Solar power systems can provide numerous benefits to homeowners, including lower electric bills, lower carbon footprints, and potentially higher home values. However, these advantages are usually accompanied by significant installation and maintenance costs, and the magnitude of the gains can vary greatly from one house to the next.
This article will assist homeowners in performing the necessary financial calculations to determine the viability of solar power in their homes.
Solar power: An overview
In theory, determining whether solar power makes financial sense for your home is straightforward. You’ll need to figure out:
- The price of a solar energy system
- How much energy it will generate
- The amount of money you would otherwise pay for the same amount of energy
- How long will it take for your initial investment to pay for itself in energy savings?
- Will the system pay for itself in five years?
If it does, and you have the necessary funds, it’s probably a good idea. If you must wait longer for savings or take out a loan to afford the system, you must carefully consider your options.
In practise, however, things are not so straightforward. Each of these factors varies greatly, and the costs and benefits of installing solar power for two homes—even if they are neighbors—can be drastically different.
However, there are some tools that can be useful. If you are new to solar energy and want to understand the basic cost model, calculators like this are a good place to start.
Energy production calculation
The second factor in your calculations will be the amount of energy your system will produce and when it will do so. Even for experienced solar engineers, this can be a difficult calculation to perform. But first, let’s go over the fundamentals.
One of the most important factors to consider is the amount of solar irradiation available in the geographical location of the home; in other words, how sunny it is where you live. Being closer to the equator is generally better for using solar panels, but other factors must be considered.
How much money will you save?
You can predict how much you can save in energy costs per year once you know how much a solar power system will cost upfront and how much energy it will produce.
This is another tricky calculation because a lot depends on how you currently pay for electricity. Utilities frequently charge residential customers a flat rate for electricity, regardless of when they use it. This means that, rather than offsetting the high cost of peak electricity generation, homeowners’ solar power systems simply offset the price they pay for electricity, which is much closer to the average cost of power production.
Is solar power beneficial?
After you’ve completed all of these calculations, you’ll most likely end up with a single number—the number of years it will take for a solar system to pay for itself in energy bill savings. If you live in a sunny part of the country and currently have high utility bills, you may be looking at a system that will reach this point in five years. Others may have to wait 10 or 20 years to get to this point.