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By Will Shippee | 16 min read


Is Solar Worth It, Now That The IRA Is Here?

As a specialist with more than 15 years of experience in the renewable energy space, this is a question I’ve often heard from homeowners. Many people were already asking whether solar was worth it before the Inflation Reduction Act (IRA) passed in August 2022, and now they’re asking about whether anything has changed because of it.

IRA

These numbers also take into account the average cost of deploying a solar installation in Colorado Springs, which can range from over $14,000 to around $20,000. As you can see from the above home’s results generated by the EnergySage Calculator, a solar system can eventually pay for itself in electricity bill savings. But getting your full return on your investment in Colorado Springs can take an estimated 10.5 years. Of course, after that, you’re pocketing $17,000 over 20 years. Systems are usually warrantied for 25 years.


In California, where electricity bills can easily run $200 or more a month for a large home, solar is probably worth the investment. In the below example, I ran a house in Indio, California, through the EnergySage Calculator. The home is about 2,300 square feet in Riverside County, where the monthly electric bill averages around $195 or higher.


This estimate takes into account the average cost of a solar installation in Indio, California, which can range from over $11,000 to more than $15,000. As you can see, it would take just under five years — more than twice as fast as the home in Colorado Springs — for this homeowner to see a financial payback on her solar investment. The long-term potential financial savings for this homeowner is significant, as much as $55,000 over a 20-year period when you factor in lower electric bills and the 30% IRA solar tax credit, along with other state and local solar incentives.

ira

Do time of use rates make solar worth it?

Some states provide financial incentives that allow homeowners to use solar power to help them take advantage of Time of Use (TOU) rates. TOU rates are essentially differing rates you would pay for electricity depending on when you consume it. During peak demand on a summer afternoon, electricity costs more than in the middle of the night.


Sending electricity back to the grid during opportune times is called net-energy metering. To better understand how this can benefit homeowners, let me explain how net-energy metering works. When you turn on an oven, you’re taking electricity from the grid, so your utility charges you by the kilowatt-hour for that energy. A kilowatt-hour is a measure of electrical energy that is equal to a power consumption of 1,000 watts for one hour.


If you’re producing energy with solar power and are producing more energy than your home is consuming, then the extra electricity will be sent back to the grid. The beauty of net metering is that you get paid for sending electricity back to your utility! This is why, for the last 20 years, utilities have paid an average of 11.10 cents a kilowatt-hour back to electrical consumers for electricity they’re sending back to the grid, at which point other residents can then use that energy.


Now, not all electricity is created equal. And some states offer more favorable payback rates than others. For example, If you live in Rhode Island, you can take advantage of the Rhode Island Renewable Energy Growth Program, which will pay 27.55 to 31.05 cents per kilowatt-hour for solar generation that your system produces for the first 15 to 20 years.


Also, electricity in the middle of the night is not very valuable. But electricity in the summer afternoons and evenings is extremely valuable because this is when the grid is strained due to air conditioners and people staying indoors after work. This is when utility companies would love to have more power. If you have a solar battery, you can discharge your battery power back into the grid during these peak time periods and the utility will give you more money back for that power. At times when electricity is more valuable, utility companies charge more for electricity usage. That’s called Time of Use rates.


Note that utilities will automatically switch your electrical billing system to TOU rates when you install a solar system in your home. If you don’t have solar, the cost of electricity goes up as you use more energy. With this traditional billing system, you’re billed on a tiered structure where at the beginning of the month, power is cheap. But, at the end of every month, each kilowatt-hour that you get is more expensive.


You can use a new solar system to take advantage of TOU rates by selling your stored electricity back to the utility when its value is at its highest — in summer afternoons and evenings. If your state pays out a good TOU rate, solar is often a better investment because it increases the value of the electricity you are selling back to the utility.


So, is solar worth it?


The answer is: It depends. It depends on what you expect to gain from your solar investment, whether your goals are financial, practical, or values-based.

