Let’s face it: Energy is expensive. In retirement (and even before), utility bills are usually a dreaded site and most people are looking for ways to reduce how much they have to pay every month. The average electricity price in the United States is around $0.13 per KWH, according to government data, and the average American family spends over $1,430 a year just on electricity. So how can you reduce that? There are many ones, one of which is to consider installing solar panels for your home. But how much can you really save?
The answer naturally varies depending on where you live. The national average might be $0.13 per KWH, but states can vary significantly. And then, even within states there can be significant differences. So, a good place to start is to look at your electricity bill or call your utility company to find out exactly what the rate is in your area. Calculate how many KWHs you use generally use each month and then subtract how much energy you could get from solar panels. Then, multiply that number by your electricity rate to see how much you might be able to save.
Next, look at how much the panels themselves will cost you. Often times it can be a bit of an expensive upfront cost. According to energysage.com, a 6kW solar energy system will cost about $13,188, an 8kW would be $17,584, and a 10kW system would be $21,980. So, expensive, but they will pay off in the end. It might take years, but is in an investment to save you cash incrementally as well as increase the value of your home.
Finally, to help offset the cost, look for tax credits or incentives. Quite a few cities offer incentives for using solar energy and it’s worth looking to see if your city or state does as well. Additionally, the federal government has a number of programs that might be helpful as well. It’s tax season now, so incentives like these should be on everyone’s mind. If you decide to take the plunge and install a solar system, you might be able to save some money come next tax season.
Solar production has been on the rise (dramatically) over the past decade. So, is solar energy in your home worth it? The answer can be a little tough to find out, but if you do your research, you’ll know for sure. Solar energy is an investment to save in the long run, much like switching to energy efficient light bulbs. There is a higher upfront cost but savings over time. And, cost aside, solar energy is an easy way to reduce your carbon footprint and be more environmentally friendly.
Andrew is a corporate finance consultant living in Los Angeles, specializing in distressed and bankrupt consulting. He helps clients review business plans and the general market and decide what steps to take next. He has a masters in finance.
Andrew enjoys running and biking in the San Gabriel mountains, cheering for the San Francisco Giants and eating (but trying not to gain weight).