The cost of residential solar installations continued to rise in the first half of 2023 but the pace of the increase has begun to slow, according to an industry report.
EnergySage, a solar equipment marketplace, has issued its Market Intelligence Report, showing how rising interest rates and inflation have affected the market for residential solar.
The report is based on millions of homeowner shopping transactions on EnergySage.com throughout a 12-month period for solar panels, inverters, batteries, and more from solar companies in 41 states and Washington, DC.
The report shows prices for solar equipment increased on the EnergySage Marketplace over the last two years but began to slow down in the first half of this year, rising just 1.8%. In the first two months of the third quarter, prices actually began to fall.
However, financing costs have not gone down. Between the second half of 2022 and the first half of 2023, the most frequently quoted solar loan on the EnergySage Marketplace changed from 1.99% on a 25-year loan term to a 3.99% interest rate for a loan of the same length. However, that only increases the monthly payment on a $30,000 loan by $30.
“Between the changing net metering landscape in California to start the year, and the slowdown in overall consumer demand challenging the solar industry this summer, 2023 has been a tumultuous period so far,” said EnergySage CEO and founder Vikram Aggarwal. “At this unique moment for the solar industry, the activity within the EnergySage Marketplace, and the analysis of those trends found within this report, provide a unique perspective for the state of the industry, both from the installer and the homeowner perspectives.”
Tax credits can help
Despite the higher cost of a solar installation, there are still plenty of tax breaks that can make such an installation worthwhile and speed up the time the installation pays for itself.
The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system paid for by the taxpayer. A tax credit is a valuable tax break since the dollar among of the tax credit can be deducted from the amount of income tax that you pay.
Congress recently passed an extension of the tax credit and raised the percentage of the expense subject to the credit to 30%. The taxpayer must install the system at their home and complete the installation during the tax year.
How quickly the system pays for itself depends on what you are currently paying for electricity, costs that vary from state to state. Equipment and installation costs also vary by state. ConsumerAffairs breaks it down here.