How Much Do Solar Home Costs? The Planning, Calculation, Finance, And Future Savings Summarised 2021


A very confusing item right now is how to research and review the costs of solar power in your home and what are the solar power pros and cons.

I will break the costs of solar power into two areas. I will cover the actual costs including the federal and government solar power rebates and then I will cover the trends for the costs of solar power in a second post.

The Cost Of Solar Power Summary

There are essentially three areas you need to consider when going through your evaluation.

  • Upfront Costs – Currently the cost of the solar power panels and equipment can be pretty pricey. I will cover those details below.
  • Government Credits – Depending on your state, these are life savers and the government realizes that without these credits, it would be impossible for the average family to afford.
  • How long you will be in your house – If you plan on moving or could move in the next couple of years, the solar power costs will not be a wise investment. More on that below.

The Cost Of Solar Power Calculation

I used the Sunpower Solar Power Cost Calculator to do my analysis. I walked through it and found it very objective and fair. Avoid calculators that don’t take into account the cost of money or loans.

Key Variables – I made these up and they assumed I live in California because the credit is best there. I also assumed a 2000 sq ft home with all average living conditions.

You can see that the initial cost of the equipment is 38,000 dollars. Don’t pass out quite yet! The government credits and rebates bring that down to $21,337.00! You can see that if you live in a state that does not yet cover these costs as aggressively as California does, you have some catching up to do on your ROI.

Assuming you don’t have $21,000 dollars laying around, you have to then assume you will want to take out a loan. One difficulty in this is that loans aren’t easy to come by. Keep in mind, this is money you will save over time, so the loan isn’t the same as buying a car or boat.

The Cost Of Solar Power – Financing

So how does this look? Well you can see from the table (click to zoom in) that your loan is 142.00 dollars, so its a matter of how quickly you save on your bills each month. Bottom line: The more your bill is over 142 dollars in this example, the faster you will return your money!

There’s two parts to this savings as you can see. There is a very quick initial return on your energy bills of 1,600 dollars in the first year alone So the first 5 years will be very good as that is how long some people can estimate they will live in their home. Secondly, if you are in that house for over 18-25 years, you will essentially fallen off the grid with a positive cash flow of roughly $10,000.00.

The Cost Of Solar Power Summary

While these take in prime conditions, living in sunny California with an aggressive rebate, they do have some long-term advantages. Sunpower estimated that this would be a 10.3% ROI. While that initial cost would scare off some, that type of ROI would lure in any business, so it should be the same mindset for the average homeowner.

I will cover the trend in the industry in another blog, but as solar power equipment is expected to fall and utility prices are expected to rise, this gap should be even better over time.

And if you are doing this for environmental reasons, then you should know that this investment was the equivalent of reducing 8,300 miles of driving in the first year!

Change Of Perspective Required

When I review how people | companies have been analyzing the investment into solar power, they do it in such a complicating way that I am going to re-emphasize and try to simplify the justification into the investment. Please comment if you see this helped or confused the issue. People tend to ask “How much do solar panels cost”, How much does solar power cost; What is the cost of solar energy; or how much does a solar panel cost.

I believe this is the wrong way of looking at it. The true way to answer the question of whether solar power is a good investment for you is to ask “Will I see a profit in my solar power investment over a time period that I am comfortable with.” If you treat it like a business proposal, it makes much more sense.

Here are my assumptions:

  • Your electricity cost per year: $1,200.00
  • Electrical Costs / yr Increase: 3%
  • Location: San Jose, California
  • Money: Home equity Loan: 20 Year Loan, 7%, 20% down payment.

Obviously if I own a solar him in San Jose, California as in my example, it is a prime location and presents an optimum scenario. The first price is the cost of the solar energy system. The second are the solar tax credits for both the state and federal solar programs. As you can see, what you are left with after a $24,000 dollar system and tax rebates is a solar panel and solar energy system of $14,000. So what next? Well look at your energy bill savings.

You are saving approximately $950.00 per year on the system. So at the very very rough level, it will take you 14 years to recoup this investment. In more specific terms, because you took out a loan, you will save roughly 25 dollars per month in electricity during the life of the loan. It also has a great resell in case you are worried about moving before you recoup your savings.

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