Solar: Affordable & Predictable Energy for CT Homeowners
Predictability. We expect it just about everywhere else, but for some reason not with electricity. At the end of the day, none of us expect free electricity, but wanting affordable and predictable energy rates shouldn’t be unreasonable.
As Eversource's July rate hikes take effect, many Connecticut homeowners face higher utility bills amid rising summer temperatures. These increases, caused by the summer heat and increased usage, leave residents with unpredictable and escalating energy costs. It might even leave homeowners wondering what other options there are. Installing solar panels offers a way to take control of your energy expenses, providing predictability and stability.
Is Solar Worth it in CT?
Solar energy provides a unique advantage: it allows CT homeowners to lock in their energy costs. By investing in solar panels, you can significantly reduce or even eliminate your dependence on the grid, shielding yourself from future rate hikes. There are two main ways to go solar. The first is paying for your system up front, a significant investment that results in substantial long-term savings, or a Power Purchase Agreement, which doesn’t require you to own the equipment but instead simply purchase the power the solar panels produce.
Let’s break down these two paths to energy predictability.
Solar Financing Options: Cash vs. PPA
When considering solar installation, homeowners have two primary financing options: paying upfront (cash) or opting for a Power Purchase Agreement (PPA).
Cash Purchase: This option involves buying your solar panel system outright, leading to maximum long-term savings and potential eligibility for incentives and tax credits. It offers the most control over your energy production and costs. One of the first questions everyone asks is how long it takes to recoup that investment. We’ll share the math below, you might just be surprised.
PPA: A PPA allows homeowners to install a solar system with little to no upfront cost. Instead, you agree to purchase the electricity generated by the panels at a rate lower than current utility rates with a low fixed yearly increase. Sure, you miss out on some of the long-term savings, but this option provides immediate savings and protects you from utility rate increases, thus allowing you to benefit from the predictability of solar without a large up-front investment.
As mentioned, there are also other financial incentives potentially available to homeowners considering solar panels. Solar incentives in Connecticut, such as solar rebates, sales tax exemptions, and property tax exemptions are some of the ways to help reduce the overall cost.
How the Predictability of Solar Power Can Save You Money
Now let’s see exactly how each of these two options results in energy savings over time.
Cash: Investment and Payback
Investing in owning a solar system provides homeowners with financial predictability and long-term savings. Let's break down the math:
Initial Investment: Let’s use an average cost of a residential solar project of $31,500.
Federal Tax Credit: A 30% Federal Tax Credit bringing the net average cost to $22,050. This is NOT a discount. You will receive a credit against your taxes for 30% of the project total, effectively reducing the cost by $9,450.
Monthly Savings: Using an average electric bill of $233/month, we can estimate the payback period.
To find the payback period:
Initial Investment: $22,050
Monthly Savings: $233
Since you own your solar panel system you will be producing your own electricity and pay nothing to the utility company. This assumes your system was sized to cover 100% of your energy usage. As long as your home qualifies, this is a reasonable assumption to make.
So, it takes approximately 7.5 years to pay off the investment. After this period, assuming the system covers 100% of the energy needs, the homeowner essentially pays nothing for electricity.
Yearly Savings Calculation:
Initial Annual Savings: $2,800 (based on $233 monthly savings)
Assumed Yearly Utility Rate Increase: 5% (that you won’t be subject to anymore)
To calculate the savings over time, we start with $2,800 and increase it by 5% annually:
Over the next 10 years after having paid off the system you’d save over $35,000. Not only will homeowners save over time, but starting day one they will be shielded from utility rate hikes.
PPA Agreements: Fixed Rates and Predictable Costs
A Power Purchase Agreement (PPA) offers a different financial model:
Current Utility Rate (in CT): 29 cents per kWh
Starting PPA Rate: 18 cents per kWh (rates can be higher but as of 2024 homeowners should think twice before signing a PPA agreement starting above 24 cents per kWh)
PPA Rate Increase: FIXED 2.99% annually for length of term (This fixed increase is predictable, unlike the variable and often surprising rate hikes from utilities like Eversource.)
To calculate when the PPA rate equals the current utility rate:
Initial PPA Rate: 18 cents
Utility Rate: 29 cents
Annual Increase: 2.99%
It takes around 14.5 years before the PPA rate matches the current utility rate, and that’s assuming that in 14.5 years the utility rate wouldn’t have increased at all! In reality, utility rates are projected to increase 5% each year, so locking into a fixed 2.99% and starting at a lower cost per kWh makes a Power Purchase Agreement a very attractive solution to energy uncertainty. Recent increases in Connecticut highlight the volatility of traditional energy costs, making solar a stable and cost-effective alternative.
Conclusion
Solar panels offer homeowners in Connecticut a way to gain control over their energy costs. Whether through purchasing a solar panel system outright or entering a PPA, solar provides a predictable, long-term solution to rising utility rates. By investing in solar power, homeowners can secure their financial future, reduce their environmental impact, and enjoy peace of mind knowing they are protected from rate hikes and no longer held hostage by the utility company.
If you're looking to learn more about solar power or solar panel installations, contact Earthlight Technologies today.