The size of your home and your home’s location will determine how fast your financial payback will be and how much you’ll save on top of that. We’ve provided a couple of geographic-specific examples where solar is worth it, and that list is growing as more states begin to offer financial incentives for homeowners.


And there are practical considerations that go beyond financial. From a resilience standpoint, solar combined with battery storage can keep your home powered longer than a battery alone during power outages. If you live in Texas, where millions of people lost power during a winter storm in 2021, you have a true understanding of how valuable power resiliency is when you can’t rely on the power grid to keep you warm. When Hurricane Ian hit Florida in October 2022, an entire neighborhood in Fort Myers, the Babcock Ranch community, never lost power because the community was powered by a nearby solar array made up of 700,000 individual panels, along with the battery storage they needed to keep the power when the sun wasn’t producing enough energy.


Your personal values also come into play when determining if solar is worth the investment. Your personal goal may be to reduce your home’s carbon footprint. In the U.S., electricity usage accounts for 25% of our country’s greenhouse gas emissions. Coal-powered power plants in states like Kentucky and West Virginia create carbon emissions and contribute to local air pollution in areas close to the plants.


When you invest in a solar system for your home, you can reduce the amount of carbon-emitting electricity from your utility grid, pulling directly from your solar panels instead. Even when you are not pulling electricity from your solar system, you’re helping offset the need for carbon-emitting power generation by sending more solar energy back to the grid. What’s more, a typical residential solar system can eliminate 3 – 4 tons of carbon emissions each year, which is the equivalent of planting 66 trees annually.


Given the reasons I’ve outlined above, there are several factors to consider before investing in solar power for your home. There are limitations to how much return you can get on your solar investment, and not every home is an ideal candidate for solar power. This is why Schneider Electric has partnered with EnergySage, an online solar marketplace that has collected a vast amount of data on solar energy from both solar providers and homeowners.


You can use the EnergySage Marketplace to help you decide if solar is worth the investment for your home. Just a few of these resources include:


  • Descriptions of the types of solar energy systems and how they work


  • Breakdowns of the costs and potential savings of going solar in your area


  • The steps you’ll need to take to assess your home’s solar readiness


  • Answers to frequently asked questions about energy storage and solar batteries

These numbers also take into account the average cost of deploying a solar installation in Colorado Springs, which can range from over $14,000 to around $20,000. As you can see from the above home’s results generated by the EnergySage Calculator, a solar system can eventually pay for itself in electricity bill savings. But getting your full return on your investment in Colorado Springs can take an estimated 10.5 years. Of course, after that, you’re pocketing $17,000 over 20 years. Systems are usually warrantied for 25 years.

In California, where electricity bills can easily run $200 or more a month for a large home, solar is probably worth the investment. In the below example, I ran a house in Indio, California, through the EnergySage Calculator. The home is about 2,300 square feet in Riverside County, where the monthly electric bill averages around $195 or higher.

This estimate takes into account the average cost of a solar installation in Indio, California, which can range from over $11,000 to more than $15,000. As you can see, it would take just under five years — more than twice as fast as the home in Colorado Springs — for this homeowner to see a financial payback on her solar investment. The long-term potential financial savings for this homeowner is significant, as much as $55,000 over a 20-year period when you factor in lower electric bills and the 30% IRA solar tax credit, along with other state and local solar incentives.

Do time of use rates make solar worth it?


Some states provide financial incentives that allow homeowners to use solar power to help them take advantage of Time of Use (TOU) rates. TOU rates are essentially differing rates you would pay for electricity depending on when you consume it. During peak demand on a summer afternoon, electricity costs more than in the middle of the night.

Sending electricity back to the grid during opportune times is called net-energy metering. To better understand how this can benefit homeowners, let me explain how net-energy metering works. When you turn on an oven, you’re taking electricity from the grid, so your utility charges you by the kilowatt-hour for that energy. A kilowatt-hour is a measure of electrical energy that is equal to a power consumption of 1,000 watts for one hour.


