Could installing solar panels save you money? Will your investment pay off in the future? In short, yes. Solar Panel ROI is something all of our customers are concerned about.
We get it because investing in solar panels is a big decision, and there’s a lot of confusion around the process.
In this article, we’re going to break down all the nuances and show you exactly why getting solar panels makes sense financially.
You’re also going to learn how you can save thousands, and sometimes hundreds of thousands of dollars over the years by switching over to this renewable energy source.
And it’s easier than it’s ever been.
First, here are some key points about solar energy:
- Over 500,000 solar panel systems were installed in 2021 in the United States. [1]
- Cost of materials have consistently risen over 2021 due to supply chain issues and inflation. [2] This means the sooner you get your installation, the more money you save.
- Solar energy accounted for 46% of all new electricity-generating capacity in the US in 2021. [3]
Residential solar installation costs vary depending on multiple factors, such as:
- Local labor, equipment costs, and available inventory
- Local incentives (see the Arizona Solar Incentives)
- Financing and cash options
- The proper system size to cover your energy needs
To help you understand how affordable solar can be, we’ve mapped out the math and other important factors to think about below.
3 Keys To Ensuring The Most Solar Panel ROI
You want to maximize your savings and return on investment and here’s how to do it through:
Arizona Solar Incentives
In Arizona, there’s a tax credit of up to $1,000 on solar systems, and a federal tax credit of 30% that is available to all people with taxable income through December 31, 2032.
☀️ Note: As of August 2022, the federal government has updated their guidelines for the federal solar tax credit. It was 26% through the end of 2022, but now they’ve updated that to 30% through the end of 2032.
So if you’re wanting to get a solar system installed, the time is now.
Working with a company you can trust and rely on.
At the office, we often refer to the solar industry as the Wild West. It’s quite fitting given our geographical location here in Arizona. But unfortunately, it’s true.
The person who gave you a quote last week might not be in business long enough to get your panels installed and turned on. And then you’re left dealing with the bank who gave you the loan, or the company you paid cash to. And now you’re on the phone with your lawyer wondering what your next move will be.
You want to choose a company that is transparent, honest, who values education, and who will be there in the longterm.
Both Bryan (SunTap Power CEO) and I (SunTap Power CMO) have been in the industry long enough to see companies come and go. Some companies seem successful on the outside, only to be crumbling financially and on the brink of bankruptcy. In fact, we know of multiple companies here in Tucson who’ve gone under in 2022 alone.
- We’ve seen solar companies completely sabotage their customers’ solar systems by taking their deposit money and delaying installation upwards of 12 months without any recourse.
- We’ve gotten calls from customers of other companies who were looking for support because their installer went out of business and they needed someone to come out and look at their system.
- And we’ve routinely helped soon-to-be customers sift through the multiple quotes they’ve gotten from companies that promise the best system and service at a rock-bottom price, which is almost always too good to be true.
The bottom line is you must feel 100% comfortable with the company you trust to take care of your solar system.
Collectively, we’ve done 10,000+ installs, 4,000 alone in the state of Arizona. We’ve been in business for 7 years and have grown rapidly in the last 3 years. We have the expertise, competence and experience to see your installation through from start to finish.
Now we’ll look at another interesting but confusing concept called net metering.
Net Metering (Net Billing In Arizona)
You may have read about net metering while doing some research about solar panel ROI. This is a common perk that most people don’t understand all too well. We’ll clear it up for you right here.
We don’t have net metering in Arizona. Instead, it’s called Net Billing. If you’ve been researching this online and still don’t quite understand it, here’s what you need to know:
💡 Net Metering: this is where your utility company pays you, the homeowner, the full-retail rate of the electricity you produce and send back to the grid. If the retail rate of electricity is .12 cents per kWh, they’ll pay you .12 cents for each kWh you generate and send back to the grid.
But with Net Billing, it’s a different story. Instead of sending you money at the full-retail rate of what your electricity costs, you get a credit on your bill for a percentage of the retail value depending on which utility company you’re with.
For example, let’s say the full retail rate of electricity is .12 cents per kWh, you may only get back .08 cents as a credit. We say may because the retail rates vary depending on the individual utility company. But no matter what, it will always be credited back slightly less than what it’s worth.
This is also known as the “excess generation credit rate” (EGCR). This rate is updated annually, and it’s not going to be in favor of the homeowner. The more people who go solar, the less utility companies are going to want to pay individuals for the electricity they generate.
