The Financial Benefits of a DC Solar Electric System

When considering the financial benefit of a solar electric system, there are a few questions that you should take into account.

1. How does solar work? The sun creates solar radiation, which solar panels convert into Direct Current (DC) electricity. The Electrical/Utility Grid, along with you home runs off of Alternating Current (AC). In order to convert the direct current (DC that solar panels create) to alternating current (AC), there is an Inverter system that is accepted by all Utilities. The AC electricity is distributed directly to your electrical panel where the power created is distributed through your house as it is needed. If you don’t utilize the electricity created, it runs through your utility meter and spins it backwards (similarly to a deposit in a checking account) and you receive credit for it via “Net Metering”.

2. Are utility rates increasing and is there any data to support what typical utility rate increases have been? The average utility rate increase in the state of CA over the past 30 years is 7% per year. So if you plan to live in CA, you need to account for a 7% increase in the cost of your utility bill moving forward.

3. What does your money in a savings account currently produce in the way of a return cash invested? If your money is in a savings account (that you could use to pay your electric bills at retirement, you are currently earning anywhere from .05 – 2.5 % on cash invested.

4. What is the rate of return on cash invested in solar? The cost of Solar Electricity is low, and fixed (insulates you from utility and inflation increases). Solar Electricity produces an average of a 10-15% return on cash invested.

5. Can you benefit from a federal tax credit? If you have any tax liability (have to pay any taxes) you are eligible for a dollar for dollar federal tax credit, which pays for 1/3 or 30% of the cost of a solar system. So you have the choice of paying tax to Uncle Sam, or using this money to pay for your personal solar electric system (free money).

6. How can you take advantage of cash back rebates? Utilities (via funding through the CA Solar Initiative) offer a cash back rebate (many have expired) for solar electric systems installed. The average cash back rebate ranges from $650.00 - $2,250.00 (free money to help pay for your system).

7. What is the payoff vs. expected production life/is this a no brainer from a financial perspective? Most solar electric system components last/produce electricity for 30-40 years, and solar panel manufactures offer a 25 year warranty on their product. Further, if you select a reputable solar installation company/contractor, they will stand behind the system and their craftsmanship for 25 years as well. The average payoff for a solar electric system is 5-7 years. Considering a payoff of 5-7 years and a production life of 25-40 years, investing in a solar electric system is a no brainer.

8. Is there any verifiable data that proves that solar electricity will increase the value of your home? Solar electric systems absolutely increase the value of a home and (in most places) does not increase your property taxes like other home improvements do. Multiple studies have been conducted (one by the University of California Berkeley) and have reported that a home with a solar electric system vs. a home without one sells for an average of $5.50 per installed watt. So an average sized system (5kW) can help your home sell for an additional $27,500.00.