With energy costs continuing to rise and interest rates on the upswing, many people are wondering whether solar is a wise investment in 2023. In the past, experts had projected a return on investment (ROI) of 6-8% for residential solar, with a payback period ranging from 12-18 years depending on the system’s production. For commercial systems, the ROI was expected to be higher, ranging from 10-15% with a payback period of 6-10 years.
However, due to recent changes brought about by the Inflation Reduction Act, predicting the ROI and payback period for solar in 2023 is a bit of a wild card. The Investment Tax Credit (ITC) is now 30%, and commercial installations may be eligible for various adders that could increase savings to as much as 40-60%.
When considering residential solar, it’s important to view it as a cost-reduction measure that may be better than traditional investments. With even a modest yield of 8%, solar can provide significant tax-exempt savings. In contrast to other investment types that are subject to taxation, solar investments lock in savings that can actually increase over time as electricity rates continue to rise. In addition, solar is an excellent way to conserve cash — once your solar system is paid off, your electricity bill will be significantly reduced, or even eliminated altogether. This makes it an ideal investment for retirement, as it provides predictable energy cost savings.
For businesses, the benefits of solar go beyond the ROI and payback period. The energy cost savings can be reinvested in growth, new equipment, facilities, or staffing. Solar systems are built to last, with a lifespan of 25 years or more. While the ROI for commercial systems is frontloaded rather than linear, businesses that own their own energy-generating systems enjoy significant financial benefits over time.
So, is solar a good investment for 2023? While it’s true that solar can be expensive, once you own your own system, it is one of the best investments you can make. To learn more, contact us!