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Is solar right for grandma? How and when older Americans should go solar.

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Installing solar panels on your home can be a brilliant idea for several reasons. It can save you money on electricity bills, paying for itself in as little as 4 or 5 years in some places, and providing energy for up to 30 years after. A solar installation adds value to your home, reduces greenhouse gas emissions associated with burning fossil fuels, and looks pretty darn good, too.

With all those benefits, solar is great for a lot of people, and solar is great in a lot of places. But solar can be “not great” for certain people, even in places where it’s great for others. Right now, we’re going to explore the reasons solar may or may not be great for some of the greatest people around: Older Americans!

Older American demographics

For the rest of this article, let’s assume you’re reading this because you are an older American—age 55 and up—and you’re interested in whether solar is right for your home. Before we get into the reasons solar will or will not work for you, let’s delve into some statistics:

People 55 and older make up 28% of the American population. Nearly 80% of those folks own their own homes. Older adults are living longer than ever before, and 87% of them want to stay in their homes as they grow older.

The average amount these folks spend on electricity is around $1,500 per year, and that number will likely rise by about 3.5% per year, which is the average annual increase in electricity prices in the USA. If those numbers hold true for the next 25 years, a person who is currently 60 and intends to stay in their home for 25 years can expect to spend over $58,000 on electricity in that time.

Annual expenditures on electricity by age

Increases of 3.5% add up over time.

So now we’ve established that older Americans intend to live in their homes for decades after retirement, and their spending on electricity could represent a huge chunk of change. But, as an older person, can you go solar and save a significant amount of money on that expected $58,000 expense? That depends.

How much solar does the average older American need?

At an average cost of $.13 per kilowatt-hour (kWh), the average senior consumes around 9,850 kWh per year for their $1,500. To generate enough electricity from solar power to eliminate that electricity bill, you would need a 7-kW solar array, which would cost around $25,000—give or take a couple grand—before incentives.

That’s about 20 high-end solar panels, each of which produce 350 watts under full sun. It’ll take up about 430 square feet of roof space on your south-facing roof. If you have the space and the cash, this much solar can offset almost all of your electricity usage for 25-30 years.

A roof with 20 solar panels on it

What 20 solar panels looks like on a roof

Of course, how many solar panels your home needs depends on how much energy you use and where you live, among other factors. Connect with one or more expert solar installers to get customized savings estimates today.

Is solar a good deal for older homeowners?

That 7-kW array looks like it might save you twice as much as it costs, but considering you could be paying for it all at once, does that still make it a good deal? That all depends.

The first thing to think about is your ability to reduce the cost through taking available incentives. Every homeowner in the USA can take 30% of the cost to install solar panels off their tax bill the next year, but only if they have been taxed that much. This presents a complication for older Americans, because retirees usually live on fixed incomes without a lot of taxes taken out.

The 30% tax credit for a $25,000 solar purchase would be $7,500. If you know your average tax bill based on your streams of retirement income, be that Social Security, pension payments, or IRA and 401(k) withdrawals, you can figure out if you’ll be able to take the tax credit. At a tax rate of 12%, that means you’d have to have approximately $62,500 of income after deductions and without other credits, to receive the full amount of the solar tax credit.

Strategies to maximize your solar incentive payments

One way to make sure you can take the federal solar tax credit is to pay for solar by taking an additional disbursement from your 401(k) or IRA. You’ll be taxed extra for the year, but the extra amount you withdraw would increase your tax burden enough that you’d be eligible for the full credit.

Some states also have their own tax credits, solar rebates, and other incentives like SRECs. If you’re interested in finding out what incentives you qualify for, connect with our trusted solar installer partners to get customized savings estimates.

Disclaimer: we are neither financial advisers nor retirement experts, and the numbers and what-if scenarios in this article are only intended for educational purposes. Talk to a licensed financial planner, accountant or tax attorney before making any decisions about how to pay for solar panels.

How older Americans can think about paying for solar

When it comes to paying for solar, you have a few options: You can pay cash up front, and see ultra-low utility bills for the next few decades; you can get a solar loan or fixed-rate home equity loan or line-of-credit and pay the panels off over time while still owning the system and seeing lower bills; or you can sign up for a solar power-purchase agreement (PPA), where the solar installer owns the system and sells you the electricity for cheaper than retail rates. Let’s look at all three.

Paying cash for solar as an older American

Paying cash for solar isn’t the way to earn the best financial return, but it can be a very smart move for more mature homeowners. The advantages of paying cash are full ownership from day 1, no ongoing payments, and an immediate increase in home value equal to close to what you paid for the panels themselves.

Here’s a chart showing an estimate of the cumulative annual savings of an average 7-kW system :

Estimated cumulative annual savings from 7-kW solar

Now keep in mind, the above chart shows the savings from an “average” 7-kW system, in a state that gets average sunshine and charges average electricity prices ($.13/kWh, as in the above example). That means if you live in a place that gets more than average sun like Arizona, Florida, or Nevada, your system will produce electricity and save you more every year.

Similarly, if you live in a state with high electricity prices, like New York, New Jersey, or Massachusetts, each kWh saves you more, and your payback time is quicker. Finally, there are states that get lots of sun and have high electricity costs, like California and South Carolina, and these are where you save the most.

Again, buying solar panels with cash or a loan is best if you can take the federal solar tax credit. Like we said above, taking an extra disbursement from your retirement account can be a great way to increase your tax burden for the year and make claiming the tax credit easier. That’s another point in favor of paying cash.

