Solar power used to be a prohibitively expensive technology, but recently, the cost of residential solar panel systems has dropped … by a lot. And what once seemed like a futuristic option is finally taking off.
"Solar is one of very few home improvements that starts paying for itself the minute it is installed and turned on," says Mike Newman, an outreach manager for Clean Markets, a firm in Philadelphia that works with businesses to maximize energy efficiency.
In general, he says, homeowners can recover the upfront cost in as little as three to four years -- or as far out as 10 years or more -- depending on local utility, state, and federal incentives, as well as the cost of electricity.
Now that China and other nations are churning out lower-cost panels, prices have dropped across the board. Improvements in technology have also driven down costs, Newman says. The Solar Energy Industries Association reported in January that prices had dropped 53% since 2010, and the National Renewable Energy Laboratory forecasts continuing double-digit declines for the next few years, although perhaps at a slower pace.
And companies offering solar leases allow homeowners to take advantage of lower prices without the upfront cost of buying the solar technology, or the cost and hassle of maintenance.
"In every market we aim to be at least 20% cheaper than what the utility offers in that market, and sometimes we can be as much as 50% cheaper," says Dagen Olsen, national sales trainer for LGCY Power, an authorized dealer for Sunrun, which offers solar leases.
"That precipitous drop [in solar panel prices] has a bottom, and the instability of those economics opens the door for an opposite reaction of consolidation and stability," he said. "As such, the industry is now projecting a modest decline in material pricing to the tune of only 15% over the next two years."
So if you're thinking of going solar, here are some things to consider.
Is your roof too old for new technology?
Newman advises homeowners to assess the age and condition of their roof, as well as its orientation toward the sun. For maximum efficiency, panels should be installed in a place that receives optimal sunlight at peak daytime hours.
If a roof is too old, faces the wrong direction, or is shaded by nearby trees, owners can opt for a ground-mounted solar system, he said. This carries a higher price tag, however, because installers need to build a structure to hold up the panels, dig trenches, and lay cables that carry electricity to the home.
Which type of panel is right for me?
Most solar power systems use photovoltaic cells, typically made of crystalline silicon, to convert solar power into electricity. Newer thin-film cells can be used as roof tiles or even skylight glazing. There's no "best" panel for a residence, Nelson says. Much like choosing a car, homeowners must decide which factors they value most -- price versus performance and efficiency.
And don't dwell too much on where the panels were manufactured, Nelson says.
"Chinese panels, American-made panels, American companies with [overseas] assembly facilities -- be it in the Philippines or Mexico -- basically are all puzzle pieces that the consultant and the customer have at their disposal to assemble the best possible project design for the customer and property," he said.
How many panels do you need?
Three factors are used to determine the size of a solar panel system: the usable roof area (or ground mount area), the annual amount of electricity the home uses, and the homeowner's budget. A good installer will work with homeowners to determine what works best in the allotted space and budget.
And solar doesn't have to be all or nothing. "A homeowner may have enough roof area for a solar system that would offset 75% of their annual electricity costs," Newman said, "but their budget may only allow for a system that can do 60%."
If you're not ready to commit, lease
The advent of leasing options has been a game changer in the solar power market.
"Because there's no upfront cost, it makes solar really accessible for all income levels," Olsen said. "Everyone can take advantage of solar, as long as they're a homeowner."
Olsen says that while conventional electricity through California's Pacific Gas and Electric can run from 16.5 cents to 33 cents per kilowatt-hour, depending on usage (heavy users pay a higher rate), Sunrun charges California consumers 15 cents per kilowatt-hour, with a 2.9% annual increase. Customers can also opt for a flat rate of 19 cents per kilowatt-hour, over 20 years.
In addition, solar leases are transferable if you end up selling your home. The additional paperwork could intimidate some buyers, although Olsen says Sunrun has a service transfer team that works with your real estate team to finesse the transition.
Or you can buy the system
Owning is more of a long-term investment, but you'll have more options in terms of choosing a system. It's difficult to give a cost range for a solar system because of the different energy agencies, systems, and state regulations involved. A cost calculator -- like this one at Solar Estimate -- can help determine what you'll pay based on system size and what percentage of energy needs to be offset.
As an example, Olsen said the purchase price of an average solar system in California would run about $23,000. Plus, you can take advantage of the 30% federal solar investment tax credit through 2016, and any other local or state incentives. For more information, see dsireusa.org and energy.gov.
There has also been an explosion in the variety of credit options available for financing, Nelson said. Many programs offer zero out-of-pocket plans for the homeowner.
When plugging in numbers, Nelson warns potential buyers against focusing on a "payback period," or how long it will take to recoup the cost of the investment. "That's a very shortsighted approach, especially in the case of a long-term investment."
Just think, the next time you enjoy a beautiful sunny day, you could be enjoying the knowledge that you're saving money on power -- and contributing to a healthier planet. With all that extra cash, maybe you can afford that Tesla -- or at least a Leaf. Maybe.
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