Tax credits make it a good time to install solar panels at home

Interest in residential solar energy in the Delaware Valley continues to grow, spurred on by a generous federal tax credit, state and utility rebates in Delaware and New Jersey, more efficient panels and systems, and eco-conscious homeowners.

Although recent supply-chain kinks have bumped up prices of panels and other equipment and created wait lists, solar panels sold today still cost less than those available just five or six years ago and produce more electricity. That means most homeowners can install fairly small projects to cover their needs.

But the biggest obstacle for most families remains price: A typical-size solar project in the Philadelphia region area runs about $16,500.

But you’ll get your money’s worth. A 26% federal tax credit and various state and utility incentives will help pay for a chunk of upfront costs and, over time, you’ll cover the rest by avoiding expensive electricity bills.

How quickly you’ll recover your upfront costs depends on where you live, because governments and utilities in Delaware, New Jersey, and Pennsylvania offer very different levels of incentives.

New Jersey residents who tap the state’s strong solar incentive program — which would pay our hypothetical homeowners almost $10,000 over 15 years for the renewable energy their system would generate — will see the shortest payback period: They’ll break even within seven years, according to our nonprofit group, Consumers’ Checkbook.

Delaware residents who collect generous Delmarva Power incentives upfront over the 20-year life of the system will get a fairly quick payback time: Within eight years.

And in Pennsylvania, where local incentives aren’t as big, payback won’t happen for 10 years.

After that, with systems providing free electricity for years, most area residents will come out ahead on their energy bills by $13,000 to $22,000 over 20 years, depending on their location.

You can finance a solar project purchase and avoid the big upfront spend. Installers offer loans or you can obtain a home equity line of credit. But that adds thousands of dollars in interest charges.

Alternatively, homeowners can sign on with a company that supplies equipment through a lease in exchange for paying it a flat monthly fee — typically $70 to $120 per month in this area — and letting it collect the tax credit and incentives.

At Checkbook.org in general, we don’t think these arrangements represent good deals.

Inquirer readers can access Checkbook’s full solar energy report, and all of Checkbook’s unbiased ratings of local service providers until April 5 at Checkbook.org/Inquirer/Solar.

Of course, many homeowners want to minimize their homes’ impact on the environment, regardless of any cost-benefit calculation. If you are in this group, solar for sure is for you.

Start by making sure your abode and its roof are good fits for solar. Roofs that have unobstructed southern exposure are best.

Because solar panels last for 25 years or more and because your shingles will need equal longevity, ask a roofer if you should replace shingles where you plan to install panels. If your roof is newer and still covered by a manufacturer’s warranty, ask your roofing contractor for written acknowledgment that the installation of solar panels will not invalidate the warranty.

Checkbook’s undercover shoppers found some installers recommended systems that were too large — and more costly — than needed, so get your own estimate of the system size you need. Gather your electric bills for the last 12 months and tally how much power you used and what you paid. Then use various calculators offered by three handy websites to estimate what you need: The PVWatts Calculator from the U.S. Department of Energy (pvwatts.nrel.gov); and Google’s Project Sunroof (sunroof.withgoogle.com);and the SolarReviews.com site’s estimator(solar-estimate.org).

If you’re planning to buy an electric vehicle in the next few years, add about 2.5kW of capacity per car to your system size.

Next, collect proposals from solar companies. Checkbook’s undercover shoppers collected prices for two homes with typical projects and found big company-to-company price differences for each. For one home, prices ranged from $13,395 to $27,246 for a 5.7 kW system; for the other, prices ranged from $11,750 to $23,900 for a 5.0 kW system.

The lesson? Collecting several prices could mean saving $10,000.

Thoroughly vet solar contractors you consider. Skeptically review any marketing materials — some companies promise overly optimistic scenarios. Carefully read the contract and ask the company to clarify anything you don’t understand.

Ask how long the company has been installing solar energy systems. Has it completed at least 100 projects? Does it have experience getting permits approved in your jurisdiction and approvals to connect systems to your electricity utility? You don’t want your home to be a guinea pig for an inexperienced installer.

Make sure any installer you consider has an electrical contractor’s license; then verify it with the licensing authority. Also ask for proof that companies and any subcontractors carry liability and workers’ compensation insurance.

Find out how long it will take to get things done and when you’ll have to pay. As with most home improvement jobs these days, solar projects are often delayed due to supply-chain delays.

Look for a long-term workmanship warranty that will protect you if your system breaks down or doesn’t operate as efficiently as promised. Installers’ warranties can vary from one to 10 years; the longer, the better.

If you can, avoid making a big deposit before work starts. Usually, $1,000 or more is due when you sign the contract, and then another payment is due when installation begins, with the balance upon completion. By withholding as much money as possible until work is complete, you retain maximum leverage to insure the work is done correctly and promptly.

Consider other steps to reduce your home’s energy consumption. Most of our homes unnecessarily waste lots of energy. Often, the combined effects of making inexpensive improvements, adopting better habits, and buying better products will provide large savings. At Checkbook.org we detail 32 changes you can make around your home that will save energy.

Delaware Valley Consumers’ Checkbook magazine and Checkbook.org is a nonprofit that helps consumers get the best service and lowest prices. It is supported by consumers and takes no money from the service providers evaluated.