Ann Arbor (informed comment) – The Inflation Reduction Act (IRA) has established a 10-year 30% tax credit for installing solar panels on rooftops. If someone is planning to spend a long time in their home. The IRA does not only subsidize the group itself through huge tax breaks.
According to the Department of Energy, Toby Stranger in Consumer Reports lists the following expenses for which you can receive a 30% tax credit for your home solar system.
The useful life of a solar panel is about 25 years. Before installing in 2013, we re-roofed the house and hoped that the new tiles would last as long as the new panels. Our 16 solar panels cost $18,000 and generate over 4 megawatt hours per year. Ann Arbor has very little sunshine in December and January, so those two months are a waste. However, these panels almost completely cover our summer use, and since our air conditioner is electric, that’s what we want.
You’ll hear a lot of things, many of them wrong, about how long you have to pay for a panel to save on electricity. The array of panels we have today can cost anywhere from $12,000 to $14,000 because the cost of panels has come down a lot. With an IRA, you can get a 30% tax credit, assuming you owe that much in taxes. On a $14,000 system, this brings the cost down to $9,800. But consider this: Zillow estimates that solar panels can make your home 4% bigger. On a $200,000 home, the value of equity increases by $8,000.
However, with the median home price in the US this year being $348,000, installing rooftop solar panels would add $13,920 to your net worth. So between a tax break and capital gains, the panels are practically free to use, depending on the kilowatts of array you install. If you factor in the tax credit and increase in home value, you can save on your energy bill, if not immediately, then soon after you buy it. Of course, the increase in equity is irrelevant until the panel reaches the end of its life, so not everyone is willing to count on it.
Even excluding equity increases, in my country a $14,000 system would take over 7 years to pay off after the tax credit, which is not much for a 25 year system. In addition, as the cost of fossil fuels rises, the payback period shortens. In the UK, solar panels are estimated to pay off in as little as four years due to soaring fossil gas prices.
If you combine solar panels with a home battery system such as a Powerwall, the payback period can be cut in half. And as mentioned above, there are also tax incentives available when you purchase these products.
Also, if you buy an electric car, you can get a $7,500 tax credit in some cases, and you use a fast charger during the day to charge your car with solar panels, or you use a home battery like a Powerwall. A system that pays for less free time both at the machine and at the panel, saving on gas and electricity.
To be honest, it seems to me that if you are a homeowner and live in your current home for another ten years, you are probably wasting money by not installing solar panels.
Apart from the costs, you are satisfied with the reduction in CO2 emissions. Our panels produced 33.5 MWh of sunlight, which, if not enough, significantly reduced our carbon production. We don’t think we’ll be in this house for long, or we’ll install more panels and install a heat pump, and now a big tax credit.
Juan Cole is the founder and editor-in-chief of Informed Comment. He is the Richard P. Mitchell Professor of History at the University of Michigan and the author of many other books, including Muhammad: Prophet of Peace in Imperial Conflict and Omar Khayyam’s Rubaiyat. Follow him on Twitter @jricole or on the informed comment page on Facebook.