However, there is a positive side to all of this. The excess generation credit rate can’t decrease more than 10% per year, and when you go solar, you’re locked into the EGCR rate for 10 years. And because of this, you won’t have to worry about your credits decreasing for another decade.
So… this all the more reason to make a decision now and lock in your savings.
Solar Panel ROI Is Based On Your Usage (Check Your Bill)
Whenever we design a solar system, we take 3 main factors into account to bolster your solar panel ROI:
- Your total energy usage over the last 12 months (your electric bill)
- Your roof size, roof shading, and angle to the sun
- Solar panel degradation and energy offset
Your System Size Is Based On Your Electricity Bill
Here’s an example:
This is a digital version of their bill we created for ease of looking at the numbers. This customer’s average bill is $282/month. This customer is on an APS plan where they pay a fixed amount each month based on yearly averages.
When adding up their total kWh usage, they’re consuming around 23,560 kWh over 12 months. Knowing this number is crucial because it helps us accurately design the size of the solar system to cover all your energy needs.
And if we don’t design a system that covers your total usage (at the bare minimum), you won’t be able to produce enough electricity from your solar panels to power your home.
🚨 Major Alert: it’s common for companies to give you a quote on a system size that is smaller than what your current needs are.
And most of the time, it’s so they can compete on price and win your business because it’s the less expensive option. The problem with this is that it’s going to leave you with both a solar system payment and a sizable electricity bill every month.
Our goal is to size up your system to a point that you cover all your energy needs with your solar system alone. This way, your electric bill is minimal to connection fees only, or is eliminated altogether through power buybacks (also known as “excess generation credit rate” that you just learned about in the net billing section).
In the next section, you’ll see that we’ve sized the system to produce a total of 26,347 kWh for the year. This system is slightly oversized to account for panel degradation, and to ensure you are able to rely on the efficient, more affordable solar energy for years to come.
Roof Size And Important Details
All of our technicians are the best at what they do. Many are former roofers, so they know all there is to know about carefully placing the panels on your roof for maximum production.
At first, we do the initial design using elaborate software based on the available Google images of your roof.
In this example below, this customer has a total of 44 Mission Solar brand panels, which are 340 watts each. This was our preliminary design:
You’ll see the majority of the panels are on the south side of the roof, where they get the most sunlight. And then we have 2 lone panels on the north side.
Keep in mind, this design is computer-generated and is not always the final layout because it’s up to our technicians to make the ultimate decision on where the panels are placed when they do their site survey.
Sometimes they change the layout for better efficiency, or for leaving room to add more panels in the future if the customer wants them.
In the case you don’t have enough roof space, we will aim to install higher wattage panels so we reduce the need for the total panels placed on your roof, or we can explore ground mounted options.
Now… Once we have sized up your system, we take into account the normal wear on the panels themselves, known as degradation.
Understanding Solar Panel Degradation
When accounting for the right system size, we always think about the life of the panel.
All the panels we use for installation are guaranteed to be functioning at their highest possible output for 25 years. This ensures you get the maximum solar panel ROI for years to come.
To be clear, if your panels are underperforming or have a malfunction of any kind during the 25-year warranty period, they’re covered at no cost and will be replaced by the manufacturer.
In general, solar panels will degrade anywhere from 8-15% over 25 years. There’s a range of 8-15% because different panels have varying designs and technologies that determine their degradation rates.
One is not better than the other, and we always size your system based on availability of materials, affordability, and your wants/needs.
💡 All of the details are covered upfront and in-depth during our conversations, so if you want to schedule a consultation, get in touch we’ll get you a free quote.
Degradation means the power output will lessen over time, but this is a natural process. If your system isn’t sized appropriately, you will eventually run out of enough energy generation to cover your needs. When this happens (and it does when people don’t get the right system size), you’ll end up relying more on grid power to make up for the difference.
To ensure that your system fulfills all your projected energy needs over the 25 year life of the panels, we size your system in excess of what you need right now to account for the degradation rates.
When creating a quote, we take into account the total degradation rate and build that into your solar panel system. For example, if we decide on a panel for you that has a 15% degradation rate, we’re going to size up your system to 115-120% of your needs.
This means that in the 25 year lifespan of your system, you will always have 100% of your energy needs met as the panels degrade.
Another example is if we place panels that degrade at 8%, we’ll size your system to 108-110% of your current needs.
At the end of the day, our goal is to ensure you get to rely on solar energy and reduce or fully eliminate your electricity costs.
