Whether you already own your home or you’re a first-time home buyer, solar panels are an important consideration for the environmentally conscious. There are initial costs, installation options, and numerous questions you need answered before you’re ready to go solar.
If this is your first time considering a solar panel installation for your home, you will need to be aware of state mandates or tax incentives. We’ve created this beginner’s guide to solar panels to help homeowners learn about solar power and how it affects your budget, energy use, and impact on your home’s value.
How Do Solar Panels Work?
The sun is 93 million miles from earth—yet the energy you can harness is as close as your own home. Equally remarkable: In a single hour, the sun could give the whole world enough power to last an entire year. But how does solar energy work?
Solar panels are called PV modules because they contain photovoltaic (PV) cells made of silicon or other conductive materials under a layer of glass. Each of these cells has potential energy from electrons activated by the sun’s photon rays—called the Photovoltaic Effect.
When the sun’s rays come in contact with solar panels, it activates electrons in their cells. This creates energy that travels through circuits to a solar inverter, converting this energy into the regulated electricity we use to power our homes.
Is Solar Power Safe for the Environment?
While there are negligible environmental costs from manufacturing and installation of solar panels, the lasting, positive impact of their use far outweighs the negatives.
Solar power is an environmentally-friendly way to generate reliable renewable energy. We’ll be able to depend on the sun’s energy for the next several billion years, so solar panels provide a clean, pollution-free energy source for your home.
According to EcoWatch, 1 in 4 homeowners plan to install solar panels on their homes in the near future.
Are State Mandates Encouraging the Installation of Solar Panels?
You may still be sitting on the fence about installing a solar energy system. Part of our beginner’s guide to solar panels is to show how state mandates encourage you to install a solar energy system.
There’s a good chance your state will eventually require you to make the shift in the near future. The real question is—should you make the move now, so you can take advantage of incentives and/or rebates currently available?
States Are Pushing the Move Towards Solar
States are establishing renewable energy policies in Clean Energy Standards (CES). 11 states and territories in particular are establishing mandates that push for a 100% clean energy goal.
In 2018, California mandated that all new construction of single-family and multi-family homes up to three stories tall, include solar panel installations. In addition, homeowners making any substantial upgrades to their existing homes must also install solar panels.
It’s not enough just to have some form of solar power—it must be sufficient to power your entire home. A second mandate awaits approval from the California Building Standards Commission (CBSC), adding a battery storage requirement to the solar panel mandate.
How Does Solar Affect the Value of My Home?
A 2013 report from the U.S. Department of Energy showed homes with solar panels routinely sell for $15,000 more than those without solar panels installed.
People are placing a higher value on environmentally-conscious decisions. Buying a home is the largest investment most people make; it’s only logical to want to buy a home with solar already installed.
State Mandates Might Impact Street Value
As states make their move towards more aggressive mandates or policies, it’s safe to assume it will become hard to sell a home without solar power.
Making the Move to Solar: 4 Pros and Cons
Installing solar panels is a unique decision for every homeowner to make. Consider weighing the following four pros and cons:
Pros
- You’ll likely start saving on your electricity bills immediately and even more over time.
- The Federal Government provides tax incentives to help transition to solar easier.
- Some states offer tax breaks and incentives to help save money when installing your solar energy system.
- Since states are starting to require the move to solar, it makes sense to do so while incentives are in place.
Cons
- There are upfront costs to install solar panels.
- Leasing solar equipment instead of owning it can impact your potential savings.
- Depending on your home’s location, your installation options may be limited.
- If you plan to move in the near future, the investment may feel burdensome.
Are There Other Reasons to Go Solar?
With the cost of electricity on the rise, solar becomes comparatively more cost-efficient. As aforementioned, solar does involve upfront costs. But adding solar panels can significantly reduce your electric bill—for many it eliminates monthly electricity costs entirely.
Solar Power Helps You Gain Energy Independence
Natural weather events or an over-extended energy grid can mean power blackouts. But with solar and battery-powered backup, you’ll enjoy electricity through extreme weather events and outages. In addition to a solar battery system, you’ll have power even if the public grid goes down.
