Costs and Benefits of Residential Solar
The economics of investing in a solar electric system for your home varies depending on a number of factors, including:
- Solar System Performance - a function of orientation, pitch (slope) and shading issues
- Electric Rates - depends on your individual utility rates (note that rates in NJ, NY and CT have all increased from as little as 7.7% to nearly 40% for some rate payers -- the economics below assume these new rates)
- Utility or state subsidies (usually referred to as rebates)
- 30% federal investment tax credit, with a cap of $2,000 for residences
- 25% state income tax credit for NY residents, with a cap of $5,000 (none in NJ or CT)
- Annual Sale of Solar Renewable Energy Certificates (SRECs) in New Jersey (sometimes called "Green Tags")
Below are the economics for typical 5000-watt residential solar systems in New Jersey, New York, and Connecticut, on fully-sunny, south-facing roofs. The calculations include an assumed 5% average annual escalation in electric rates, which is approximately the historical average for the region over the last 30 years. If rates go up more quickly, then annual rates of return will be higher and payback periods will be shorter.
New Jersey Homeowner Cost Savings Chart
| Initial Investment |
| 5000 Watt Solar Electric System: |
$42,000 |
New Jersey Clean Energy Program Rebate:
($3.80 Per Watt) |
- $19,000 |
| Net Investment: |
= $23,000 |
| Federal Tax Credit: |
- $2,000 |
| Net Investment After Tax Credit: |
= $21,000 |
|
| Annual Value |
Yearly Electricity Produced:
(6,350 kWh at $0.155) |
$984 |
Sale of RECs Per Year:*
(6,350 kWh Estimated at $0.225/kWh) |
+ $1,429 |
| Total Annual Value of Solar Production: |
= $2,413 |
|
| Return on Investment |
Annual Rate of Return:
($2,254 / $21,000)
Comparable to a 14-16% return from a taxable investment |
11.49% |
|
| Years Until Payback |
| Payback of Net Investment from Value of Annual Production |
8-9 years |
* Note this is an estimated value |
* CCEF measures solar in PTC watts rather than the industry-standard STC watts.
What CCEF calls a 5,000 watt system would be considered approximately a 5,600 watt system elsewhere.
Also, CCEF's $5.00/watt (PTC) rebate may be lower in installations that are less than ideal.
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