No ongoing payments can be a big advantage if the time should come to sell your home. Homes with liens against the equity can be more complicated to sell, and, though no one wants to think about it, that could add a burden on your spouse or family if you should pass away or need to leave the house earlier than you intend.

The bottom line for a solar cash purchase for older Americans: If you can swing it, cash purchases provide a lot of benefits: immediate ownership, a nice big tax break in year 1, any other incentives that exist in your state, a boost in the value of your home, and a decrease in the time needed to sell it. The only drawback is it’s a big up-front investment, and you can see better returns over time with a solar loan.

Get custom quotes for solar to see how much you can save by paying cash for solar panels.

Taking a home solar loan as an older American

If you’re healthy and ready to live another couple decades in your home, a home solar loan can be an excellent idea. A home equity loan or line of credit (HELOC) is probably the gold standard here. HELOC rates are lower than other types of loans, and payback options are flexible.

One of the benefits of a solar loan is no or low down-payment requirements. You can choose to finance the whole cost of your system, or even pay 30% up front in anticipation of getting that tax credit the year after.

That first payment can have profound impacts on how much your payments are and how much you end up paying back, too. A 15-year loan for $25,000 at 5% interest would carry payments of nearly $200 per month, or $2,400 per year, which would result in additional costs compared to that estimated $1,500 annual electric cost we mentioned above.

But if you put $7,500 down knowing you’ll get it back at tax time, your payments on the resulting loan would be about $140 per month. As the per-kWh cost of electricity rises over time, the lower loan payments will equal your former electricity bill in around year 3. So a loan is a way to slowly pay for your system, while spending about the same amount as your electricity bill to start.

Here’s a look at estimated loan payments vs. electricity cost on the same timeline as the above charts:

Annual expenditures on electricity by age compared to solar loan payments

With a properly-designed solar installation, all electricity after year 15 is $0

The most important thing to note in that chart is how the rising cost of electricity compares to the fixed cost of the loan. If your solar panels produce the amount they’re rated for, the chart represents the differences in cost between the two options of getting all your electricity.

The bottom line on solar loans: Installing solar and paying with a loan protects you against increases in the cost of electricity from your utility company, and guarantees you won’t be paying for power after the loan’s paid off. You’ll also see that same boost to the value of your now more-desirable solar-powered home. The only drawback is potentially complicating the sale of your home, unless you have enough stashed away to pay off the loan before you sell.

Talk to your local solar installers to see if they have solar loans that can save you money from day 1.

Solar PPAs for older Americans

This one is a tough one. A PPA is also called “third-party ownership,” and what that means is the solar installer owns the panels they install on your roof and charge you for the electricity they produce. A PPA can still offset your entire electric bill, but it’s only really worth it if the electricity you’re getting from the solar panels is cheaper than what you would’ve been paying to the utility company.

Solar PPAs are designed to work for people who can’t take advantage of the federal solar tax credit, but still want to save money with solar panels. The solar installer makes a profit because the money you’ll be paying them for the electricity will help them recoup their costs, because they can claim the commercial version of the tax credit and get reimbursed by the feds for 30% of the costs.

The PPA escalator takes you up…and that isn’t a good thing

One thing to know about solar PPAs is the price of electricity doesn’t stay the same over time. Instead, it’s subject to what’s called an “escalator,” which raises it by a set amount every 12 months. Most PPA escalators are around 2%, so if electricity costs from the utility continue to rise by their historical rate of 3.5%, you should be fine.

But the escalator does introduce some risk that your solar rate will rise faster than rates from the utility company, and if your starting per-kWh solar cost is close to your current utility cost, you could end up paying more for solar than you would have for utility company power.

Another potential pitfall is that PPAs can make it more difficult to sell your home—even more difficult than loans. That’s because you’d be asking the buyer to take on a contract for energy that they might not be willing to pay. Having solar panels on the roof of your new house is nice, but not owning the panels can be a turn-off, even if the contract represents a savings to the new owner.

Here’s the solar savings of a PPA might look over the course of a 25-year PPA contract under which solar electricity starts out at the same price as utility power ($.13/kWh), but rises at 2% instead of the utility’s 3.5% increase:

Annual expenditures on electricity by age compared to a solar ppa

You can see above that your savings start out small, but by the end of the contract, you’ll be saving nearly $1,000 per year on electricity costs.

The bottom line for solar PPAs for older Americans: Choose a PPA is you can get a significantly lower rate for solar energy than you do for utility company power, but beware the escalator clause, and be ready to have trouble transferring the PPA to the new owner of your house.

Home solar for low-income seniors

There are a couple places in the country that have developed good programs for low-income homeowners. The best program is California’s Sing-family Affordable Solar Home (SASH) and Low-income Weatherization (LIWP) programs, which are backed by funds collected from all California electricity customers.

Low-income homeowners in California can get free solar panels installed through either program, and LIWP offers other energy efficiency home improvements as well. Check with our friends at GRID Alternatives, who administer the program for the state, for more information.

Colorado offers the Weatherization Assistance Program (WAP) offers essentially free solar panels to low-income owners of homes that meet certain criteria. The rules ensure the program’s money will be spent adding solar panels to homes that will “provide high return on investment,” which means homes that can best use the solar electricity that is generated.

Another great program in Washington, D.C. helps all homeowners go solar through grants available from Solar United Neighbors (SUN). Fiscal Year 2018 grants haven’t begun yet, so keep an eye on the SUN website for more details.

Finally, the best resource for low-income solar program descriptions is Vote Solar’s Low-Income solar policy guide. If there’s anything to know about where low-income folks can get grants, rebates, and loans for solar power, it’ll be there.

Last modified: August 17, 2018

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