Thursday, October 15, 2009

Economics of Solar Energy Systems

Economics of Solar Energy Systems
Grid connected solar electric (photovoltaic or PV) systems provide significant economic benefits
to homeowners. There are several ways to consider the benefits of these highly reliable systems:

Solar is a hedge against future electric rate increases.
According to the U.S. Department of Energy, national average electric
rates have increased 5% per year since 1970, and this trend is
expected to continue through 2030. This means that todayʼs $100
monthly electric bill will likely be $160 in 10 years and $340 in 25 years.
With 25 years of guaranteed production, a solar energy system allows
a homeowner to “pre-pay” for their electricity at a fixed rate.

Solar adds value to a home.
As long as the system is installed in an aesthetically pleasing way,
solar immediately adds resale value to a home. In fact, the exact
value is very easy to quantify. The panels are guaranteed to produce
power for 25 years. At any given time the remaining production under
warranty can be calculated and multiplied by the current electric rate
(with escalation, if desired) to come up with an accurate value that the
system adds to the home. A solar equipped home has lower
operating costs (monthly bills) than a comparable non-solar home.

Solar pays back.
Over its lifetime a solar energy system will typically provide electric bill
savings equal to 2-3 times the initial price of the system.

Solar provides a significant return on investment.
Solar provides a significant, reliable, and long lasting return on
investment. Consider that returns from investments in the stock
market or savings accounts are taxable income. The investment in
solar provides electric bill savings, which are not taxable. To compare
an investment in solar to other investments, it is important consider the
value of the electric bill savings in pre-tax dollars. Depending on state
rebates and local electric rates, the 25 year electric bill savings from
an investment in solar typically provides a 10% to 20% average annual
return on the initial investment.

When financed, solar can provide immediate savings.
By financing solar in a 30 year mortgage or other secured loan, the net
loan cost (after tax benefits) is often equal to or less than the first year
monthly electric bill savings. This means that the homeowner is “cash
positive” on the investment from day one. Additionally, the loan is a
fixed payment, while electric rates are always increasing.

Specific economic returns of solar energy systems vary by geographic location and are affected by state and utility rebates, current and future electric rates, and average sunlight for an area. Contact your Ready Solar representative for more information about specific locations.

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