I’ve been doing some research into getting solar panels installed in our home in order to save money on the monthly electricity bill.
Anyone living in Canada knows that the winters can be cold and summers are generally warm. But solar panels rely on sunlight, so your exact location will have a big impact on the economics of installing them in your home.
Solar panels appeal to me because of the idea of saving every month and lowering the monthly utility bill. But being a numbers guy the rate of return would have to be high enough for me to have them installed.
Solar panels are also getting attention because of climate change and government policies. With governments aiming to reduce carbon emissions, solar seems like a great option for everyday households to reduce their carbon footprint.
Economics of Solar Panels
Anyone (especially me) considering installing solar panels in their home would want to know what the numbers look like – cost, savings and rate of return.
Here’s the numbers I got for one quote:
- $17,000 initial cost
- 5,600 kwh of electricity generated
- 2.2% rate of return (year 1)
The solar panels would generate more electricity than I’d typically use in a month during the summer and would then be sold back to the grid at the current market rate. On the other hand in the winter when the solar panels aren’t generating as much electricity I would buy electricity from the grid as most people do. A bidirectional meter would need to be installed to make sure I’d get credits for generating more electricity than I use.
Surprisingly, snow doesn’t affect the solar panels much in the winter. A study recently done in Alberta showed that snow had less than a 10% impact on the electricity generated. I assume this is because the panels don’t tend to get covered in snow often because of their angle.
Keep in mind that these numbers are specific to me – your situation might be totally different depending on where you live, which direction your roof faces, and of course the initial installation cost.
Here are a few things that could change the economics of installing solar panels:
- Your location. If you live in a more southern area that gets more sun (and stronger rays) – more electricity can be generated, improving the rate of return
- Direction (and slope) of your roof – if you have a roof that gets a lot of sunshine you’re more likely to be able to generate more electricity
- Your cost of electricity. In my case I currently pay $0.08/kwh – if you pay more then your savings would increase and so would your rate of return.
It’s also worth noting that the solar panels are uniquely configured for each home, so if you plan on selling your home in the next 10-15 years you’ll want to consider whether you’d get your money back from installing them since they are considered an addition to the home.
In the future I think anyone who is interested in getting solar panels will need to see either two things – electricity rates to go up or the cost of installing solar panels to go down (or both). If either of those things happen then the rate of return will go up.
There will always be a sub-segment of people who want to install solar panels for philosophical reasons and will want to go “off the grid”, but for most people the numbers will have to improve before it starts to become mainstream.
Conclusion – the current economics of getting solar panels installed doesn’t work for me right now but I am hoping things improve in the future. I hope the cost of the solar panels decreases so more people like myself will use them in their home.
Would you consider getting solar panels in your home?