THE BENEFITS OF GOING SOLAR
Doing the Math
Putting Home Solar into Perspective
Solar is a long-term investment anyway you look at it. The system is designed to last 25 years, allowing your home to create its own electricity for the next quarter century.
If someone had come up to you 25 years ago and said “Hey, its 1995 why are you not exploring alternative energy sources for your home?”, you would have thought they were crazy. Gas was $1.15 a gallon, the average home price was $150,000 and the average American was earning $54,000 a year. Your average homeowner was not concerned with reducing their monthly electricity bill by investing in renewable solar energy. Flash forward to today; gas averages $2.60 a gallon, the average home price is $315,000 and the average American is earning just $63,000 a year. The cost of living has increased greatly while wages have lagged well behind.
Electricity is no different, $100.00 worth of electricity in 2000 now costs over $160.00 in 2020. People all over the country are very interested in reducing their monthly electricity bill with renewable solar energy. Virginian’s enjoy some of the least expensive energy costs in the United States at an average of .10 cents a kwh used. That .10 cent a kwh Virginians pay for electricity, more than doubles in the most expensive states . Imagine your monthly electricity bill doubling, then factor that into your annual household budget and things get tight quickly.
In Virginia, most folks return on investment is going to run somewhere around 9-12 years, at about the midpoint of the systems warrantied lifespan. That’s not to say the system will not last longer, but that’s the minimum manufactures guarantee. In other states with higher electricity rates that ROI can be reduced to 4-6 years in some cases, giving almost 20 years of free renewable energy to the homeowner.
There is no way to know what electricity rates will do in Virginia over the next few years, but we do know they are not likely to go down. The federal tax credit on solar is set to expire in 2022, we know that it has helped to keep electricity rates consistent for the last few years. Once it is gone, we could start to see a slow creep in electric prices as the cost of alternative electricity options becomes less attractive to homeowners.
As long as you own your home and are hooked up to the grid, you will have an electric bill. So, for the next 25 years you are going to pay for your electricity one way or another from your local power company. Let’s say in today’s dollar value, you pay $2,000 a year for electricity. That same electricity 20 years ago would have cost you just about $1,100. The price has almost doubled in 20 years and there is no reason to expect this trend to change as the world globalizes and competition for resources increases.
So, $2,000.00 a year x 25 years (systems warrantied life) with a 3% increase annually to account for inflation, works out to be about $72,000 spent on grid electricity over the next 25 years. That’s not accounting for a rise in electricity costs, so let’s add another 3% annually to account for annual energy cost increase making it 6% a year for the next 25 years. That puts the cost of gird electricity for the next 25 years at over $100,000 cumulatively.
Of course, this is an estimate, there is no way to know what the actual cost will be. But, we can tell you that if you decide to generate your own electricity, becoming your own power plant, you will spend far less than that $100,000 over the next 25 years. Most of the systems we install cover between 60- 90% of a the homes annual consumption. At a solar production average of 75% of annual consumption, that’s a $60,000 savings over the next 25 years after the system is paid.
Homes today are built considering energy efficiency, but older homes were not constructed with energy conservation in mind. Making your home as energy efficient as possible while reducing your annual electrical consumption goes hand in hand with adding solar to your home. The less electricity your home consumes the less solar you need to meet the demand. Home electrical appliances are engineered to consume less electricity and be more efficient with every new design.
New Car Comparison
Most people think nothing of buying, or more than likely financing a new $30,000 car.
- The average American will get a 5 year loan at a 5.27% rate
- They will use that car for 6 years on average before trading it in for a new one.
- Thats 1 year after paying off the loan, they will get another 5 year car loan
- During those 5 loan years, the car will lose almost 60% of its initial value.
- During those 6 years of use the average annual cost to keep the car on the road is $8,469.00. Thats insurance, gas, basic upkeep and loan interst, it does not include the payment to principle.
- 6 years of car ownership will cost the average American over $50,000.00 before starting the cycle over agian
Having a reliable vehicle in Virginia is considered a nessesity today. But it is no more a necessity than electricity is in today’s world. We rely on it for everything from charging our phones to running a well pump, both necessities in our lives. But it is no more a necessity than electricity is in today’s world. We rely on it for everything from charging our phones to running a well pump, both necessities in our life.
Grid electricity in America has been taken for granted almost as long as it has been available. We assume that it will always be there for us at a reasonable price. What we are starting to see in some parts of the country is that that might not always be the case. We need electricity in our daily lives the same way we need a vehicle.
- Most people should think nothing of buying or financing a new $30,000 home solar system.
- Solar can be creatively financed in a number of ways up to 30 years with rates as low as 4.99%
- There is a 26% tax credit available that can be applied to the cost of the system or be kept as cash
- Solar systems have a 25-year expected functional lifespan
- The break even point for a home solar system is about 10 years in Virginia.
- From the first day the system is turned on it is working to save you money every month for a minimum of 25 years.
- The system requires almost no maintenance over its 25-year lifespan and is covered under your homeowner’s insurance
- Solar adds value to your homes resale value
- At the end of those 25 years, the system is paid off and the homeowner has saved as much as $60,000 on electricity during that time span
- If those monthly savings were dedicated to a Roth IRA or Virginia 529b plan at an average 7% rate of return, that 60,000 would be worth an estimated $157,000 after 25 years.