Many people have been wondering about when the best time go make the switch to solar is. A lot of people decide that waiting is the best answer, after all: solar prices have been declining year after year for decades. A system purchased in 2015 cost 8% less than it did in 2014. Waiting is clearly the best option, isn’t it? This year’s lower prices are fantastic for home or business owners looking to go solar today, but how much more will they save if they wait another year or two?
The answer is: Waiting does not pay.
There are tons of variables that have had an impact on the prices of individual solar installations. Equipment costs are certainly a big one: In 1975 solar panels cost a whopping $105.05 per watt. Today, those prices have dropped below $.61 per watt! That’s a huge savings, and who says it won’t drop to $.50, $.40, or even $.30 per watt in the next few years?
Well the truth is, Solar panel costs probably will continue to decline, but that does not necessarily mean more savings for a homeowner, and there is more to it than just what it takes to get it on your roof.
- 10 years ago, 80% or more of the cost of a solar system was due to the equipment, and only 20% was for the installation and business costs. Today, because equipment has become less expensive, the fixed costs of running a business make up the majority of an installation’s price.
If the equipment price trends stay the same and you decide to put your installation off until next year, you could save at most $1500 on the cost of an average system. That’s big savings right? Well, let’s look at what you would be missing.
If you put off your decision to go solar, you are going to be stuck paying your electric bill in the meantime. With electricity prices on the rise this could prove to be a pretty expensive option. Every year that you don’t go solar is another year that you are taking away from your ability to save on your electricity bills.
People who went solar 5 years ago are already seeing their systems pay for themselves. These early adopters paid 30 or 40% more for their solar system, but today their net cost is $0.00! For them, the future only holds savings and clean energy.
It’s not even just about offsetting your electric bill. A big part of their payback was through their costs being lowered by incentives.
Tax Credits and State Incentives
2 to 3 years ago, there were more incentives than there were today. In markets with SRECs (renewable energy credits that can be sold), a customer could receive $5,000 a year by simply having a solar system produce electricity. In states like New York, NYSERDA incentives were once $1.50 per installed watt 4 years ago. That means a 7,000 watt system that an installer sold for $32,000 only cost $21,500 up-front. When you take the 30% federal income tax credit of $6,450 and the maximum 25% NYS tax credit of $5,000 off this: That $32,000 system cost the homeowner just $10,050. When you factor that this $10,500 solar system could save them $2,000 a year in electricity bills, that is some serious savings.
However, It’s not too late to take advantage of the great federal and state incentives that are available to go solar. The federal income tax credit of 30% still remains for all states, Massachusetts and New Jersey have SREC programs available, and Vermont has fantastic production incentives. In New York, homeowners receive up to $5,000 in dollar for dollar state tax credits against the cost of their system, and that’s in addition to the NYSERDA rebate is currently $.40 per watt, and is getting lower. For a 5,000 watt solar system in NY, that is $2,000 off the top of the system cost! (The average system size is between 5,000 and 7,000 watts)
Since solar power is less expensive than it was before, less incentives were needed to make it feasible. It’s a great structure that works together to help you go solar- and is paid for by your own tax savings, not your neighbors, and not the government. Going solar today means you won’t miss out on these great opportunities to save money.
The cost of waiting
Ultimately, the decision is yours to make, but it is worth looking at just what it could cost to wait a year.
Let’s say you decide to wait to purchase your 5,000 watt solar system until next year. Today, that system would have cost you $13,000 ($15,000 minus a $2,000 NYSERDA incentive) and given you $7,150 In tax credits to offset your taxes paid, dollar for dollar. That’s a net cost of just $5,850 for a solar system that would save you around $900 a year in electricity.
This year: Initial Cost: $15,000
- 5,000 watt system at $3.00 per watt
- $15,000 total cost.
- -$2,000 NYSERDA ($.40 per watt)
- -$7150 Tax credits
- =$5850 net cost
- $900 in annual savings
- Break even in 6.5 years, (assuming electricity prices stay the same and don’t go up)
If you wait until Next year:
- 5,000 watt system at $2.70 per watt
- $13,500 total cost (super optimistic price discount of $1500)
- -$1500 NYSERDA (incentive will drop to $.30 in a year, maybe even $.20- but let’s be optimistic)
- -$6,600 Tax credits
- PLUS $900 in electric bills for the year spent waiting for cheaper prices.
- $6,300 net cost (It’s more expensive!)
- Break even in 7 years, (6 year payback + the year spent waiting)
Someone who goes solar on January 1 of 2017 will see their system pay all its costs back around June 1 of 2023. Someone who goes solar on January 1 of 2018 will see their system pay all its costs back around January 1 of 2024.
Hold on a second. Upfront payment? That sounds Expensive.
The numbers exercise above is based on an upfront purchase of the system, but what if you don’t have thousands of dollars to put down on a system? Financing is the answer. More and more banks are embracing solar today than ever before. With tax credit bridge loans and low-interest financing, you could actually see your system saving you money right away. What used to be a 100 monthly bill could turn into a $90 solar payment- that’s an ROI of… NOW! Apex Solar has a number of financing partners that we work with every day, and help get people the right system for their home and financial situation. From interest-free bridge loans for the tax credits to full system financing, our business is installing solar, and we try to make that as easy as possible.
Apex Solar has a number of financing partners that we work with every day, and help get people the right system for their home and financial situation. From interest-free bridge loans for the tax credits to full system financing, our business is installing solar, and we try to make that as easy as possible.
What it all means:
Waiting to go solar in all likelihood will not actually save you any money. The tax credits, state incentives, and programs that are available are designed to offset high equipment costs, and they phase out as equipment gets cheaper. Ultimately, the best time to go solar was yesterday, but the second best time is today.
NYSERDA: The New York State Energy Research and Development Authority has a grant which is available to individuals and businesses who install solar power. It is an incentive that is calculated and awarded on a per-watt basis.
SREC stands for Solar Renewable Energy Certificate. Solar home-owners and commercial businesses in RPS states can earn one SREC for every 1000 kilowatt hours (kWhs) generated by their solar PV system. For a typical 5 kW home solar installation, you could earn about six SRECs per year.