Step 2: Solar as an Investment

In many ways, your solar system is a financial product. Understand how to maximize the return on your investment.

Your Return on Investment

Your solar system is capable of generating annual returns on your investment ranging anywhere from 10% to more than 30%.  These returns come in the form of reduced electric bills, protection against future electricity rate increases, and potential increases in the value of your property.

So a solar system is one of the best ways to invest your money, and the returns earned through solar often exceed paybacks from other investments such as stocks and bonds.

What determines your return on investment?

Property characteristics: Which way does your roof face? What is the pitch of your roof? Is there shading? All of these factors will affect the performance of your system.

Electricity rates: Historical trends suggest electricity prices will rise about 3% every year, so when you invest in a solar system it means as your utility costs increase, your savings also increase.

Incentives: Connecticut offers two incentives to help homeowners install solar. One incentive is a rebate for customers who purchase their system or finance with a solar loan. The other is a performance-based incentive and applies to those who enter into a lease or Power Purchase Agreement (PPA). Learn more about Connecticut’s solar incentive program – the Residential Solar Investment Program (RSIP) here.

Price:  Are you getting the best deal? Stay current on Connecticut solar market trends and economic insights by checking out our quarterly Solar Market Spotlight (download from link in menu on the right).

Property value: Will the value of your property increase when you sell your home? A 2015 study by Lawrence Berkeley National Lab found that homeowners who purchased solar systems in many cases saw their home value increase by thousands of dollars. Studies are now beginning to emerge on the impact of solar systems on home values – and there are indications that solar homes sell faster and for more money than non-solar homes.  Read the study.

Tax Benefits: At the local level, your solar system is free from property-tax. At the federal level, when you purchase your system, you are eligible for a 30% Federal Investment Tax Credit (ITC). Learn more here.

With a lease or Power Purchase Agreement (PPA), the financing company owns the system, so all of the benefits from federal tax credits and State incentives will go to them and be built into your monthly payments. 

You should consult with your tax advisor to determine the most suitable course of action for you. 

For example, at the state level, if your system costs $30,000 and your State of Connecticut rebate is $4,000, you can benefit from an income tax credit of $7,800. Find out what solar rebates are currently available through the Connecticut Green Bank.

There may be other tax benefits as well. Most clean energy systems can be financed with a loan (solar loans or home equity, for example) and the interest on these loans also may be tax deductible. We recommend that you consult your tax advisor for guidance on tax credits. 

Solar compared to other investments

While returns earned by investing in a solar system are different than returns from investing in stocks and bonds, solar systems have characteristics that may make them good options in an overall investment strategy.

Significant portions of your returns from solar are in the form of savings so they are not taxable. Stock and bond returns, on the other hand, are 100% income so they are subject to both federal and state taxes.

Installing a solar system can pay dividends well into the future

Investing in a solar home means being economically prepared for the future - but it also means having a system that is able to produce enough power to reduce your energy costs.  Once you've determined that the size of the solar system will  be effective in producing power and reducing your energy costs, you can expect these benefits in the future.