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As the world deals with climate change, it's becoming clearer that renewable energy sources like solar power are necessary to reducing greenhouse gas emissions. A recent report from the Intergovernmental Panel on Climate Change (IPCC), solar power is the fastest-growing source of electricity globally. And the economic benefits of solar energy are becoming more widely known, with homeowners, businesses, and communities seeing some serious cost savings when it comes to their utility bills, tax incentives, and the creation of jobs.
Highlights & Key Takeaways
- The economic benefit of solar energy is significant and reduces energy costs for households and businesses.
- The solar industry has created numerous job opportunities in manufacturing, installation, maintenance, and research and development.
- Solar energy promotes energy independence by reducing dependence on foreign oil and gas.
- Homeowners will appreciate that solar power can increase the value of a property and provide long-term cost savings.
What Are the Economic Benefits of Solar Energy?
Solar energy is rapidly becoming one of the most practical sources of electricity, and its benefits reach far beyond the environmental impact. The economic benefits of solar energy are significant. Jobs are being created and home and commercial real estate values are on the rise.
According to the National Solar Jobs Census, the U.S. solar industry employed 255,037 workers as of 2021. This number is expected to grow in future years. Plus, solar energy can help shore up local economies by reducing the reliance on foreign oil and advancing the need for energy independence. In the sections below, we'll dive into the economic advantages of solar energy in more detail.
Solar Energy Economic Benefit #1: Reduced Electricity Costs
Solar energy can save homeowners and businesses big time when it comes to their energy costs. Solar panels reduce electricity costs by up to 70%. But the amount of money you can save with solar panels depends on a wide variety factors such as your geography, the amount of electricity you use, and the cost of electricity in your area.
- Homeowners can save up to $3,000 annually. On average, solar panels can save homeowners $100-$200 monthly on electricity bills. So, with a 5-kilowatt (kW) solar panel system, you can expect savings of up to $3,000 annually on your home electricity bills.
- Businesses can save 75% of their electricity costs. Solar panels can reduce the reliance on grid electricity, and companies that take this approach are eligible for a federal investment tax credit (ITC) that allows them to deduct 26% of the cost of the system from their federal taxes.
Solar Energy Economic Benefit #2: Protection from Unpredictable Energy Prices
A key benefit of installing a solar energy system is that it can produce the most energy when demand is at its highest. According to the U.S. Energy Information Administration (EIA), during the morning hours, electricity demand typically peaks as people get up for the day, turn on the lights, turn up the thermostats, and take hot showers. Plus, as businesses open for the day, it demands more power too.
This peak demand period is often the most costly time to use electricity, as utilities become less efficient and more expensive power plants to meet the demand. However, solar panels are particularly effective at generating energy during these peak demand periods. They produce the most energy when the sun is at its highest in the sky and when electricity demand is at its highest.
Solar Energy Economic Benefit #3: The Ability to Earn Electricity Credits
Solar Renewable Energy Credits (SRECs) are certificates earned by homeowners and businesses that generate solar energy. Each SREC represents one megawatt-hour of solar energy that has been developed.
The value of SRECs varies based on market demand, but they can be a valuable source of income for homeowners and businesses that generate more solar energy than they consume. For example, in states like Massachusetts and New Jersey, SRECs have been known to sell for several hundred dollars per megawatt-hour. SRECs are currently selling for anywhere between $5 and almost $500, depending on the state. Pricing for SRECs vary based on:
- Lower solar power generation in the winter months
- Higher consumption of electricity
- Legislative changes that impact the solar market
- The number of solar systems installed in any given state
As a rule of thumb, you can estimate the number of SRECs your system will produce by multiplying the size of the system by 1.2. So, a 5-kilowatt solar energy system will produce approximately six SRECs annually. Thus, in addition to providing an extra source of income, over time SRECs can help offset the upfront costs of installing a solar panel system, making it more accessible for homeowners and businesses.
Solar Energy Economic Benefit #4: Low Maintenance Requirements
A significant advantage for solar panel owners is that they are typically easy to maintain and have low overall maintenance costs. Solar panels have no moving parts, and only need occasional cleaning and an annual inspection. Inverter replacement, required every five to ten years, is typically a solar energy system's most significant maintenance expense. Inverters can cost about $1,000 to $1,500 for an average-sized build.
Solar Energy Economic Benefit #5: Long-Term Savings
Most solar panels will last for 25 to 30 years, and many manufacturers offer warranties that will cover 20 to 25 years. That said, solar panels are a long-term investment, and their lifespan can vary based on several factors, including:
- Quality of materials: Higher-quality panels and components tend to last longer.
- Installation: Proper installation by trained professionals can help ensure a longer lifespan for solar panels.
- Weather: Extreme weather conditions such as hail, snow, or high winds can damage solar panels and shorten their lifespan.
- Maintenance: Regular cleaning and maintenance can help extend the lifespan of solar panels.
Home and business owners who have solar panels installed may start seeing a return on their investment within five to ten years, depending on the size of the solar panel system, the cost of electricity in their area, and available financial incentives.
Solar Energy Economic Benefit #6: Avoiding Time-of-Use Charges
Time-of-use (TOU) charges are a type of electricity pricing structure that vary depending on the time of day, with higher rates during peak hours and lower rates during off-peak hours. Utility companies often charge peak rates to encourage customers to shift their energy usage to off-peak hours, reducing strain on the grid.
