switching to solar makes sense for his or her property.
- Your Electricity Usage & Cost: If you use a lot of electricity and your monthly utility bills are high, you are a great candidate for solar. As a baseline, if you pay $100 or more each month you should consider making the switch. Consultations are always free and can be completed without any obligations.
- Age & Condition Of Your Roof: The condition of your roof is important to assess prior to solar panel installation. If a repair or replacement is needed, some solar companies will work with you on affordable roofing options. This can alleviate some of the financial burdens associated with necessary roof work.
- Roof Shading: The amount of shade your roof receives will determine where you can install panels and how much energy those panels will be able to produce. If your roof gets more shade than your neighbor’s roof, for instance, this can affect your level of solar production and your savings.
- Roof Space: In correlation with the amount of shade your roof receives, the size of your roof is also an important factor. The more spacious your roof, the bigger your solar system can be. If you have more panels on your roof you can produce more solar energy and receive more savings.
- Roof Azimuth & Tilt: Your roof’s pitch and the direction it faces can also affect how much sunlight it receives, which affects panel production. Most solar companies will work with you to help you achieve the highest possible solar production and maximize your savings.
How Should You Finance Your Solar Panels?
Every homeowner is different. Luckily, there are different financial options available when considering solar.
- Power Purchase Agreement (PPA):
With a power purchase agreement, qualified homeowners pay for the energy that the solar system produces at a predictable rate that is lower than the local utility. The rate also provides price protection from rising electricity costs for the duration of the solar agreement. Your solar company will handle system design, permitting, financing, installation and activation with little to no upfront costs. At the end of the agreement (typically between 10-25 depending on the financier), the PPA can be extended, or the system can be removed or purchased, depending on the preference of the homeowner.
- Solar Lease:
Similar (and as common) as a power purchase agreement, qualified homeowners can lease a solar system for little to no upfront costs. The difference between a lease and a PPA is that leases offer a flat, fixed monthly payment for the system as opposed to a rate based on specific energy production. If production fluctuates, the rate does not change.
- Solar Purchase:
If you want to own your system and take advantage of the 30% federal tax credit, you can often either purchase it outright with cash or qualify for a solar loan. There are several financing options available for homeowners that want to purchase a solar system with little to no upfront cost. Your solar company will outline a financial payment plan in detail in comparison to PPA and lease options so that you can determine what is best for your home.
What Incentives Do You Have Available
Solar is now among the cheapest forms of electricity worldwide. There are additional incentives and tax credits associated with installing a residential system in the US to make the option even more affordable.
30% Federal Solar Tax Credit: Also known as the “ITC”, homeowners that purchase systems are able to deduct 30% of the cost of the system on their federal income taxes. The incentive is available through 2019 and then reduces to 26% in 2020, and 22% in 2021 before it expires completely.
State Incentives: As a qualified homeowner, you have access to additional solar incentives and rebates regardless of the financial option you choose. Varying from state to state, the most common incentives are SRECs and net metering:
- SREC: The Solar Renewable Energy Credit (SREC) allows you to earn (and sell) energy credits for every kilowatt-hour your system produces. Most states offer this incentive.
- Net Metering: If your system produces more energy than your home uses, the excess power is sent back to the grid and builds “bank” of credits with your utility company. You can use these credits throughout the year when your system production is lower, which is dependent on the weather.
For more a more in-depth synopsis of state solar policies, incentives, and rebates available to you, DSIRE.org is a notable resource:
How Does Solar Installation Work?
Solar installation can take 1-3 days, depending on the size of the system. Every homeowner should understand how the panels are mounted and connected to the electrical grid prior to installation.
- Electrical wires are filtered through metal piping that is installed from your electrical box up to your rooftop
- Racking mounts are aligned and then bolted to the top of your roof’s rafters (this is the only piece of equipment that is actually attached to your roof)
- Solar panels are attached to the bolted racking and then connected to the electrical piping
- The power inverters are connected to your panels so that they can start producing electricity
How Does Solar Energy Actually Work?
When making the commitment to install a solar power system on your roof or property, you may want to know how you’ll be generating clean electricity:
- Sunlight hits your solar panels and creates energy
- The energy is converted into electricity
- The electricity is used as needed and excess power is sent back to your bidirectional meter
- Excess power is sent from your meter to the utility grid and builds a “bank” of credits
- Your utility company provides electricity at night after your “bank” of credits are used
Think solar is right for you? Let us know! We’ll answer any additional questions you may have.
*Calculated from the U.S. Census 2016 American Community Survey data on free-standing single-family homes and GTM Research (a research division of Greentech Media)