How to Make Money with Solar Panels
Solar panels are great for the environment, but they can be even greater for our wallets. There are a number of different ways to make money with solar panels.
This includes ways for homeowners to manage their finances and for investors to set up solar farms.
Whether you are looking to install solar in your home or considering investing in green energy, keep reading to find out the benefits of going solar.
Switching to Solar
If you are thinking of switching your household to solar, the first thing you need to understand is your household consumption.
The average household consumes around 11 000kWh of energy a year.
You will also need to understand your monthly consumption so that you can calculate what size system you will need to meet your needs.
If you are averaging around 900 kWhs per month, a 6 kW system will probably meet your needs. You can even check out DIY solar kits that come with everything you need - inverters, panels, batteries.
If you’re still debating the cost-effectiveness of going solar, read on to see how you can make money by installing a solar system.
Savings on Electricity
One of the major incentives to go solar - apart from saving the environment - is that it decreases your electricity bill.
While you will still receive an electricity bill after installing solar, it will be much less than what you were paying before.
Savings vary between states, based on a number of factors. These include the electricity rate in your state as well as the sunshine hours you get.
The average home with a 6 kW system can save between $10,000 and $30,000 in total. For some examples, Floridians can save around $13,000 while Californians can save $32,000.
You also avoid the effect of the 2.2% yearly inflation on fossil fuels.
With solar, once you have bought your system, you have control over your energy and associated costs.
Increase the Value of Your Home
A slightly less direct way to make money off of installing solar panels is that installing them drives up the value of your home.
With green energy becoming the future, installing solar panels makes your home a more valuable future asset.
Studies have shown that having a solar system installed can increase the resale value of your home. Research conducted on Zillow found a 4% increase.
While this certainly isn’t an immediate way to make money off of your solar panels, it is a reminder that solar panels are an investment that pays off on many levels.
Not only will you save money while living in the home, using the methods above, but you will be at an advantage if and when you decide to sell.
One of the first ways you can make money (or at least save money) through installing a solar system is the Solar Investment Tax Credit (ITC).
As an incentive to encourage more people to move to solar energy, the federal government implemented a tax credit that can be counted against your federal income tax.
As of 2022, you can claim back 26% of the total cost of your solar power installation. This means that on top of saving money using solar power, you can offset some of the high upfront costs.
If you’re thinking about installing solar, this is a reason to act now because this tax credit will decrease to 22% in 2023 and to zero for residential installations after that.
A commercial tax credit of 10% will remain after 2023.
The credit of 26% applies to systems installed between 2020 and 2022.
Net metering is one of the best ways to save money on a solar system.
Have you ever asked yourself what happens to the unused energy generated by solar panels?
Sometimes your solar panels will generate more electricity than you consume, and this energy gets sent to the grid.
That means the utility company is getting to use your excess solar power.
In most states, this will then reflect on your electricity bill as a credit that can be used to offset future electricity costs.
This is especially useful for the winter months when sunshine hours tend to be less than the summer months.
While states do not currently payout for excess energy generated, in the U.K., individuals are paid directly for the energy they supply to the grid. This legislation came into place at the beginning of 2020, after being debated.
As solar is a rapidly growing industry, this could be indicative of future trends in solar legislation.
Set up a Solar Farm
If you are serious about making money off of solar power, you can set up a solar farm. You would buy and install solar panels on a piece of land, and sell the energy that it generates.
Requiring a large area of and high sunlight hours, this is profitable but definitely comes with a big upfront cost.
You will need at least 1 acre of land, which would be able to hold a 435 kW array and generate a 350 mWh output per year.
The average cost of setting up a 1-acre solar farm would be around half a million dollars, and it would generate around $15,000 a year.
But if you really want to make money off a solar farm, you need at least a 1 mW system.
The installation will be around $1 million, and you need 6-8 acres of land. This would generate around $40,000 per year.
Unlike net metering, you are not sending the electricity you generate to a utility company, but rather selling them on special markets.
The U.S. average trading price was $27.40 in 2019, to give you an idea of the price you can sell your energy for.
In general, solar farms have a 13%-15% return on investment.
Lease Your Land
If you like the idea of a solar farm but are put off by the installation costs, leasing your land might be a perfect solution.
If you do have an area of land not currently in use, you can lease your land to a solar company.
You will make less profit, but they cover the installation costs so it is a much smaller investment.
On average, you can expect around $2,000 per acre of land leased out.
How to Make Money with Solar Panel FAQs
How Long Does It Take to Break Even on Solar Panels?
Installing solar panels is obviously a large upfront cost, but the savings you make will help you break even.
To calculate how long it will take you to break even with your solar panel installation:
- Determine the total cost of the installation. Then subtract the tax subsidy of 26% of installation costs (if you act fast enough). This is your net cost.
- Work out your annual electricity savings, factoring in net metering. This is your annual benefits.
- Divide your net cost by your annual benefits. This gives you the number of years it will take you to break even on your solar system.
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