Originally published on Cost of Solar.
If you’d like to reduce your electricity bill, it can pay to do a full energy and efficiency audit of your home, and to then take action on some of the lower-hanging fruit of efficiency measures, such as adding better insulation, installing a smarter thermostat, switching to LED lighting, killing vampire energy devices, and upgrading appliances to more efficient models.
After those aspects of home electricity consumption are addressed, the next best thing you can do to reduce your electricity bill is by investing in renewable energy, which can put money back in your pocket, month after month, for the next couple of decades (at least).
The rising cost of energy is hitting us where it hurts, right in the wallet. And our dependence on dirty energy sources, such as coal, for electricity generation is also hitting us where it hurts, in the form of increased air pollution and poor air quality, which has been implicated in both short- and long-term health issues, especially in children. The good news is that we can address both of those issues on a very personal level, by having a home solar energy system installed, which costs much less than you might think.
The way our residential energy infrastructure is set up makes complete sense historically, because other than a home boiler or furnace (which burned oil or coal on-site for heat), it was the standard to generate energy (often by burning coal or natural gas) in a central location and then distribute it to individual homes as electricity. However, the amount of electricity used at home was much less then than it is now, and with our heating systems now shifted to electric-based devices instead of furnaces and boilers, and with the addition of electric air conditioning systems and an exponentially larger number of appliances and gadgets in the home, it’s starting to make less and less sense.
Why should we burn a dirty fuel off-site, and then send it across the county or city (with losses along the way), when we can tap in to a virtually limitless source of energy that produces no pollution, right on the roof of our house? Generating electricity on-site, with a rooftop solar system, and sending the excess on to the grid for neighbors to use, offers a cleaner and more efficient (not to mention more direct) way of powering homes and businesses. For buildings with appropriately sized and sited solar arrays, the owners or residents can reduce electricity bills anywhere from 25 to 100%, while also lowering peak energy prices for everyone and helping to make the local grid more resilient.
For home or business owners looking to reduce their electricity bills with solar, there are at least a couple of options to choose from, depending on the physical location of the building, the amount of cash or credit available to the owners, and the amount of rebates or solar incentives in that city or state.
The solar lease / PPA (power purchase agreement) system is heralded as a great innovation in solar financing, as it took the cost of the system (especially the up-front costs) out of the equation for the homeowner and allowed for $0-down solar energy systems, while still delivering the electric bill cost reduction. As a result, leasing as a pathway to solar has taken off, with some 70% of the US homes going solar choosing a solar lease.
Outright ownership of a home solar energy system is the other big option, and although it requires a bit more up-front, the long-term savings are much better, and homeowners can also take advantage of the solar incentives, which they can’t with a solar lease. Financing a rooftop solar array can be done in a variety of ways now, from PACE loans to conventional loans to solar-specific loan vehicles, and while cash on the barrel is still the cheapest option (avoiding interest payments), financing this renewable energy investment will still yield a return as good as (or better than) investing in the stock market or buying a bank CD (certificate of deposit). After the initial payback period (5-7 years, depending on the situation), a home solar system will continue to reduce electricity bills for decades afterward, with little to no maintenance or additional costs. And, by pairing home solar with an electric car, the payback time on the solar array is shortened, while also cutting fuel costs to near zero.
The third option, which is not available in all areas, is participating in a community solar project, or solar garden, which allows residents to purchase as few as a single solar panel to as many as it would take to offset a significant portion of their electricity use. The community solar owners then receive a credit for the power produced by those panels, which reduces their electricity bill by that amount. This option may cost more per watt than a complete solar system which is owned outright, and won’t yield any of the national solar tax credit benefits, but can be a feasible method of getting started going solar without committing to a home-sized system.
Granted, not every home or business is going to be able to reduce electricity bills and benefit from solar in exactly the same way, simply due to the wide variety of different situations. If you don’t use much electricity to begin with, the payback period for solar is going to be much longer. If a roof is partially shaded, even seasonally, it may not be feasible to install solar at that location, and if you live in a multi-owner building, where you don’t own the roof, it can be challenging to have ‘owned solar’ on-site. For older homes that will need a new roof in the next few years, it may make much more sense to do that first (and to add a lot more insulation above the ceiling at the same time) than to install solar panels and then have to remove them for the roofing project and re-install them just a few years later.
Image: Mike DelGaudio
Reprinted with permission.