Can Going Solar Save Me Money?

Solar is the fastest-growing source of power generating capacity in America – and residential rooftop solar is the fastest-growing part of the solar market. According to the Solar Energy Industries Association’s annual figures, over 2 gigawatts (GW) of home solar power capacity were installed in 2015, a 66% increase over the previous year and the fourth straight year of greater than 50% growth. To give you a sense of perspective, that’s about as much electricity capacity as several big coal power plants! It’s clear that home solar is in the midst of an unprecedented boom - and you can be sure it’s not just because awareness of the dangers of climate change is also rising.

(Source: SEIA/GTM, Solar Market Insight 2015 Q4)

 

Solar is booming simply because it’s a sensible investment for more and more households on purely financial terms. For example, a typical Californian homeowner using a loan to finance their system can save up to 20% 1 on their electricity costs from their very first month, even after accounting for loan payments! If electricity rates were to rise at an average rate of 3.2% per year over the next 30 years , that would translate to over $60,000 in savings over the 30-year life of the investment 2 – and that doesn’t even include the $15,000 on average a solar panel adds to the value of your home, according to a study by the Lawrence Berkeley National Laboratory.

Solar has become such a solid, mainstream investment for homeowners today for two main reasons – the first is obvious, the second maybe less so.

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Savings is based on the average self-reported savings of Mosaic borrowers between 10/1/2014 - 3/31/2015 using our 20 year choice rate loan product. Savings depend on credit profile, timely monthly payments and making the prepayment target. Savings are calculated by (Electricity bill before solar) - (Bill after solar + Mosaic loan payment). Results may vary based on geography and weather variability. We assume a solar panel life span of 30 years, a decline in panel production of 0.5% per year, inverter replacements at years 10 and 20, and retail electricity rates increasing 3.2% per year (The US Average electricity price change from first half of 2014 vs first half of 2013 according to the US Energy Information Administration).

Savings is based on the average self-reported savings of Mosaic borrowers between 10/1/2014 - 3/31/2015 using our 20 year choice rate loan product. Savings depend on credit profile, timely monthly payments and making the prepayment target. Savings are calculated by (Electricity bill before solar) - (Bill after solar + Mosaic loan payment). Results may vary based on geography and weather variability. We assume a solar panel life span of 30 years, a decline in panel production of 0.5% per year, inverter replacements at years 10 and 20, and retail electricity rates increasing 3.2% per year (The US Average electricity price change from first half of 2014 vs first half of 2013 according to the US Energy Information Administration).

 

Costs of Solar Are Falling

The costs of solar panels are falling steadily as manufacturers build ever-larger and more efficient factories to serve a solar market that is booming all over the world, not just America. The process of manufacturing solar cells is very similar to that of the silicon-based computer chips that power our laptops and smartphones, and their costs can be expected to follow a similarly steady downward trajectory with growing economies of scale. And, in addition to these declining hardware costs, “soft costs” – all the costs other than the panel itself, such as system design, integration, and installation – have also declined as solar installation companies become larger and more sophisticated.

(Source: Lawrence Berkeley National Laboratory, Tracking the Sun)

 

These factors have combined to reduce the median cost of going solar from about $12 per watt in 1998 to $4 a watt in 2014, according to the most recent tracking data from the Lawrence Berkeley National Laboratory. And, according to SEIA’s own reporting, these costs fell further to $3.50 per watt by the end of 2015, demonstrating that this trend isn’t slowing down anytime soon.

It’s also worth noting that, just as the costs of solar have steadily fallen, the prices charged by utilities for their power keeps going up. In fact, according to the U.S. Energy Information Administration, average residential electricity prices have gone up 14 out of the last 15 years, for an overall increase of nearly 50%. When you combine locking in your electricity costs with today’s low-cost solar panels and the prospect of ever-increasing utility rates, the compelling value proposition for going solar is easy to understand.

 

Solar Finance Options

For all those fundamental economic drivers, an equally important part of the home solar boom has been the blossoming of financing options over the past few years. As solar technology established a track record of reliable operation and an increasingly attractive consumer value proposition, finance providers became very happy to cover the capital costs for solar installations in exchange for steady returns on investment. And as it turned out, eliminating up-front costs and allowing homeowners to easily pay off their solar panels over time is what cleared the way for truly supercharged residential solar growth.

Initially, the big game-changer in solar financing was the solar lease, or similar arrangements known as power purchase agreements (PPA). Under this financing model, companies like SolarCity essentially use your roof to install solar panels that they own, and then sell you the solar electricity they generate under a long-term contract. Although these prices are set to be lower than utility electricity prices, they also often come with annual “escalators” that are designed to increase at a similar pace to utility prices.

For this and other reasons, you can usually capture more of the value proposition from solar by

owning your solar panels instead of leasing – just like a car, home, or other big capital purchases. In fact a recent study by the National Renewable Energy Laboratory (NREL) estimates that owning solar, whether through cash purchase or with loan financing, can save up to 30% more over the long term compared to leasing and PPA alternatives.

 

Thus, as solar investments become more and more attractive and as homeowners become more savvy, the industry is expected to move increasingly away from the lease model and towards direct ownership of solar facilitated by loan financing. This combination offers the best of both worlds – like a lease, it eliminates the up-front costs of going solar, but it also allows homeowners to capture more of the savings.

 

Mosaic Can Help You Maximize Your Savings

Mosaic is one of the leading providers of home solar loans and we’re dedicated to not only helping you maximize your savings over the life of your solar investment but making the process as straightforward and easy as possible.  Keep reading to learn about the process of going solar with Mosaic – or just click here to get started with a free solar quote!

 

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