Conversation with a banking executive: is solar worth the investment?

Guest Author: Amber Isaku, Vice President of Lending, A+ Federal Credit Union

I’ve been leading the lending and mortgage operations for credit unions and community banks for over 13 years, and one of the things I love is that A+FCU takes a unique approach to financial advising. We’re focused on helping our members determine a financial path that meets the goals they have in mind. Finances aren’t one size fits all – we believe financial products should meet the individuals’ needs and goals. In terms of ways to spend and save money and reach goals, we work with members in three key areas: how to budget for monthly expenses, how to save for short-term goals, and how to invest for long-term goals.

Recently, I’ve seen that solar power can be an addition to a homeowner’s investment strategy that meets those key areas. Here are a few of the key benefits we’re seeing in 2023 and beyond with solar power.

Saving Monthly Expenses: Lower Cost of Electricity

More and more people have shifted to working from home during the pandemic, and with the addition of more electronics, electric vehicles, and rising temperatures in Texas, electricity bills are only getting higher. 

Adding solar panels to your home can help offset these increased energy costs – but you should look at what you currently pay for electricity. The higher your electricity rate, the faster solar panels will return their investment because the value you get for producing your own power will be higher. Solar may still make sense in places where electricity costs are low depending on any incentives, rebates, and available financing options.

Short-Term Savings: Lower Taxes

The Federal Solar Investment Tax Credit (ITC) is a dollar-for-dollar reduction in your federal tax liability equivalent to 30% of the cost of your solar energy system.* You can take the full deduction when your system goes online or over time once you’ve paid it off. Any unused credits will roll over into the next tax year as long as the solar ITC is still in effect. Homeowners can reap this benefit anytime between now and 2033 when the ITC will reduce to 26%. After 2034, it will expire. 

Long-Term Investment: Higher Home Resale Value

Rooftop solar panels can increase your home’s resale price with a return on investment (ROI) that is higher than many other types of home improvements. According to Zillow, solar panels boost the selling price of a home by 4.1%.

Additionally, according to the National Renewable Energy Laboratory, home valuation increases by $20 for every $1 in energy bill savings. So if a homeowner saves $700 annually in electricity costs, their home valuation increases by $14,000 based on solar panels alone. 

Solar power systems require minimal maintenance costs. Any damage from storms or other natural events will be covered by your homeowner’s insurance, and any necessary repairs or replacements should be covered by your system’s warranty. For example, Freedom Solar offers a 25-year warranty for their SunPower solar panels.

Short- and Long-Term Well-Being: Energy Independence

Generating your own energy through solar makes your household more self-reliant by freeing you from depending entirely on energy companies and grid electricity. A home solar panel array combined with a high-capacity home battery backup or backup generator provides the ability to source your energy on-site as well as store any excess energy for emergency use.

Solar power also allows you to harness the energy of the sun and power your home or business without contributing to local air pollution. Most electricity is still generated by burning fossil fuels, with coal and gas accounting for 59.6% of the nation’s net sourcing. 

By installing solar panels and sourcing your own renewable energy at home, you’re contributing to a cleaner environment and a more robust electric grid. Solar panels also have a usable life of 40+ years and are recyclable once they reach their end.

How to Pay for a Solar System

Acquiring solar panels for your home is a significant investment, but with the continued availability of great financing options, you can usually go solar with no money down. 

This means you can invest in solar right now while continuing to save and invest. This is an economic benefit of solar energy that’s especially relevant during tumultuous times. Fortunately, federal, state, and local rebates, tax credits, and other financial incentives will reduce upfront and total life costs.

Paying for your system outright will make sense if you have sufficient liquid assets available to invest. Solar provides a low risk return rate relative to other investments – such as the stock market. That said, many people choose to take out a loan to pay for their system. Financing your solar system through a lender reduces the upfront cost and can often be structured to eliminate your electric bill by effectively replacing it with a loan payment. The loan has a shorter term than the life of a solar power system, which means you’ll get significantly more financial benefits when your loan is paid off.

We believe that going solar is something that all Texans should have access to, from educators to families and everyone in between. And luckily, new options in solar financing makes solar more accessible than ever for homeowners.

About A+ Federal Credit Union: A+FCU is a full-service financial institution located in Austin, Texas with the mission to provide education to every member and community member and give them the right guidance for their unique financial situation. Learn more at aplusfcu.org.

*No representation or warranty is being made regarding the availability of, or your eligibility for, a federal solar tax credit or any state solar tax credit, rebate, or other incentive.

This is not meant to be tax or investment advice. We recommend talking with a tax or investment advisor for more specific information and recommendations.