As part of our commitment to providing valuable information to our community, SMHA is pleased to share this article on the cost of solar energy, originally published in the Tulsa World E-Edition Plus, Home section, on February 22, 2025.
Solar energy is becoming an increasingly popular option for homeowners looking to reduce electricity bills, take advantage of tax incentives, and contribute to a greener environment. This article, written by Robyn A. Friedman for Kiplinger’s Personal Finance, provides insights into solar installation costs, payback periods, financing options, and available incentives.
We hope this resource helps our residents make informed decisions about solar energy.
Cost of Solar Energy
By Robyn A. Friedman | Kiplinger’s Personal Finance
If you’re thinking about converting your home to solar power, you have plenty of company. According to the U.S. Department of the Treasury, more than 750,000 families who filed 2023 tax returns through May 23, 2024, claimed residential energy tax credits for rooftop solar, reporting more than $20.5 billion in qualified solar-electric property expenses.
Homeowners are converting to solar power for good reason. Reducing your electric bill, or eliminating it entirely, is certainly an appealing prospect—especially if you live in areas where utility costs are high or where heating or air conditioning is required for most of the year.
Just ask Shaun Eli Breidbart, 63, a stand-up comedian in Pelham, New York. In July 2022, Breidbart added 22 solar panels to his four-bedroom, Colonial-style home.
“I switched to solar for a couple of reasons,” he says. “I care about the environment, but that was a side benefit. The main reason was economic—I wouldn’t have done it if it didn’t pay for itself.”
Breidbart still heats his house with natural gas, but he uses electricity to power the home’s central air conditioning and appliances and to charge his Tesla Model Y. His electric bill, which previously averaged $300 a month, is now about $32 and consists mostly of a connection fee, he says.
Breidbart took advantage of both federal and state tax credits to fund his solar conversion. The Inflation Reduction Act of 2022 includes a provision that increased the federal residential solar energy tax credit to 30% of the cost of solar panel installations between 2022 and 2032. That credit decreases to 26% for systems installed in 2033 and 22% for systems installed in 2034. The credit will expire in 2035 unless Congress renews it.
Thanks to the tax credits, Breidbart’s net cost for the 22 solar panels was $10,078, compared with the $21,540 purchase price. He expects to break even—in other words, his investment in solar technology will be fully offset by his energy savings—in less than five years.
Evaluating Your Energy Savings and Payback Period
The basic formula to calculate how soon you’ll recoup your investment in solar is to divide the cost of your solar installation by the amount of money you expect to save each year.
For example, let’s assume your solar system will have a net cost of $27,000 after applying eligible incentives. If you spend $3,600 a year on electricity ($300 per month) and expect to reduce your electric bill to zero by installing solar panels, you will break even on your investment in 7.5 years. That is the average payback period for a solar installation, according to EnergySage, an online solar marketplace that allows homeowners to comparison shop among prescreened installers.
EnergySage also offers a free calculator to estimate your potential savings and payback period at www.energysage.com/solar/calculator.
Lisa Vandervalk made the decision to convert her 2,000-square-foot home in Mendon, Massachusetts, to solar in July 2023, and her system was completed and activated in April 2024. Vandervalk, 44, who manages a winery, installed 30 panels on her four-bedroom home and uses the power it produces to run appliances and air conditioning and to charge her car. She still uses oil for heat and hot water.
“We could have gotten a cheaper system, with fewer panels, but we figured it was better to go a little bit bigger,” she says.
All of the power her panels produce goes back to the grid, where it’s “banked” until she needs it.
Prior to converting, her electric bill averaged $300 a month. Now, it’s zero. Vandervalk paid $40,000 for her system, which had a net cost of $27,000 after federal and state tax credits. She expects to break even in less than eight years.
Financing Options
These are the most common methods of financing a solar conversion:
- Paying Cash: If you have enough in savings to cover the full cost upfront, you’ll pay no interest and own the system outright.
- Tapping Home Equity: Many homeowners use a home-equity line of credit or home-equity loan to finance their solar conversion.
- Financing Through the Solar Contractor: Many contractors offer financing, usually through third-party lenders, but be sure to compare costs.
- Leasing the System: Leasing solar panels may involve no upfront costs, but it also means you don’t own the system or qualify for tax credits.
Leasing could complicate a future home sale, as potential buyers may need to take over the lease, which could impact their mortgage qualification.
Tax Credits and Other Incentives
The federal tax credit for solar power systems is a dollar-for-dollar reduction in the amount of income tax you owe. To be eligible for the 30% credit, the solar system must be installed at a residence you own in the U.S. Eligible expenses include:
- The cost of solar panels
- Labor costs
- Wiring and accessory equipment
- Energy storage devices such as batteries
- Sales tax on eligible expenses
State and local incentives may also be available. The Database of State Incentives for Renewables & Efficiency (DSIREUSA.org) is a valuable resource for finding incentives by location.
This article was originally published in Tulsa World E-Edition Plus on February 22, 2025. Shared as a public service by SMHA.