- TOU rates can help utility companies reduce peak demand and balance the grid by encouraging customers to shift their energy usage to off-peak hours.
- TOU rates vary by location and are often highest first thing in the morning and during the late afternoon and early evening when people return home from work and start making dinner, flip on the lights, watch television, and play on their computers and video game consoles, etc.
Solar energy is a great way for homeowners and businesses to avoid TOU charges by generating their electricity during peak hours.
Solar Energy Economic Benefit #7: Increased Property Value
Solar panels can also increase the value of residential and commercial properties. According to a study by the National Renewable Energy Laboratory, homes with solar panels installed sell 20% faster and at a premium of 4.1% on average. Solar panels can also make a property more attractive to potential buyers, particularly those interested in sustainable living or energy efficiency. Buyers are willing to pay more for homes with solar panels due to their long-term savings on energy bills.
A Lawrence Berkeley National Laboratory report found that a solar panel system of approximately 5 kW added $15,000 to a home's resale value. The study also noted that the more expensive the home, the higher the solar system's value.
Solar Energy Economic Benefit #8: Government Incentives and Tax Benefits
The average cost to install solar panels in the U.S. is about $20,000 after federal tax incentives,and as such, most people pay for their project using a solar panel loan. On the low end, you can install a smaller system for around $14,000, while a high-priced Tier 1 solar panel system can cost $40,000 or more. But various government incentives and tax benefits are available to help reduce those costs. For example, as we mentioned earlier, the federal government offers a Solar Investment Tax Credit (ITC) that can provide a tax credit of up to 26% of the cost of a solar energy system.
Many states and local governments also offer their own incentives and grants, such as property tax exemptions, sales tax exemptions, and cash rebates. These government incentives and tax benefits can make solar energy more affordable for homeowners and businesses. According to the Department of Energy, the Solar ITC has helped the solar industry grow by an average of 52% annually since it was introduced in 2006.
Solar Energy Economic Benefit #9: Reduced Environmental and Health Costs
Solar panels generate electricity that doesn't contribute to the negative environmental impacts of traditional energy sources. More specifically, solar energy can reduce environmental and health costs in the following ways:
- No greenhouse gas emissions which helps reduce the impact of climate change and improve air quality.
- Reduced need for non-renewable resources, such as coal and natural gas. This means fewer negative environmental and health impacts from extraction and transportation.
- Less water needed for electricity production that helps us conserve water resources in regions that are prone to droughts.
- Reduced need for fossil fuel power plants which means less risk that air and water pollution will contribute to respiratory and cardiovascular diseases.
- The lessened urban heat island effect improves air quality and reduces the risk of heat-related illnesses during hot weather.
As an added benefit, using solar panels helps reduce respiratory and cardiovascular problems caused by air pollution, significantly saving healthcare expenses.
Solar Energy Economic Benefit #10: Job Creation
The solar energy industry has experienced substantial growth in recent years, increasing jobs in a big way. According to a report by the International Renewable Energy Agency (IRENA), the number of people employed in the global solar energy industry has more than doubled over the past five years, reaching 4.4 million in 2021.
We can thank solar energy for creating the following jobs and career paths.
- Panel manufacturing
- Design and engineering
- Project development
- Operations and maintenance
- Sales and marketing
- Research and development
- Supply chain
- Policy and advocacy
As more countries transition to renewable energy sources, the solar energy industry is expected to grow. This will inevitably provide more job opportunities and economic benefits.
Solar Energy Economic Benefit #11: Local Economic Growth
Solar energy and solar panels can significantly impact local economic growth beyond job creation and reducing energy costs for households and businesses. Solar projects often require skilled labor and investment in local infrastructure. When a community invests in solar, it can stimulate regional economic growth by creating new jobs, increasing tax revenue, and attracting new businesses.
Moreover, solar energy can reduce the strain on local energy grids during periods of high demand, leading to more reliable and efficient energy systems for local communities. This can help reduce energy costs and improve residents' overall quality of life. Additionally, as the cost of solar energy continues to decrease, it can become a more affordable and accessible option for low-income households, which can further contribute to local economic growth by helping to alleviate poverty and increase disposable income.
Solar Energy Economic Benefit #12: Energy Independence
Solar energy offers a sustainable and cost-effective alternative to imported energy sources by generating electricity from the sun's rays. Solar energy has a significant impact on the energy independence of the U.S. We have historically relied heavily on foreign oil and gas, making us susceptible to volatility in pricing not to mention supply chain disruptions. With solar energy, the U.S. can decrease its dependence on foreign energy.
To increase your own energy independence, you can do the following:
- Install solar panels or other renewable energy sources to generate electricity locally.
- Invest in energy-efficient appliances and lighting to reduce overall energy consumption.
- Use energy storage systems like batteries to store excess energy for later use.
- Reduce reliance on the grid by participating in demand response programs or using time-of-use pricing to shift energy use to times when solar panels generate the most energy.
- Consider purchasing an electric or hybrid car to reduce reliance on gasoline and imported oil.
The economic benefits of solar energy are numerous, including job creation, local economic growth, and reduced energy costs. By generating electricity from the sun's rays, solar energy reduces our dependence on imported energy sources, protecting against price volatility and supply disruptions. In addition, solar energy projects often require skilled labor and investment in local infrastructure, contributing to local economic development. With its sustainable and cost-effective nature, solar energy presents a significant economic growth and development opportunity.