Installing a solar panel at your residence can give you the satisfaction of contributing to a green environment. But if you want to make sure that your contribution to a green environment does not burn a hole in your pocket you can do a financial viability check.
Let us learn how to do a financial viability scrutiny of your investment in solar panels. The most important element of a feasibility investigation is doing a cost benefit analysis.
Capital cost and operating cost of running a solar panel
The upfront money that you require to invest to own a solar panel would depend on the capacity of the solar panel you need to own and any subsidies that the state government or federal government provide. The capital cost would also include the cost of racks, inverter and other accessories that go along with a solar panel.
As far as operating cost is concerned you need to account for the interest earnings that you forego by making the capital investment required for installing the panel.
Apart from the opportunity cost there is also the repair and maintenance costs. These are generally minimal and primarily include the cost of replacing the inverter and its batteries.
Tangible benefits of a solar panel installation
While doing a benefit analysis make sure that you incorporate the following financial benefits in your calculation.
Savings in your electricity bill
By installing a solar panel you can save on your electricity bill. If your solar panel is rated for 1KW, you can look to save a significant amount of money on your electricity. The amount of electricity units that can be generated by the solar panel would depend on the solar radiation at that place and how long the sun shines during the day on an average during the year.
Once you know the number of units you can save every year, the next step is to determine how much this would translate in money terms every year. To do so multiple the energy units that you save with the power tariffs in your town and this will give you the annual savings in dollar terms. Do incorporate the impact of inflation in power tariffs while calculating the annual savings. Since the life of a solar panel is typically 25 years, you would need to work out the annual savings for the next 25 years.
Government incentives if any
Some governments provide tax incentives for installing solar panel. If you qualify for any of these benefits you need to add it to your annual savings from solar installation
Home value enhancement
If you have a solar panel installed at your residence and if you are looking to sell your residence in future you may be able to attract more buyers. This should translate into improved liquidity and better value as well for your residence.
It is advisable that you make a thorough investigation before investing. Study more on the internet and consult a solar panel installer in your area for further advice. You may also discuss the financial viability of installing solar panel with your friends who have already installed solar panel or people in your social media network who are knowledgeable in the subject. It is however suggested that you always keep in mind the environmental benefits of installing solar panels when making feasibility analysis.