Are solar panels a good investment for CT homeowners?

The installation of solar panels to homes in Connecticut last year was the highest in a decade, and so far in 2024, the addition of the now-familiar rooftop units are on a pace to at least match last year’s activity.

Eversource, the state’s largest utility, said 11,600 of its Connecticut customers — the majority of them residential — installed solar panels last year, up 60% compared with 2022 and quadruple the number a decade ago. Eversource said about 70,000 of its customers statewide now have tapped into solar power.

As electricity bills rise, when does investing in a solar panel system make sense for a homeowner?

“It’s like any other investment you do to your house,” said Ali Bazzi, an associate professor of electrical and computer engineering at the University of Connecticut in Storrs. “You need to consider how long it’s going to take to basically break-even with your monthly payment or your rate of return if you had invested that money in something else.”

Bazzi, who founded a laboratory program at UConn that studies solar power systems, said examining whether a residential property is right for solar panels is likely worth the effort for most homeowners.

“It could provide some relief in terms of the energy bill,” Bazzi said. “The costs of energy are going up all the time. If you’re going to pay for a loan or you’ve already bought it, the cost is fixed, it makes sense.”

Eversource customers with solar panels are still a relatively small part of the utility’s Connecticut customer base at about 5%. But the rise in energy prices early in 2023, tied partly to the war in Ukraine, prompted a surge by homeowners looking for cheaper alternatives — a trend that is likely to continue, experts say.

Solar power, in particular, is in the crosshairs in Connecticut.

The cost of electricity averages 28.57 cents a kilowatt hour, and is among the highest in the nation, according to an analysis by Find Energy, an independent energy data aggregator.  Connecticut ranks behind just three states: Hawaii, California and Rhode Island.

Connecticut compares with a national average of 16.12 cents a kilowatt hour, Find Energy found.

Bill Colonis, associate director of homeowner engagement at the Connecticut Green Bank, said any analysis by a solar panel contractor will be specific to an individual property, starting with how much sunlight shines on the roof, which direction the home faces and the age of the existing roof.

Panels can be pricey

At the core, solar panels allow a property owner to generate their own electricity, thereby reducing what must be purchased and paid for monthly from a utility.

In Connecticut, the systems also allow homeowners to sell back electricity that isn’t being used to grid for a credit on their monthly utility bills.

But solar panel systems can be pricey, and therefore out of reach for some.

According to Find Energy, the average estimated prices for solar panels in Connecticut range from $11,310 for a 3-kilowatt system to $26,390 for a 7-kilowatt system. The range covers how much electricity will be generated, affecting the reduction in the monthly utility bill.

But those costs are before incentive plans offered in Connecticut and by the federal government that can bring down the price. The incentives are intended to reduce a property’s carbon footprint, the total amount of greenhouse gas, a factor, experts say, is influencing climate change.

The federal Inflation Reduction Act in 2022 boosted the solar tax credit from 26% to 30% and extended it until the end of 2032. The credit was previously set to phase out this year.

One way to do a quick, back-of-the-envelope calculation on when an investment in solar would break starts with first determining the “upfront” costs for installation. Then, subtract tax credits, rebates and other incentives. Add in financing costs such as loan fees and interest.

Next, calculate how much the solar panels will cut energy bills to determine savings.

Finally divide the system cost by the annual utility bill savings to arrive at the total payback period in years.

At the Green Bank, which provides loans for solar projects and advises consumers, Colonis recommends also considering potential future uses such as the purchase of an electric vehicle.

For a 5-kilowatt system, Find Energy estimates the average payback period is eight years on systems that typically last 20-25 years. The average net savings, after out-of-pocket costs, could be…