Are solar panels still worth the investment?
For years, California homeowners seeking to reduce their carbon footprint, as well as their dependency on costly local utilities, have been purchasing and
installing photovoltaic (PV) solar panels on their properties.
Times have changed and, for reasons we’ll examine in this post, the number of homeowners in California who are purchasing solar panels is rapidly declining. There are others, however, who still see a future with solar energy, especially when paired with the new generation of home batteries that have made their way to market over the last few years.
Solar’s benefits went beyond clean energy
When properly scaled for the property’s current (and, to a degree, future) electricity use, most solar installations not only produced enough energy to power the property, they often produced excess energy that the system owner was able to sell back to the local energy company. This practice is known as Net Energy Metering (NEM).
Homeowners considered NEM a crucial component to their solar energy system because, when combined with the monthly savings they realized on their electricity use, it accelerated their ability to reach the break-even point on their installation.
NEM isn’t what it used to be — and consumers have noticed
Recent regulatory changes designed to encourage the purchase and adoption of home batteries, however, have adversely impacted NEM and may have actually backfired. As a result of these new regulations, the price local utilities are required to pay consumers for their energy has been reduced by up to 75%. This price reduction has resulted in significantly extending the amount of time it takes for consumers to see a positive return on their solar investment, making solar energy a much less attractive option for many homeowners.
In fact, according to trade publication pv magazine, “Utility interconnection
request data shows that solar sales (in California) have fallen between 66% and
83% year-over-year following NEM 3.0.”
Today’s solar is all about home batteries
Home batteries have become a central feature of many newer solar installations. With home batteries in place excess energy produced by the solar panels is captured and stored instead of being sent back out to the grid. This offers homeowners many advantages, including the ability to take a home, at least temporarily, completely off the grid. Batteries can supply energy at night when the per kWh rates are often higher. They can also step in and power homes during grid outages.
The downside to home batteries is the price tag. They can add an additional $15,000 to $25,000 to the price of the system. This significantly increases the time it will take for the system to pay for itself. These systems are generally better suited to homeowners with the resources to pay the upfront cost in whole, since financing will add more to the cost and, therefore, make it even harder to realize a positive return.
Tax credits are still available
Consumers have long enjoyed using federal tax credits to help offset the high cost of buying and installing solar energy systems. The most frequently used tax credit is the Residential Clean Credit, a tax credit that can help cover up to 30% of the system’s cost (note that it does not apply to new roofing which is often
required for installation – unless you are installing solar-electric collecting
roofing).
Fortunately, this credit is still available. It provides a 30% tax credit for systems placed in service through 2032. Barring an extension, this credit will sunset in 2035. There are other credits though, like the one requiring American-made PV panels, they can be hard to qualify for (over 90% of all PV panels are currently
manufactured in China).
Does solar energy make sense for you?
Between today’s regulatory changes, high cost and longer ROI timeline, newcomers to solar energy face a much more complex decision than that faced by early adopters. In the table below, we’ve listed out some of the pros and cons for you to consider.
Pros
- Ability to power your home with clean, renewable energy
- Smaller carbon footprint
- Ability to live off the grid
- Tax credits can lower cost
- Adds to home’s resale value
Cons
- Already expensive cost to purchase climbs even higher with addition
of home batteries - Financing purchase can drive cost even higher
- Batteries mean longer time required to achieve positive ROI — even
longer with batteries or financing - Some tax credits are hard to qualify for
Bottom line: Solar is not the clear choice it once was
Ultimately, the decision to purchase solar panels for your California home will likely come down to two key factors: 1) your commitment to clean energy (and/or your desire for energy independence) and 2) your available financial resources. If, after weighing the pros and cons, you feel solar is the right choice for your property, acting sooner rather than later can help ensure you’re able to take advantage of available federal tax credits.