Heat Pump or Solar Panels: 3 Things To Consider To Save Money on Energy Bills
As Kipler recently reported, there is a debate going on between heating pumps and solar panels for the best way to save money on energy bills. The news outlet reported, “Since the passage of the Inflation Reduction Act, Americans also have access to generous tax credits that can reduce the cost of these energy-smart home improvements.”
When it comes to saving the environment and reducing the effects of climate change, there are a lot of great alternative energy options to consider. However, not all of them are cost effective.
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“Ultimately, the cost-benefit analysis of installing a heat pump or solar panels on a house will depend on the specific circumstances of the homeowner, including the cost of electricity, the type of heat pump, and the location of the home,” said Jay Sander, owner of Castle Dream Construction and a licensed contractor.
Sander cited a study by Michigan Technological University stating that “heat pumps have lower lifetime costs and greenhouse gas emissions than propane heaters, even without solar panels. However, when solar panels are added to the system, greenhouse gas emissions are reduced by 50% immediately, and the savings are expected to increase over time.”
According to Sander, the study showed that most homeowners would save money by upgrading their propane heaters to heat pumps and solar. With that in mind, GOBankingRates picked the brains of Sander and a few more experts on this debate and got a look at some of the pros and cons of each system.
Heat Pumps: Pros & Cons
“Installing a heat pump can cost anywhere from $5,000 to $15,000, depending on its size and complexity,” said Rassan Grant, director at Norstone USA, referring to the upfront costs. “Thankfully, government rebates and incentives can take a bite out of that price tag.”
Grant described how heat pumps “are energy-efficiency wizards, potentially cutting your heating and cooling bills in half.” He added, “That translates to hundreds, even thousands, of dollars back in your pocket each year.”
According to Grant, the benefits of a pump are: “Heats your home in winter, cools it in summer. Saves big on bills in the long run. Eco-friendly bonus points!” On the flip side, Grant highlighted, “Upfront cost hurts. It’s like a long wait for the reward. May not be the best choice for extremely cold climates.”
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Solar Panels: Pros & Cons
“Depending on how much energy you use, where you live, and your local net metering policy (where your utility buys any excess power you generate), you could significantly reduce your electricity bills,” said Grant, noting how some homeowners achieve net-zero energy bills, where they end up paying almost nothing at all.
Grant explained that the financial benefits of solar panels are “potentially huge savings on electricity bills” while generating clean, renewable energy and increasing a home’s value.
The bad news again is the high upfront cost, reliance on weather patterns to produce sunshine, and using expensive batteries for storing excess energy.
So when it comes down to it, what is the more viable, money-saving option? Depending on where you live and how your home is set up, the answer will vary. However, there are a few factors to take into consideration across the board when it comes to heating pump versus solar panels
1. Lease vs. Buy
“As a professional with solar panels installed on my own home, I would only consider buying solar panels,” said Robin Saidov, owner of Your Energy Footprint. “Lease agreements will include an annual escalation of the electricity rate that is likely higher than the average annual increase that you pay your utility.”
She continued, “Most solar sales people will provide misleading information in their sales pitch on how fast your utility rate is increasing, so you should calculate this yourself. Each utility is regulated by the state where they operate, so a homeowner can typically find historical rate information on google or by calling your utility.”
According to Saidov, the cost of installing a heat pump can vary depending on the type of heat pump, with ductless mini-split heat pumps costing as little as $500 for a quick and easy installation.
“The value of a solar setup varies substantially by market, with buyers in states where electricity bills are higher placing more of a premium on solar panels,” added Sander.
2. Purchase Financing
“For purchasing panels, you will get the most value typically by paying cash,” explained Saidov, who called this a “significant investment,” which is why financing might be the way to go.
“You should always ask for the cash price to ensure a substantial fee isn’t being added up front to give an attractive interest rate. Using a home equity loan, rather than financing through the installer, may make more sense,” she advised.
“The cost of installing solar panels can also vary depending on the system’s size and the home’s location,” Sander said. “However, solar panels can add value to a home, with residences with solar being 24.7% more likely to sell for more than their asking price.”
3. Net Metering
Saidov cautioned that before a homeowner makes the decision to invest in solar, “You need to confirm with your utility how you would be paid for electricity that you generate and send out to the grid. Solar sales reps will never bring up the fact that many utilities only compensate you for the generation portion of your electric rate, which is roughly half of the price you pay per kWh,” Saidov cautioned buyers.
“If you’re generating electricity during the day and sending it out to the grid, and then using electricity from the grid after sunset, you can actually lose money if you overpay for your solar system,” she added, noting how the key is to shop around to find an installer without exorbitant sales commissions.
Final Verdict
Again, it all depends on your needs, your location, and how your home functions.
“If upfront costs are a dealbreaker, and you’re OK with a slower payback, a heat pump might be your best bet,” Grant said, adding that a pump doubles as a year-round air conditioner.
However, if long-term savings and generating your own clean energy are your goals, “Solar panels could be the sunniest path,” Grant suggested.
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This article originally appeared on GOBankingRates.com: Heat Pump or Solar Panels: 3 Things To Consider To Save Money on Energy Bills
