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Should I install solar now, or wait until the cost goes down?

We get this question a lot. So much, in fact, that it’s related to one of our top ten solar myths. Here’s the answer: Install solar now.

Here’s why:

Solar is a good investment now, beating the S&P 500 in most of the United States. By installing solar now, you’ll avoid paying electric bills that much sooner, which goes a long way. Moreover, you’ll take advantage of market conditions as they exist. Predicting the future is hard, so if you know something is a solid investment now, take it. That’s much greater certainty in the return on your investment than say, a Wall Street firm can give you.

And there isn’t some market-disrupting solar technology in the offing that will completely change the game by next year, so don’t be fooled by people who say to wait because panel efficiency isn’t good enough yet, or because thin film is coming into its own. Bottom line: the technology and finances make sense now, and even if the cost of solar panels drops by more than 8% in the next year, you won’t be seeing a huge difference in returns over time.

Still not convinced? We ran the numbers:

Let’s look at an investment in solar in California, where solar makes sense even though the big rebates and tax credits of the past are long gone. Here’s the rundown of our assumptions for this example:

As you can see above, we calculated a 7.5% decrease in installed costs, which is right in line with what the industry has seen the past several years. We also calculate an increase in electricity costs of about 3.5%, a number based on data from the U.S. Energy Information Administration that we use for all of our solar savings calculations.

Here’s the kicker: to get an accurate picture of the difference between the two years, you have to add the cost of the electricity you buy this year back into the price, but the federal tax credit is based on the actual installed costs, so the 2016 tax credit will be significantly smaller than its 2015 counterpart. And don’t forget, the federal tax credit for solar is going away on December 31, 2016.

Now, you might be saying “but that’s in California, one of the sunniest states!” And to that we say: “thanks for bringing that up, Mr. Strawman! You ought to know that the installed cost decreases and electricity price increases will be about the same all over the country!”

What’s more: in states like North Carolina, which has a great tax credit that expires at the end of 2015, it’s even more critical that you go solar now if you’re considering it. In some states, incentives have even disappeared before their scheduled end date, meaning if you’re banking on them being around next year, you might find yourself out of luck.

So what will the financial result of a decrease in solar installed costs be?

Considering our numbers from above, we calculated the returns for a 3.5-kW system purchased this year or next year. Here’s how it looks:

The results show that, over the 25-year timeframe we studied, purchasing a system in 2016 results in $612 more in profit than purchasing a system in 2015. Is $612 over 25 years enough of a potential increase to make waiting worth it? No, it’s not.

Remember, if installed prices don’t fall by 7.5%, that dollar amount will decrease, and you could even end up making less over the 25-year term if installed costs go down by 2% or less. And don’t forget the state incentives. If you have the chance to take advantage of them today, do it, because they may not be around next year.

If you’re considering an investment in solar power, don’t wait. Install solar now!

Last modified: April 5, 2019

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Peter
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Peter

Of the people that have installed Solar PV that I have asked, none would recommend the company that did their installation.

mike
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mike

The table above does not seem to be accurate. Ithas a tax credit of 30% (4725/15730) for 2015 and a tax credit of 27.99% for 2016 (4,371/15,616). As far as I know the credit is also 30% in 2016 which makes is cheaper to wait.

Anonymous
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Anonymous

SolarCity

Anonymous
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Anonymous

It will be very nice to know; who are the best company’s providing the best equipment and service.

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