We’ve all seen indicators of a looming recession with massive tech layoffs and rising inflation.
A recession is defined as two consecutive quarters of decreased GDP growth. Many researchers agree that it’s no longer a question of if — but when — a global recession will occur.
Typically, people try to cut costs and save money before and during a recession. Making a big purchase like solar might be the last thing on people’s minds.
If you have been looking into solar, but feel worried about taking the next step because of the impending recession, keep reading to find out if it still makes sense for your financial situation by looking at the history, benefits, and solar financing options available.
Key Takeaway: Should I Buy Solar During a Recession?
You should buy solar during a recession if you have enough savings and/or a steady income to afford solar. Defaulting on a solar loan or lease can affect your credit score and can also lead the lender to repossess your solar panels. However, if you are able to pay for your panels, you’ll experience long-term financial and environmental benefits.
Check out this article to see if solar is the right investment for you.
The most recent recession was the Great Recession lasting from December 2007 to June 2009. Caused by the housing bubble bursting, this was the longest period of slowed economic growth since World War II, and it affected many aspects of the emerging solar industry.
According to the 2008 U.S. Solar Industry Year in Review Report by Solar Energy Industries Association, the U.S. solar market continued to grow substantially during the recession in 2008. However, the industry did see substantial layoffs, limited credit access for solar companies, and decreased investment in renewable energy sources.
In 2008, the price for a new residential solar panel system cost as much as $40,000–$50,000. This is about double what most solar panel systems cost today.
The most popular solar financing during the time was power purchase agreements. Sunrun started offering a solar lease program in 2007. Many customers had a hard time securing leases because of the tighter loan requirements.
Many factors contribute to today's promising solar outlook amidst a possible recession.
During the Great Recession, the government passed the 2008 EESA and 2009 American Recovery and Reinvestment Act to promote residential and commercial solar growth. Similarly, the U.S. government just passed the Inflation Reduction Act of 2022, which secures a 30 percent tax credit for those who choose to go solar in the next decade.
The federal solar tax credit, along with affordable solar technology, makes solar technology more accessible to many Americans, even during times of economic uncertainty. Switching to solar has become a way to save on your monthly electric bill and invest your money with reasonable loan terms.
One of the main financial reasons to go solar is the electric bill savings. Utility rates continue to rise to match the global demand and high fossil fuel supply prices. Eversource, a utility company in Connecticut, recently submitted a request to increase electric bills by nearly 50 percent for customers.
More utility companies are switching to demand-based pricing, which increases prices during times of day when most people typically need energy. Rising gas and utility prices can become a financial strain, especially during an economic slowdown.
If you get a solar panel system that matches your energy output, you should see a significant reduction in your electric bill. A solar representative from Sol Vista Roofing says that most solar customers can keep their monthly costs the same or lower than their previous electric bill. This helps new customers start saving within months of installation.
Some states have net metering policies that allow you to sell your excess electricity back to your local utility provider. This can help offset the cost of the lower-producing months.
Some of the best states for net metering include the following:
The stock market becomes volatile during a recession as stock prices fluctuate to reflect consumer confidence. When compared to other investments, solar can be a low-risk option that also benefits the environment.
Purchasing a solar panel system can also increase the value of your home after you’ve paid off the entire system. Keep in mind that solar is a long-term investment and that you may need to wait a few years before you start seeing significant savings.
If you are considering solar, we suggest calculating your payback period. The average payback period for most solar customers is 7–10 years. Some of the factors to keep in mind when projecting your payback period are
The Federal Reserve typically lowers interest rates to combat the natural slowdown of consumer spending. This is meant to encourage more lending and investments. Getting a solar loan during a recession is a great time to secure a lower interest rate. This can help you save hundreds to thousands on interest depending on the current rate.
As of 2022, the federal government is also offering tax credits that can make solar more affordable. Individuals who purchase their solar panel system upfront or with a loan are eligible for a 30 percent tax credit.
Alan Duncan, Founder of Solar Panel Network USA, points out that specific states might have rebates and incentives to further lower the cost of solar. With this benefit, Alan points out, “you could potentially be saving money right away by installing solar panels during a recession.”
According to a ForbesHome survey, 36 percent of respondents said their main hesitation preventing them from going solar is the high upfront cost. This number may be even higher during times of financial hardship. Customers have four solar financing options: cash, solar loan, solar lease, or PPA.
During a recession, customers might feel like their only option is a solar lease or PPA. Some companies may advertise “free solar” or “no cost solar.” This can seem enticing especially when wallets are tight.
However, you should keep in mind that a solar lease or PPA doesn’t provide the best overall savings. It’s often best to choose solar ownership over a solar lease to maximize savings. That may mean waiting a little while until your financial situation stabilizes and you are able to save up for a down payment.
Jake Hill, financial expert and founder of DebtHammer, says investing in solar at any time is a great idea, “if and only if you can afford it.” Whether or not there is a recession, the best time to invest in solar is when you have the credit score and financial savings to pay for solar upfront or secure a solar loan.
Practicing smart money habits can improve your financial situation during times of economic slowdown. If you are considering solar, you can feel confident in your investment by conducting thorough research and comparing quotes from reputable companies.
When shopping for solar, look for companies with an established reputation and history. Be sure to check out the terms and conditions before signing any contract. Price is a big factor in the decision-making process but it shouldn’t be the only factor. Ask about workmanship and equipment warranty and the installation process.
June 19th, 2023
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