Residential solar energy is becoming more widespread than ever. Solar power is clean, efficient, and environmentally sound. Today it’s also cost-effective and a great investment for many homeowners. If you’re considering making solar part of your next project, here are a few things worth considering.
Excellent ROI in Residential Solar Energy
Return on Investment (ROI) is a term used in the financial world. The concept is simple. If you invest money today, you can expect to later receive some amount in return. The ratio of your return to your initial investment is your return on investment. The average ROI for the S&P 500 over its 90-year history is 9.8%. It’s a good measure of the ROI offered through investing in U.S. stocks.
How does that compare to an investment in residential solar? In many places in the U.S., solar offers equivalent and even higher returns. So before you invest all your money in traditional investments, consider investing in solar.
Generating your own power from the sun makes sense in just about any climate. But your ROI will vary a lot depending on your location. Some factors influencing return are:
your household’s electricity demand
your climate
panel and roof orientation
panel type
your power company’s net-metering terms and conditions
federal and state incentives
financing
Here in the U.S. these factors combine to produce a range of annualized returns. In states such as Kentucky and Louisiana, returns may be as low as 3%. However, in 20 or more states, returns equal or exceed 9.8% Also, in a handful of states returns exceed 15%. Massachusetts offers the highest return in the U.S. at 28%. Before investing, do some research into solar returns in your area.
Express Your Values
Solar arrays play a big role in a house’s appearance. Arrays can be visually appealing or eyesores. In order for arrays to look good they have to be carefully worked into a house’s design. Creative architects see solar arrays as an opportunity for expression of environmental values. They’re also adept at designing with new solar technologies. Building integrated photovoltaics (BIPV) replace conventional building skins. BIPV is currently the solar industry’s fastest growth area. By combining demand reduction with careful design, you can end up with an aesthetically pleasing result that meets all of your electricity needs. When made a design feature, solar arrays can be an attractive symbol of one’s environmental awareness.
Residential solar can be a great investment. But with some projects, investments in energy efficiency may offer even better returns. If “A penny saved is a penny earned,” investing in efficiency works the very same way. By reducing your energy demand, you also reduce your need for solar. Below are a few of the top efficiency strategies worth considering:
higher insulation levels
better air-sealing
high-quality windows and doors
high-efficiency space heating and cooling
high-efficiency water heating
Some of these demand-reduction strategies also offer big secondary benefits. For example, higher insulation levels provide added comfort. High quality windows and doors offer long-term durability. Choose the right mix of strategies for your given project. Reducing demand will allow you to better leverage your solar investment.
Tax Considerations for Residential Solar Energy
If a solar installation raises a home’s value, will it result in a property tax increase? Many of my clients ask me this, but the answer is actually, “no”. Property value assessments are for the home’s value before solar improvements. So adding a solar array won’t affect your property taxes.
Many states, including Vermont, offer tax and financing incentives for residential solar energy. Used together with federal tax incentives, solar panels can earn valuable tax advantages. To qualify for federal credits, install your system before December 31, 2021. The tax break covers 30% of the system and the installation costs. If your credit is higher than your taxes, the unclaimed portion can be transferred to the following year.
If these federal tax incentives sound appealing to you, consider your installation soon. The credit is set to decrease to 26% for the 2020 tax year, then further to 22% for 2021.
Solar residential energy plays a critical role in curbing climate change. It’s an integral part of almost every modern green home. Consult us to discuss the perfect solar solutions for you.
Harry Hunt has worked in and across a wide range of contexts—from commercial and residential buildings, to urban planning, interiors, and landscapes. Harry is a member of the American Institute of Architects (AIA), and is a Leadership in Energy Efficient Design (LEED) accredited professional through the United States Green Building Council. He is certified with the Passive House Institute (PHI) in Darmstadt, Germany and is registered with the National Council of Architectural Registration Board. Harry is a registered architect in Vermont.
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