Solar Panels: Smart Investment or Big Expense?

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We all know that perception is everything. There’s a huge difference in how people view a $10,000 investment versus a $10,000 expense. So could solar power systems be suffering from a perception problem? EnergySage set out to find out just that.

In a survey of 150 consumers interested in solar energy and other clean energy systems (like solar hot water, small wind turbines and geothermal) for their home or businesses, EnergySage found that 50% of respondents thought of solar panel systems as an investment, 30% considered it an expense, and 20% did not know enough to tell the difference between the two.

What More People Need to Know About Solar

Additionally, only 40% said that they believed solar power systems are a good investment, 20% thought they were a bad investment, and a whopping 40% did not know enough to make that determination. So, now we know where we stand. And, we also know that we definitely have our work cut out for us.

EnergySage’s mission is to accelerate the adoption of solar power and other clean energy systems by making people aware of their financial benefits. People already know that solar panel systems are beneficial for the environment. What they need to know is how these systems also benefit their pocketbooks and bottom lines. So, here are some facts:

Annual returns range from 5%-30% [1]

Even at the lower end of the spectrum, the return is great. Why? Because unlike the returns on other types of investments, say stocks or bonds, the returns produced by solar photovoltaic (PV) systems have several additional advantages such as:

  • The returns are all but guaranteed for 20-40 years (the operational life of the system). You will always need to heat, cool and power your home or business, and rather than sending a check to the local utility or oil company every month, your clean energy system will allow you to heat, cool, or power your homes and business by using free sources of energy/fuel from the sun, the wind or the earth.
  • The returns will get better every year. On average, gas, electricity and heating oil prices have increased between 3% and 10% every year even as demand has fallen. Effectively, this means that the amount you are saving each year increases 3%-10% which means that your annual returns will continue to rise each year.
  • Returns are tax-free: The returns you receive from your solar panel system are savings, not income. They are not subject to Federal or State income taxes. Depending on your tax bracket, the returns on your solar power system actually represent 20%-35% more money in your pocket than you would realize from a taxable mutual fund investment earning the same rate of return.
  • Solar power systems increase the value of real estate. You don’t have to keep your property for a long time to benefit from your investment in a solar energy system. Properties equipped with solar energy systems are more attractive to buyers because they cost less to own and operate. Solar energy systems will fetch higher prices and help to sell your home faster.
  • Additional benefits include rebates, incentives, tax credits, deductions and exemptions that further reduce your Federal, State and local tax bill in the year you purchase a system. The Federal government, and some state governments provide tax credits for a portion of the purchase price of a clean energy system. These tax credits can reduce the effective purchase price by 30% or more. Additionally, most clean energy systems can be financed with loans (e.g., home equity or other loans) and the interest on these loans may also be tax deductible. If you are a business owner, you are also eligible to deduct the depreciation on your investment over time. Some states exempt the purchase of clean energy equipment from sales taxes, and some local governments exempt solar power systems from property tax assessments, so even though the value of your property will increase when you install a system, your property taxes may not increase.

Spreading the Word about Solar

That’s a pretty compelling argument for solar energy systems, right? EnergySage is committed spreading the word about solar energy and other clean energy systems as an investment and we expect to see big changes in next year’s survey, so stay tuned.

To see how some of these effects work in the real world, check out this solar PV case study in Clifton Park, New York that’s saving $3,500 annually and earning a 16.1% return on investment.

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[1] The percentage return is calculated by taking the annual amount of savings and/or income produced by a clean energy system annually and dividing it by the purchase price of the system

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