If you’re producing energy with solar power and are producing more energy than your home is consuming, then the extra electricity will be sent back to the grid. The beauty of net metering is that you get paid for sending electricity back to your utility! This is why, for the last 20 years, utilities have paid an average of 11.10 cents a kilowatt-hour back to electrical consumers for electricity they’re sending back to the grid, at which point other residents can then use that energy.


Now, not all electricity is created equal. And some states offer more favorable payback rates than others. For example, If you live in Rhode Island, you can take advantage of the Rhode Island Renewable Energy Growth Program, which will pay 27.55 to 31.05 cents per kilowatt-hour for solar generation that your system produces for the first 15 to 20 years.


Also, electricity in the middle of the night is not very valuable. But electricity in the summer afternoons and evenings is extremely valuable because this is when the grid is strained due to air conditioners and people staying indoors after work. This is when utility companies would love to have more power. If you have a solar battery, you can discharge your battery power back into the grid during these peak time periods and the utility will give you more money back for that power. At times when electricity is more valuable, utility companies charge more for electricity usage. That’s called Time of Use rates.


Note that utilities will automatically switch your electrical billing system to TOU rates when you install a solar system in your home. If you don’t have solar, the cost of electricity goes up as you use more energy. With this traditional billing system, you’re billed on a tiered structure where at the beginning of the month, power is cheap. But, at the end of every month, each kilowatt-hour that you get is more expensive.


You can use a new solar system to take advantage of TOU rates by selling your stored electricity back to the utility when its value is at its highest — in summer afternoons and evenings. If your state pays out a good TOU rate, solar is often a better investment because it increases the value of the electricity you are selling back to the utility.


So, is solar worth it?


The answer is: It depends. It depends on what you expect to gain from your solar investment, whether your goals are financial, practical, or values-based.

The size of your home and your home’s location will determine how fast your financial payback will be and how much you’ll save on top of that. We’ve provided a couple of geographic-specific examples where solar is worth it, and that list is growing as more states begin to offer financial incentives for homeowners.


And there are practical considerations that go beyond financial. From a resilience standpoint, solar combined with battery storage can keep your home powered longer than a battery alone during power outages. If you live in Texas, where millions of people lost power during a winter storm in 2021, you have a true understanding of how valuable power resiliency is when you can’t rely on the power grid to keep you warm. When Hurricane Ian hit Florida in October 2022, an entire neighborhood in Fort Myers, the Babcock Ranch community, never lost power because the community was powered by a nearby solar array made up of 700,000 individual panels, along with the battery storage they needed to keep the power when the sun wasn’t producing enough energy.


Your personal values also come into play when determining if solar is worth the investment. Your personal goal may be to reduce your home’s carbon footprint. In the U.S., electricity usage accounts for 25% of our country’s greenhouse gas emissions. Coal-powered power plants in states like Kentucky and West Virginia create carbon emissions and contribute to local air pollution in areas close to the plants.


When you invest in a solar system for your home, you can reduce the amount of carbon-emitting electricity from your utility grid, pulling directly from your solar panels instead. Even when you are not pulling electricity from your solar system, you’re helping offset the need for carbon-emitting power generation by sending more solar energy back to the grid. What’s more, a typical residential solar system can eliminate 3 – 4 tons of carbon emissions each year, which is the equivalent of planting 66 trees annually.


Given the reasons I’ve outlined above, there are several factors to consider before investing in solar power for your home. There are limitations to how much return you can get on your solar investment, and not every home is an ideal candidate for solar power. This is why Schneider Electric has partnered with EnergySage, an online solar marketplace that has collected a vast amount of data on solar energy from both solar providers and homeowners.


You can use the EnergySage Marketplace to help you decide if solar is worth the investment for your home. Just a few of these resources include:


  • Descriptions of the types of solar energy systems and how they work


  • Breakdowns of the costs and potential savings of going solar in your area


  • The steps you’ll need to take to assess your home’s solar readiness


  • Answers to frequently asked questions about energy storage and solar batteries
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