Solar with Batteries vs. Generator: A Cost-Benefit Analysis

In the realm of backup power solutions, homeowners and businesses often find themselves choosing between traditional generators and modern solar systems with battery backup. While both options provide energy security during outages, their long-term costs and benefits differ significantly. In this case we are looking at a larger, whole-home sized generator and comparing it to a solar system that produces as much or more power. See table below for comparison of costs, savings and benefits.

Sunk Cost vs Investment

Note that the generator is a sunk cost, basically designed as insurance for power outages. It can avoid food loss from refrigerators/ freezers, operate emergency appliances, and maintain comfort. The best situation is if the power never goes out, and the generator is never used (except for required maintenance).

The solar+battery investment assumes Net Metering with the power company. All the power produced is used directly or transferred out to the power grid. The savings, in this case, is $150 per month of locally produced solar power making this an excellent investment for a homeowner (especially with the 30% Federal renewable energy tax credit). It is a crazy profitable investment for a business because they also get the benefits of depreciation which reduces their income (and therefore provides a tax “shield”).

Oh, and solar+battery provides an uninterruptible battery backup solution for outages. Think of the UPS that you hook computers and sensitive equipment to in the office.

Initial Investment

A typical whole-home generator costs around $20,000 installed, offering immediate backup power during outages

In contrast, a solar system with battery backup may require a higher initial investment of about $35,000, before tax benefits.

However, this upfront cost difference doesn't tell the whole story.

Long-Term Financial Impact

Generator Costs

Over a 20-year lifespan, a whole-home generator's total cost, including fuel and maintenance, can reach approximately $32,138 in net present value

This calculation factors in weekly test runs, monthly usage for backup, and annual maintenance costs.

Solar System Benefits

A solar system with battery backup, while more expensive initially, offers significant long-term savings:

• Electricity Bill Reduction: The system can potentially save $1,800 annually in electricity costs, with savings increasing as energy prices rise
• Tax Incentives: A 30% federal investment tax credit substantially reduces the initial cost
• Return on Investment: Over 25 years, the system could generate a total savings of $66,821, resulting in a 172.74% ROI

Business Advantages

For businesses, particularly incorporated farms, the financial benefits of solar are even more pronounced:

• Accelerated Depreciation: Using Section 179 depreciation, businesses can deduct 85% of the system's cost in the first year
• Enhanced ROI: With tax benefits, the effective cost drops to $16,170, boosting the ROI to an impressive 313.24% over 25 years

Environmental Impact

Solar systems offer the added benefit of reducing carbon footprint, aligning with growing environmental concerns and potentially improving corporate image.

Conclusion

While generators provide reliable backup power with a lower initial cost, solar systems with battery backup offer superior long-term financial benefits and environmental advantages. For homeowners, the choice may depend on immediate budget constraints versus long-term savings. For businesses, especially those able to leverage tax benefits, solar presents a compelling financial case, combining energy independence with significant cost savings over time.

 Comparison of Major Factors in Whole Home Generator vs Solar+Battery

Factor	Whole-Home Generator	Solar System w/Battery Backup
Initial Cost	$20,000 installed	$35,000 installed
Net Cost After Incentives	$20,000	$24,500 (homeowner*), $16,170 (business)
Lifespan	20 years	25 years
Net Present Value (NPV)	-$32,138	+$42,321 (homeowner*), +$50,651 (business)
Return on Investment (ROI)	N/A (cost only)	172.74% (homeowner*), 313.24% (business)
Annual Operating Costs	$974 (fuel + maintenance)	Minimal
Energy Bill Savings	None	$1,800 in first year, increases yearly
Payback Period	N/A	~11-12 years (homeowner*), ~9 years (business)
Environmental Impact	Produces emissions	Clean energy, reduces carbon footprint
Maintenance Requirements	Regular maintenance needed	Minimal maintenance
Fuel Dependent	Relies on natural gas or propane	No fuel required
Tax Incentives	None	30% federal tax credit, depreciation benefits for businesses
Power Availability	Daily energy production with backup capacity	Daily energy production with backup capacity
Scalability	Limited	Expandable (add panels or batteries)
Lag-time when power drops	Almost instantaneous	Several seconds, up to 30 seconds

* There is a 30% tax refund or “rebated” for most nonprofits. Nonprofits would generally have the same advantages and ROI as the homeowner. See IRS.gov for qualifying orgs.