7 financial benefits of installing solar panels you should know!
7 financial benefits of installing solar panels you should know!
In the face of climate change and escalating energy expenses, solar panels have emerged as a promising solution. Apart from offering clean and renewable energy, they bring significant financial benefits.
So, let’s see why are solar panels are worth your investment?
Reduction in Energy Costs
One of the most tangible financial benefits of solar panels is their potential to lower energy bills. By generating electricity from sunlight, solar panels can substantially offset or even eliminate dependence on the grid. If your solar system produces surplus electricity, it gets sent back to the grid, earning you energy credits. Alternatively, if you have an energy storage system installed alongside your solar panels, you can store any unused solar energy in a battery. This stored energy can be used during nighttime or assist in reducing your high-demand periods.
Return on Investment (ROI)
Evaluating the return on investment is crucial when assessing the financial feasibility of solar panels. While the initial costs of purchasing and installing solar panels may appear significant, the long-term savings can outweigh the upfront investment. By calculating and analyzing the ROI of solar panels by considering factors like system lifespan, maintenance costs, available incentives, and potential energy price hikes, individuals can make informed decisions about the financial benefits of transitioning to solar power.
The Indian government is taking significant steps to promote the adoption of solar energy, particularly through the Grid Connected Rooftop Solar (RTS) scheme. This initiative offers various incentives and rebates to encourage the installation of rooftop solar panels.
Residential electricity consumers can benefit from Central Financial Assistance (CFA) or subsidy under Component-A of the program. The CFA can be obtained through two mechanisms.
Mechanism 1 involves applying for CFA through the National Portal for Rooftop Solar. The exact amount of CFA available can be found on the portal. Once the solar panels are successfully installed by empaneled vendors and verified by State DISCOMs (Distribution Companies), the applicable CFA will be directly transferred to the consumer’s account.
Mechanism 2 allows consumers to apply for CFA through the State DISCOMs portal. Again, the exact amount of CFA available can be found on the portal. After installation and verification by State DISCOMs, the consumer only needs to pay the balance amount (after deducting the subsidy/CFA) to the bank account of an empaneled vendor.
Increase in Property Value
Solar panels can enhance property value. As homebuyers increasingly prioritize energy efficiency, a solar panel system can make a home more appealing and potentially increase its resale value. Although the awareness and recognition of the solar benefits among buyers, appraisers, brokers, and lenders in a specific location can impact the value increase it is important to know that the quality, technology, longevity, and warranty of the solar panels and associated equipment can affect the value.
Financing Options: While upfront costs may deter some individuals, there are various financing options available that make going solar more accessible.
Solar loans are a financing option that allows homeowners and businesses to borrow money specifically for solar panel installations.
Power purchase agreements (PPAs) are agreements between a solar panel system owner and an energy consumer. Under a PPA, the consumer agrees to purchase the electricity generated by the solar panels at a predetermined rate over a specified period.
Leasing arrangements involve renting solar panels instead of purchasing them outright.
Save on tax
Installing solar panels in India can provide certain benefits and opportunities to save on income tax. Here are a few ways you can potentially save on income tax through solar panel installations in India:
- Accelerated Depreciation: Businesses or commercial entities that install solar power systems can claim accelerated depreciation benefits. Under Section 32 of the Income Tax Act, businesses can depreciate the cost of solar panels at an accelerated rate, which reduces their taxable income and lowers their tax liability.
- Capital Subsidy: The Ministry of New and Renewable Energy (MNRE) offers capital subsidies for solar panel installations in India. These subsidies can help offset the cost of installing solar power systems. However, it’s important to note that subsidies themselves are not directly related to income tax savings, but they can indirectly reduce the overall project cost and result in lower taxable income.
- Net Metering and Feed-in Tariffs: Net metering allows solar power system owners to sell excess electricity generated back to the grid. This can result in reduced electricity bills and potentially generate income. The income earned through net metering or feed-in tariffs is typically subject to income tax, but the expenses associated with installing and maintaining the solar panels can be deducted, thus reducing the overall tax liability.
- Tax Deductions for Residential Properties: Individuals who install solar panels on their residential properties can avail certain tax benefits. Under Section 80C of the Income Tax Act, individuals can claim deductions on the principal repayment of a home loan, and the expenses incurred on the installation of solar panels can be included in this deduction. However, it’s important to note that the overall limit for Section 80C deductions is ₹1.5 lakh.
- GST Benefits: The Goods and Services Tax (GST) on solar panels and related equipment has been reduced in India. The reduced GST rate can help lower the overall cost of purchasing and installing solar panels, resulting in indirect tax savings.
Solar panels offer the distinct advantage of low maintenance costs, making them a cost-effective choice for renewable energy. Routine cleaning with a garden hose or soft brush, along with the assistance of rainfall, keeps them in optimal condition. Manufacturer warranties assure users and cover potential issues at no extra cost. Remote monitoring systems enable efficient maintenance by promptly identifying performance drops or malfunctions. It is important to note that they are constructed with durable materials like tempered glass and corrosion-resistant frames, solar panels have a lifespan of 25 to 30 years, reducing maintenance expenses.
Benefits the Community
A process known as net metering allows consumers to sell excess electricity their panels produce back to the utility company, further reducing utility bills. This often reduces a community’s reliance on fossil fuels, as well.
Solar panels offer not only environmental benefits but also significant financial advantages. From reducing energy costs and calculating ROI to accessing government incentives and increasing property value, the financial benefits of solar panels deserve consideration. While upfront costs and individual circumstances must be considered, solar panels can yield long-term savings and are a reliable source of renewable energy. By thoroughly understanding the financial benefits and conducting proper research, individuals can make informed decisions about whether solar panels are a wise investment for their specific financial goals and circumstances.