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How to Invest in Solar Energy

Solar energy has been around for a long time. So has environmentalism. However, the rapid deterioration of the planet in the recent years has caused interest in the two to skyrocket. With growing interest, there is naturally growing demand.

 

More and more people wish to limit their environmental impact. They aim to do so by living in an eco-friendly and sustainable manner. One of the best ways of being sustainable is to consume energy responsibly. This is where solar energy comes in.

 

The growing desire for sustainable energy consumption has led to an increase in demand for solar energy. As always, the market has been quick to respond. Once out of the financial reach of the average consumer, solar energy is now more accessible than ever.

 

As a result of the above circumstance, many people are asking how to invest in solar energy. Well, you’ve come to the right place. In this step-by-step guide, we’ll walk you through the process of investing in solar power for your home.

 

How to Invest in Solar Energy

Before you can invest in solar energy for your home there are some things to consider. Firstly, the initial investment can go as high as $20,000. So, you’ll want to take a good look at your finances. If you can’t manage such an outlay, it’s best to postpone your decision for the future.

 

Secondly, results will be variable and gradual. The returns for solar energy are realized in the long-term. Present costs are offset by expected returns in the form of lower energy bills. Keep this in mind when making your final decision.

 

Thirdly, the variance means that the estimates online stating just how much you’ll save are unreliable. Results will depend on how much sunlight your home receives year-long. Incentives and grants from state governments also affect the bottom-line.

 

Breakdown of Costs

With that out of the way, let’s look at the various costs associated with solar energy for your home.

 

Equipment

The lion’s share of the outlay will be on the equipment. Obviously, you can’t really use solar energy without solar panels. The cost for these will vary based on the type, size, quality and quantity of panels you end up purchasing. These factors will in turn be influenced by how much solar energy you wish to generate for your home.

 

The equipment doesn’t end there. To be able to use the energy from the solar panels you’ll need an inverter. An inverter converts direct current to alternating current. You will also need wiring to connect the various parts of the system together.

 

Most individuals purchase a battery with their system. The battery stores the energy generated by the system to be used later. This is especially useful in areas where the power company doesn’t incentivize adding excess power to the grid.

 

Labor

Of course, someone will have to install the system. You can either do it yourself or hire professionals to do it for you. Either way, you should consider the costs associated with this step. This means that you should include not only the labor but tools, materials and any other resource required to assemble the system.

 

Maintenance

You can’t really learn how to invest in solar energy without keeping all supplementary factors in mind. Maintenance is a good example. Since maintenance keeps your system efficient, it affects your savings. So, you should add maintenance costs into your calculations.

 

Solar energy systems can last several decades if maintained properly. Increasing the longevity of the system also keeps your savings going longer.

 

Time for Some Math

Now that we’ve gone through all the costs, it’s time to make some calculations. Any investment requires due diligence on your part. These will help you determine the risks and potential benefits of the system.

 

Let’s begin by adding all the costs associated with your solar power system:

  • [Equipment (x1) + Labor (x2) + Maintenance (x3)] – (savings on energy bill per year * useful life of system in years)

 

This will result in either a net gain or loss.

 

Though the above example should help you gain a rough estimate, a more accurate figure can be calculated through a different method. In this method:

  • Calculate levelized cost of electricity(in cost per kilowatt per hour $/kWh)
  • Calculate net present value of the cost of ownership (subtract maintenance costs from cost of ownership)
  • Lifetime of PV module is around 25 to 40 years
  • Calculate lifetime energy output of solar energy system

 

The Equation will come out as:

LCOE ($/kWh) =

NPV of lifetime cost of ownership/

 Lifetime energy output of solar energy system

 

The result of this equation should then be compared to the cost of electricity that your provider charges you. This comparison will help you determine whether solar energy is a viable option for you or not.

 

Benefits of Investing in Solar Energy

Investing in solar energy carries numerous benefits, some which include:

  • Reduced carbon footprint– this means that you reduce your burden on the environment and help preserve it for the future.
  • Tax exemptions– There are several tax breaks provided by federal and state governments for individuals who utilize solar energy. Many programs even front some of the cost associated with setting up a solar energy system.
  • Net meteringcreates a credit account with the power company. This means you can sell excess electricity to them. This can result in incredible cost savings, and may even mean money coming in.

 

Our Final Thoughts

Solar power is now easier to harness than ever. As such one should definitely learn how to invest in solar energy. We hope this guide was helpful in illustrating how you can go about investing in solar energy.