Solar panels make electricity that you can use to power your home, and in California, you can also send the extra solar energy you don’t use back to the grid and get paid for it! That’s called net metering, and it’s the best way to ensure you get great return on your solar investment.
There’s a lot more to learn about going solar in California, but if at any time you decide you’re ready to connect with a solar expert and get a custom solar savings quote for your home, click the button below!
A typical home in California needs a 5-kilowatt (kW) solar system to produce about half of its energy needs per year. That’s about $1,260 worth of savings every year—enough to pay back the initial cost of installing a system in just 8 years. But you don’t have to put any money down to buy the system, because banks and financing companies now offer solar loans. Getting a solar loan is like taking out a loan for a business with guaranteed income.
Check out the possible returns from the two best ways to go solar in California:
You put no money down for the system, but you get the federal government’s 30% solar tax credit, equal to $4,800. Then, while you’re paying off the loan, the money you’ll save on your electric bill is about equal to the loan payments for the system. Even before you’ve finished paying off the loan, you’ll start to see some profit, which kicks into high gear after year 15.
You put down $17,500, then get a rebate of $1,500 right away. Over the course of a year, you save $1,260 on electricity, and get a $4,800 tax break. After all those incentives, the 1st-year cost of that 5-kW system is just $9,940.
Modern solar panels come with a 25-year warranty, which ensures you’ll keep saving for long into the future. Ready to get a custom quote for your home? Just click the button below and give us a few details so we can find the best deal for you!
“Net Present What?!” Don’t panic, this isn’t an economics test.
You may have noticed the numbers in the image above, so let’s explain how we got them. NPV is just a tool used to compare investments. Basically, it asks, “if you had X dollars to invest, which investment would get you the best return?” Getting a return on your investment sooner is better than later, because you can reinvest your early profits and keep the gain train going.
We compare an investment in solar to a “what-if” investment in a Standard & Poor’s (S&P) 500 stock index fund, which has seen growth of about 7% per year over the past 25 years. We use the cost of solar in California and ask “how much better or worse (in 2017 dollars) is an investment in solar than stocks?”
Here’s what we found for the three different ways of going solar in California:
Look at all that green! When we tell you solar is a good deal in California, this is what we’re talking about. A solar investment in California should provide a better return than the stock market no matter how you choose to finance it.
The image above shows a third kind of solar financing called a “PPA”, or Power-Purchase Agreement. Under a PPA, you sign up to have solar panels put on your roof for no cost, then you agree to buy the power they produce at a price that’s a little less than your current electric bill.
A PPA offers the least amount of savings from the other ways to go solar, but it also has the least amount of risk. Because the solar company owns the panels, they do all the maintenance and guarantee the panels will produce a certain amount of energy each year.
No matter which way you choose to pay for solar, here’s some more about how we got these numbers:
Saving money without having to put anything down is always going to have a positive NPV. In California, you’ll save an average of $600 per year, or $12,000 over 20 years by paying for electricity under a solar PPA. That $12,000 is worth $5,869 in today’s dollars.
As we’re fond of saying, taking a loan for solar is a no-brainer, because it’s like agreeing to pay over time for something that is also making you money, plus you get 30% of the loan value as a tax credit (cash in your pocket) after making payments for only 1 year. In California, that tax credit windfall helps push the NPV of a solar loan to over $10,000 better than a similar investment in the stock market. That’s a huge amount of upside for a $0-down investment!
The biggest reason a solar purchase in California has a positive NPV is it allows you to recoup 30% of that investment within 1 year, and reinvest that amount in whatever you choose. On top of that, the money you save on electricity is also available for future investment. But you can see above what happens to NPV if you choose a solar loan instead. Unless you need to put cash into an asset, a loan is a much smarter way to pay for solar panels.
Keep in mind, the numbers above are based on an average home in California. If you’re ready for a custom quote for a solar ppa, loan, or purchase, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.