So what does it look like to save on a custom-designed solar system? Here’s the full breakdown. 👇
A Real-Life Solar Panel Return On Investment Example
Now we’ll get into the brass tacks of what your solar panel ROI looks like in the real world. There’s never been a time where solar has been as affordable as it is right now in the state of Arizona.
First, let’s take a quick look at the rising costs of energy in a few graphs. In this initial graph, we can see what they’re current costs are:
You can see that right now in 2022, this is what their energy usage looks like. And with the steady increases in bills each year, 3-4% doesn’t seem like much.
However, when we do the math and look at what electricity is going to cost in 20 years, the contrast is stark.
Over the years, this cost adds up significantly… to the tune of $177,479 over 20 years to be exact. And while we can’t say this for sure, the costs might be even more considering energy prices drastically going up.
Did you know that TEP is considering an 11% increase in 2023 [4]?
Rising energy costs could be much worse than they’ve been in previous years. They’re doing this because of the current demand on the grid, and they can get away with it because if you’re hooked up to TEP, you don’t have any other choice.
Let’s look at the projections and see what it truly costs you by no going solar:
This graph is charted out over the 20 year loan this customer decided to go with. Their monthly payment comes out to $220 after they applied their 26% Federal tax credit and their $1,000 Arizona tax credit.
The grey area is the cost of solar, which is $220/month over 20 years. And that total is $52,800 for their solar system and all the energy they used over 20 years.
And then you see the red dot is the forecasted utility cost, which comes out to $549/month as their average bill. And over a 30 year period, their estimated cost of electricity is $177,479.
💡 By going solar this last month, they’ve locked in the difference of $124,679 in savings over the next 20 years.
So if you live in your home and plan on being there a while, investing in solar energy makes perfect sense. Even if you plan to move in a few years, it still makes sense because you’re adding value to your home and people are more likely to buy a house with solar knowing that their energy costs will be fixed.
Some other Solar ROI Perks
📈 🏠 Increase in home value: A study performed by Zillow in 2019 stated that installing solar panels can increase your home’s value by 4.1% on average. [5]
🔋 Battery packs protect you from blackouts and brownouts: You’ve probably heard about Tesla Powerwalls or Generac PWRclls. Both of these are considered backup power sources that store electricity for when the sun isn’t shining and/or during grid power outages.
We only recommend battery packs in certain situations, and we need to have a conversation with you to learn about your needs before we recommend them.
They add a significant cost to your solar system and for many customers, they’re unnecessary. We’re glad to educate you on them and let you determine if it’s something you need or not.
What if I install solar and decide to move?
If you decide to move and have a loan, it’s easily transferable to the new homeowners. Homes with solar panels have been shown to sell faster than those without panels. [6]
Am I covered by warranties and guarantees?
Yes. Your panels come with a 25-year warranty. It covers all parts, so if anything malfunctions or if the panels degrade faster than expected, they’re replaced at no cost. Your roof also comes with a 12-year penetration warranty. This roof warranty is there to guarantee our work so you can sleep at night knowing your roof is perfectly sealed and protected from the elements.
Every Day That You’re Without Solar, You’re Losing Money
The true cost of going solar is staying with your electric company and ignoring the fact that the energy rates will continually go up year over year. And you have zero control over this.
A common concern we get is
“This is a big investment. I’m not sure if I’m ready to take on the loan or pay cash outright. I think I’ll wait and think some more about it.”
And to that, we say YES. It is a big investment, but what is the alternative?
If you choose not to invest in a solar system, you’re subject to the ever-increasing costs of your electric company. You’re at their mercy and we already know that TEP is looking to increase energy rates by 11% in 2023 [4].
The normal rate hike is on par with inflation, usually about 3-4% year over year and we know this is going to continue to increase based on historical data.
So the true cost is not the system in and of itself. The cost is how much you’re going to spend on energy bills if you don’t take control of your energy.
Look at the figures above. Our customer would have spent $177,000+ over the next 30 years. But instead, they took control with their own custom solar system, and it only cost them around $54,000. The true cost of staying with their electric company over the years is nearly 4x.
Get An Accurate & Free Solar Estimate
This is a big purchase, so you want to make sure it’s the right one. Take a moment to fill out the form below and we’ll get in touch to provide you a free quote on everything involved in getting you a solar system that is perfect for you.
Take this 60-second survey to get your free quote. 👇
🔒 Your info is safe with us. We will never sell it or rent it out to anyone.
sources:
1, 2, 3. Solar Market Insight Report 2021
4. TEP to increase rates by 11.7%
5. Tucson home values (zillow)
6. Solar Homes Sold 20% Faster, And For 17% More, NREL Study Finds