4 Different Ways to Afford Solar Panels
Coming up with the money for a solar panel installation is a major consideration for any homeowner or first-time home buyer. Solar panels aren’t cheap, after all. Fortunately, there are options available that work for just about every scenario:
- Direct Purchase
You’ll get the best value from your equipment if you can afford solar equipment, labor, and installation costs. Over time, it pays for itself as an investment that reduces or removes energy costs.
- Lease or Lease-purchase
Numerous lease and lease-purchase agreements are available, differing from state to state. Leases offer an affordable way to install solar panels, but ongoing monthly rates will reduce what you can save in electricity charges.
- Personal or Home Improvement Loan
Many homeowners choose to apply for a loan. This option still allows you to benefit from owning your own equipment, but with an added cost to pay back your loan.You can apply for a personal loan or a home improvement loan. The actual interest rates and number of payments will depend on your credit score.
- Solar Power Purchase Agreement
Yet another option is a Solar Power Purchase Agreement (SPPA). You agree to host solar power equipment on your property. In this case, it is owned, installed, and maintained by a third-party developer.
You pay your solar service provider for your electricity while agreeing to a term-contract for the equipment’s electrical output. The equipment owner/developer enjoys tax credits and other incentives.
How Much Will Solar Panels Cost Me?
You can use this cost calculator to estimate the cost of a solar panel installation—with and without battery backup. It even factors in your location, credit score, and cost impact.
Will I Save Money on My Monthly Electricity Bills?
Over the years, the cost of solar panels has steadily come down—partly as a result of research and investments from the Solar Energy Technologies Office (SETO).
Especially with battery storage, solar can reduce costs by helping you become less reliant on the public electric grid. That said, the actual changes to your energy use and costs can vary.
Use this resource to calculate accurate national energy rates. Then, you can use Google’s Project Sunroof to calculate estimated savings by zip code.
What Is the Payback Period for Solar Panels?
If you choose to purchase your own system, you may be interested to learn about solar’s payback period—how long it takes for your investment to fully pay off.
On average, the payback period is anywhere from 8–12 years, depending on numerous factors. From then on, the earnings become ongoing profits that can pay for other home expenses.
What Incentives or Tax Exemptions Are Available in My State?
Every state has different incentives for homeowners to go solar. For instance, in Florida, your entire cost for solar equipment, components, and installation is 100% tax-free. Read our article about going solar in Florida to learn more.
California’s Active Solar Energy Tax Exclusion helps homeowners add solar installations without worrying about their property being reassessed for higher taxes. This remains in effect until January 1, 2025.
To see if your state offers unique incentives or tax exemptions, you can enter your zip code on the Database of State Incentives for Renewables & Efficiency (DSIRE) website.
Federal Tax Credit
Regardless of what your state offers, a federal tax credit is available for everyone. This federal solar credit allows for either a 26% or 30% deduction on your taxes, depending on when your solar purchase is made. Learn more about how to file for federal credit.
What is Net Metering, and How Might It Affect You?
Net metering—also called net energy metering (NEM)—is an important factor for every homeowner. Solar panels that include a battery backup system can send excess energy to the community grid. NEM indirectly pays you for sharing your excess energy by running your meter backward when you send energy to the grid.
This either reduces your monthly payments, or sometimes reduces them to zero.
Every State Has Different NEM Conditions
In Florida, any energy sent to the grid is credited to the homeowner’s account to be deducted from the next month’s bill. If more energy was sent than used, you receive a rebate. But potential changes to Florida’s NEM terms may reduce the benefits people expect from NEM.
Many view the less-than-ideal terms for NEM 3.0 as a window for adding solar before 3.0 goes into effect. What’s termed NEM 3.0 includes new costs and reduced incentives. Going solar in California could mean staying under the superior NEM 2.0 for 20 years.
Learn more about where your state stands on net metering.
It’s Time to Consider Solar for Your Home
No matter where you live, the shift to solar power is happening. Talk to one of our experts at Current Home today if you have further questions.
