Residential Solar In Arizona: Calculating The Roi

You've probably heard of the many incentives and rebates associated with residential solar in Arizona. You may also be under the impression solar system installations may not be affordable, even with these incentives. It's a well known fact capital costs for solar systems have been falling in recent years. And, you may be pleasantly surprised after you calculate a return on investment (ROI) for a solar installation.

So how do you calculate an ROI? To start, you need to determine your initial system cost (also called your capital outlay). And, you'll need to access your actual monthly utility bills (also called your operating costs) before your solar system installation. Then, you'll need to estimate what your monthly bills will be after your install your solar electric system.

Fortunately, many online tools exist to help you run these numbers. You can check web sites for your contractor, industry organizations, government agencies and equipment manufacturers. Many of these sites include ROI calculators that let you simply plug in your numbers. These calculators will tell you how much you can expect to save on a monthly basis, what a system would cost and what the payback term will be.

The following information will discuss the factors used in calculating an ROI for residential solar in Arizona.

Calculating Your Initial Cost
The cost of your system depends on your anticipated usage in kilowatts and your expectations. Since solar electric is customized to individual homes, you'll have to do your research and consult with your contractor to determine the best system for your purposes.

After you determine the type of system you'll need, you can begin to collect cost estimates. Prices may vary among contractors and different manufacturer's products, so make sure you arrive at an accurate estimate that includes all components of the system and installation.

With your estimated system cost in-hand, you can now subtract discounts, rebates and incentives to arrive at your final investment cost. Industry experts cite incentives up to 70% of the total installation cost. These incentives save you a substantial amount upfront on a residential system and also come after your purchase in the form of tax credits and exemptions. Your residential solar in Arizona contractor should know all current incentive programs and be able to give you a reliable estimate of your savings.

Finally, financing options contribute to your initial cost. Many solar contractors have partnerships with financing companies. These affiliates often provide incentives for financing your solar installation.

Typically, these incentives include extended payment terms, interest-only periods to allow customers to earn tax credits first, zero-down payments, deferred interest and other creative financing programs to offset your initial investment.

Calculating your ROI
Once you have consulted with your solar contractor and selected the appropriate system, your proposal will outline your costs. Then, you factor in the incentives at the time of your purchase to reduce your costs. Tax credits are earned the same year the system is installed. This information provides a final net cost that you can use to determine your return on investment.

Keep in mind that incentives can vary greatly by type of system and installation location. Therefore, your ROI will be very specific to your installation.

Here's a high-level rundown of the steps taken in the ROI calculation:

1.Calculate the total net cost of your residential solar in Arizona project. Make sure to consider equipment costs, installation costs, interest paid on any loans, repairs and maintenance costs.
2.Total the amount of gains, discounts and rebates. Gains include home appreciation from the solar installation and estimated energy savings.
3.Subtract total costs from the total of gains, discounts and rebates. This figure provides your net savings over a period of time.

To determine your monthly energy savings from going solar, following these steps:

1.Determine your monthly average energy consumption over a one-year period from your utility company.
2.Find out how much energy is used by each of your appliances, such as water heater, air conditioner, lighting, heating, etc. Many utility companies include this information in your monthly bill.
3.Decide which of these appliances will be transferred to solar energy.
4.Calculate your monthly average usage and savings gained by using solar for each appliance.

Finally, you can calculate your payback period for your solar energy investment. The calculation is pretty straight-forward and involves dividing your net costs by your monthly savings. Generally, you will break-even in five to ten years following your installation, but your calculation will give you a more exact period. All savings after your payback period contribute directly to your ROI.

With residential solar in Arizona, you make an investment upfront, but realize significant savings following your installation. Time and time again, ROI calculations support solar installation projects.