How to Lower Your Electric Bills With Solar Power

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If you’re tired of paying high electric bills, solar power may be a great way to reduce your costs – as well as your environmental impact. Here’s what you should know before making the switch.

If you’ve noticed your cost for electricity increasing over the past decade or so, you’re not alone! You may not be using that much more electricity either; the truth is that most homeowners are paying more per kWh than they did 10 years ago. This is true across the United States, although the increase varies from state to state.

If you’re thinking of switching to solar power to reduce your electricity costs, there are some important considerations to take into account. If you’re planning to take the plunge and purchase your own system, you only have a year before the 30% tax credit expires, so now is a good time to start planning.

It’s important to do your research first, as switching to solar power can be a big undertaking – and it’s not cheap, although it can save you a lot of money in the long run. This article discusses your options when it comes to switching to solar power.

Option 1: Solar Lease

A solar lease is not unlike a car lease, in that it comes with little or no down-payment, you make regular monthly payments, and you don’t own the system. A solar lease can be very tempting if you live in a state with high electricity rates and/or a high escalation rate over the past decade, especially when there are a number of companies offering zero-down lease options and the peace of mind that comes from someone else taking on the responsibilities of maintenance for years to come.

In the case of a lease, you get to use all of the solar electricity you produce. Any excess can be returned to the grid for a credit and if you need extra, you purchase it from the utility at the normal retail electricity rate. However, as with any third-party ownership agreement, you will not be able to claim the federal investment tax credit (ITC) of 30% for solar installations.

With a solar lease, it is very important to look at the fine print and to consider your situation carefully. Are you planning on moving anytime soon? If so, ask about your options because a number of homeowners have run into difficulties when it was time to sell their home….

Is there an option to own the panels at the end of the lease term? And what is the escalation rate – in other words, by how much will your monthly payments increase every year?…

Option 2: Power Purchase Agreement (PPA)

A PPA is another third-party ownership arrangement, where you do not own the panels (and cannot claim the ITC). It differs from a lease in that the electricity produced by the system is sold to you at a fixed per-kilowatt-hour rate that is typically less than the retail electricity rate from the utility. Moreover, the escalation rate for the solar electricity is fixed so you know by how much your rate will rise over the term of the agreement.

While this option may be very attractive because of the low or no upfront cost, and the fact that you are unlikely to be responsible for maintenance, it is not for everyone. Like a solar power lease, it is very important to consider the fine print and your particular situation.

Option 3: Solar Purchase/Solar Loan

A solar purchase generally offers you the best return on your investment (ROI) because as the system owner, you can take advantage of the generous ITC available at the federal level, in addition to any available state or municipal incentives. Moreover, your solar electricity is “free” for the lifetime of your panels (on average 25 years) with no risk of cost escalation. But it’s important to note that as the owner of the system, you will be responsible for any required maintenance, which is generally minimal most years, but will eventually include replacement of the inverter(s).

Most people, however, cannot afford an outright purchase, so another option is the solar loan, many of which come with a zero down-payment option….

Again, it’s still important to look at the fine-print; in particular, if there any dealer/loan fees that must be paid at the outset. Generally, the lower the interest rate, the higher the initial fees.

Conclusion
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Fortunately, the cost of solar has decreased significantly, by about 50 percent in the last five years, so solar energy is becoming more and more affordable. Switching to solar energy doesn’t make financial sense for everyone just yet, but it does for those who live in states with high electricity rates and/or high escalation rates.
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For more tips, read the full article at Mother Earth News…

 

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