One of the common criticisms thrown against the vibrant solar plans of the NJ state government is that the demand for solar power is being created artificially and that it would not be economically feasible in the long run to both consumers and the state government.
Today, we’ll look at some numbers to find out if there’s any truth to these claims.
Contribution by Incentives
Currently, there are several state and federal government incentive programs to fuel solar adoption by residential and commercial building owners in the state. The income tax credit by the federal government can slash your netcapital investment on solar installations by as much as 26%.
Similarly, sales tax exemptions, property tax exemptions, net metering, Transition Renewable Energy Certificates (TRECs), and MACRS Depreciation make a sizeable impact on the realized profits from taking the solar route.
There is no question that these incentives are a powerful motivating tool in the solar campaign mounted by the state government.
Now, let’s check out the numbers in the absence of these incentives.
Cost Savings from Solar
The biggest advantage of solar power is that it is free. Besides the initial investment or payments, you can practically enjoy free energy for the life of your installation.
In New Jersey, households pay an average monthly electricity bill of $117.65. Over 20 years, that accumulates to $35,295 over a span of 25 years, which is the minimum life of most high-quality, branded solar panel systems. In fact, they come with a 25-year warranty and easily last 30-35 years.
Here’s the kicker: the above costs are calculated without considering any price increases by your utility company, which, as you know, can be quite frequent and exorbitant. With solar, you bypass all of that. However, for now, we can ignore that for our calculation.
By taking the solar route, you can avoid at least $35,295 in electricity bills over 25 years. If you factor it in for 30 or more years, the numbers get much bigger.
Clearly, solar is not only eco-friendly but also a financially savvy decision.
The Long & Short of It
With the average 6kW solar installation costing around $20,000, you stand to realize real dollar profits of over 75% on your initial investment just in terms of utility bill savings.
However, because most people don’t value long-term profits, the state and federal governments are offering various incentives to make upfront costs lower and help people break even in 5-6 years. That’s the purpose of the incentives – to help people witness the benefits of solar faster.