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If you want to save money on your energy bills or work toward becoming carbon neutral, going with solar power might be right for you. Solar panels absorb sunlight and transform it into renewable energy through photovoltaic technology.
You can use this energy to power your home's lights, HVAC unit and much more. Best of all, the costs of installing solar panels are falling. When you decide to go with residential solar service, you have the choice of renting or buying your panels outright.
© Getty Images This guide will help you understand the pros and cons of each option. In turn, you will be able to decide whether renting or buying is the best fit. Let's start by seeing if your home is an ideal fit for solar panels.
Is my home suitable for solar energy?
Check with a solar provider to determine if your roof has enough visibility and the correct slope for the installation. Do you have trees nearby your home that create a lot of shade? If your roof doesn't get a lot of direct sunlight, it might not be a great fit for solar panels. Regardless, a qualified provider can confirm your home's eligibility.
If your home is eligible for solar panels, check government sites and with your local energy utility to see if they offer any incentives for residential solar panels. Now, let's weigh whether renting or buying is the smart fit for you.
Benefits of renting solar panels
Instead of paying the upfront costs associated with buying solar panels, you make monthly lease payments when you rent. In many instances, the company leasing you the panels is also responsible for maintenance, but it's vital to check upfront that it covers all maintenance and repairs.
You will receive energy savings with solar panels. How much you save, however, depends on your home's electric consumption, the electric rate your supplier charges and the size of your solar energy system.
Things to consider when renting
While you will not have to worry about upfront costs, you also do not receive the tax benefits of installing solar panels. The company leasing you the solar panels will take the credit.
Moreover, since you are under a lease, you must fulfill the terms of that agreement. That's true even if you decide you want to move while still under contract. The term details could vary based on the specific solar provider, so make sure to check with any prospective installers on their terms before you make your decision.
Benefits of buying solar panels
Once you install the solar panels, you will be eligible to receive tax credits for installing the equipment.
Another benefit is renewable energy certificates. Electric companies must source some of their power from renewable energy sources. Therefore, you can end up making money on these certificates by selling the renewable energy produced by the solar panels. Over time, it will reduce the payback period of your solar system.
Things to consider when buying
When considering solar energy, the upfront costs can give people second thoughts. That's not surprising, considering a residential solar system can cost between $15,000 and $25,000.
If you can bear the upfront costs, however, you are eligible to receive a one-time tax credit of 22% of the system cost. With the US recently rejoining the Paris Climate Accord, the tax credit amount could change in the future.
With this in mind, if your system costs $19,000, you would receive a tax credit of $4,180. While it does not offset the initial costs, it does provide some relief, as long as you pay at least that much in federal income tax. What's more, with lower energy costs, you will continue to see the cost savings both now and well into the future.
Another thing to consider is how a solar system can influence your homeowner's insurance, as these policies come with coverage limits. If the value of your solar system exceeds your coverage amount, you will have to upgrade coverage.
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Tips for going green
Solar panels can offer significant energy savings. To see if this is the right fit for you, you should first talk with a few solar providers in your area. The companies selling and installing solar panels can inspect your home to ensure it's suitable for the equipment.
Along with the angle of your roof and the direction it faces (south-facing is usually best), the pros will also examine your roof's age. Ideally, you need a roof with at least 500 square feet. They will consider its age as well. Since panels can last upwards of 25 years, having a roof in optimum condition makes it easier to install a solar system.
After speaking with solar providers, you can determine if solar energy is a wise investment for you -- either to rent or to buy.
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