Top 3 Financial Reasons Why You Should Go Solar
Most people know something about solar energy these days. While this alternative way of powering your home has started to go really mainstream, many homeowners still have lots of questions.
The biggest one perhaps is “why should I switch to solar?”
There are tons of good reasons to start thinking about going solar, but for most people, the biggest ones are actually financial. Residential solar can really save you a lot of money off your electricity bill — your immediate savings can reach as high as 50% on average, especially in states where utility rates are high and projected to climb much higher. For example, utility rates have been escalating in recent years increasing 5–15% a year for most customers in Southern California.
This blog will help you understand the immediate and exponential future savings you can achieve by going solar now.
- Solar financing has never been easier or more affordable
It used to be that the benefits of solar were down the line, because of the upfront costs and because solar panels were expensive. Today, solar is dramatically cheaper, and it’s easy to qualify for high quality, super-low interest loans (as low as 1.99% or even 0.99% with Hummie’s trusted partners) and with absolutely no money needed upfront for anything.
With your electricity bill nearly eradicated, you save money right away, not at some future point when the savings match the costs. The majority of your new lower bill (aside from a small utility access fee) is now just the solar loan itself.
2. Electricity rates are always going up, but your solar payment won’t
There is a key difference between solar and your local utility company that is very important to understand: Renting from your utility vs. owning electricity production.
Paying your utility company for electricity means you’re essentially renting the infrastructure that produces and transmits electricity to you. This is a must-pay regularly occurring expense, and you’re at the whim of constantly increasing utility rates with an annual increase of ~4%.
When you purchase solar, you own the electricity produced (exception: if you acquire solar via Lease or Power Purchase Agreement [PPA]). This means that with the correctly sized solar system, you will likely meet most if not all of your energy needs. In addition, this means that now you primarily only use your utility company if your system malfunctions or underperforms, and to automatically trade surplus power you produce for energy credits used for when your needs exceed your production (Net Metering).
All you really end up paying for is a small utility fee to maintain access to the grid. Even routine maintenance is covered for up to 20–25 years with most solar equipment and labor warranties.
When you pay off the loan for your system, typically in 20 years, you own both the energy produced and the system outright, which means that instead of your bill constantly increasing, it drops almost to nothing (see example above). So, while you could see savings of up to 50% immediately, over the long term, savings can reach over 70%.
3. Take advantage of the 26% Tax Credit and add value to your home
Tax Incentives — You can pay off that loan even sooner with the tax incentives for going solar. The biggest one is the federal Residential Renewable Energy Tax Credit which allows homeowners to claim 26% of the total cost of installing solar back in their income taxes through 2023. If the credit amount exceeds your tax liability for the year, it will carry forward into succeeding years to allow you to take full advantage of it.
What this all means is that if you’re like most homeowners (you pay lots of taxes), going solar writes off a lot of money you owe or already paid, which is money back that you’re free to use however you like, including towards paying off your solar loan. Of course, with solar loan interest rates as low as they are, many financial advisors would argue that this money could be invested elsewhere for a greater return on investment (for example, in renewable energy stocks!)
This tax credit is also a major reason to go solar now, because this incentive will only be around through 2023.
Add Value to Your Home — Contrary to some perceptions, solar systems add resale value to homes. This is because solar systems produce an asset: electricity for the home over their long lifetime. A major report concluded that solar added 3–4% to the resale value of a house. This typically more than pays for the cost of installing a system. Therefore, even prospective solar buyers thinking about moving in the short-term can see the cost of a solar system largely covered in the resale of the house.
Another misconception is that it is difficult or impossible to sell a home that comes with solar. This is also untrue, because if funds from the sale of the house are used to pay off the solar system, ownership is easily transferred to the new homeowner.
There are many more great reasons to go solar (these are not even all the financial ones!). But this key information is all you need to start to see how much going solar can saving you now, at Hummie.com.