Are solar panels worth it? This is a question that many homeowners are asking as they explore ways to save money and be more energy-efficient. Solar panels can certainly help to lower your electricity bill, but they also require a significant up-front investment. As you weigh the pros and cons of installing solar panels, there are a few key factors to keep in mind.
First, consider the cost of installation. Solar panels can cost anywhere from $10,000 to $20,000, so it’s important to have a realistic estimate of what you can afford. Also, take a look at your local climate and average sunlight exposure. If you live in an area with limited sunlight, solar panels may not be as effective in generating energy. Additionally, think about the size of your home and your energy needs. If you have a large home or high energy consumption, solar panels may be able to offset a greater portion of your electricity costs. Finally, ask yourself how long you plan on staying in your home. Solar panels typically have a lifespan of 20-25 years, so if you’re planning on selling your home soon, you may not see a return on your investment. When you consider all of these factors, you’ll be able to make an informed decision about whether or not solar panels are right for you.
How To Determine If Solar Panels Are Worth It
Solar panels are worth it from both an environmental and a financial perspective. Solar energy is great for the environment because it is a clean, renewable source of energy that does not produce greenhouse gases.
Solar panels can also help to combat climate change by reducing our reliance on fossil fuels. In addition, solar panels can help to create more sustainable cities by offsetting electricity usage from the grid. From a financial perspective, solar panels can save you a lot of money over time by offsetting or eliminating your electricity bill. Solar panels are a wise investment that will pay off in the long run, both financially and environmentally.
But the equipment and installation are expensive, running anywhere from $10,000 to $25,000. Many homeowners are concerned that the upfront costs will negate any savings on electricity.
There are five steps you can take that will help you determine whether or not solar panels are right for you:
- Review Your Electric Bill
- Estimate Solar Panel Costs
- Determine Financing
- Evaluate Sunlight Exposure
- Review Incentives
1. Review Your Electric Bill
Here’s a fundamental rule for solar panels: the higher your electricity bill, the more you’ll benefit from solar panels. If your electric bill is very high, then you’re probably going to save more money with solar panels. If your electricity bill isn’t very high, then you’re less likely to save money.
Take a look at your electric bill, and try to determine how much money you spend on electricity in one year, five years, and ten years. That should give you a pretty good idea of how much you stand to save with solar panels.
Keep one thing in mind: electricity rates can fluctuate sharply. If there are national changes in energy consumption or electricity prices, then the amount of savings can change. However, even if rates do go up, you will still be saving money with solar panels because you will be generating your own electricity. In the long run, solar panels are always a good investment.
2. Estimate Solar Panel Costs
A solar cost calculator can give you a relatively accurate estimate for the price of solar panels and the potential savings from installing them on your home. The calculator will ask you for information like your monthly electricity consumption and average utility bill. With that information, the calculator can determine the size of solar system you need to cover your electricity needs. Some calculators also factor in tax incentives, which can give you a more accurate picture of your potential savings. When shopping for solar panels, it’s always best to get quotes from multiple contractors and check customer reviews before making a purchase. An online marketplace like EnergySage is a great resource for finding qualified solar installers in your area.
3. Determine Financing
You’ll save the most money by paying in cash, but that’s just not an option for everyone. Many homeowners seek financing to pay for their solar panels.
There are a few different types of financing methods for solar panels:
- Solar loan
- PACE financing
- Solar lease (power purchase agreement)
Solar Loans
A solar loan is similar to a home improvement loan. They’re offered by solar panel manufacturers, credit unions, banks, and even local utility companies.
Like any type of loan, solar loans may have different interest rates and terms. Review your finances and think hard about which loan term is best for your budget.
Some solar loans may enable you to repay the loan by selling the excess power that your panels generate—this often requires that you buy a more extensive solar system or live in an area where electricity costs are higher.
PACE Financing
Your local government may offer PACE financing for your solar panels. PACE (which stands for “property assessed clean energy”) financing will cover the upfront cost of your solar panels. You’ll repay the loan by paying an additional fee on your annual property tax.
PACE loans are repaid over a longer period, typically 10 to 20 years, so they’re easier on your budget than other types of financing. It’s also helpful that you only have to make a payment once per year. With good budgeting, you’ll be able to save for that payment throughout the year.
Not all local governments offer PACE financing, so do some research and see if it’s available in your area.
If you’re a homeowner, you’ve probably had someone tell you, “solar panels will save you money because they’ll cut your electricity bill.” They will definitely cut your electricity bill, but keep in mind that solar panels require an investment up-front that may significantly affect how much you actually save.
According to the U.S. Office of Energy Efficiency and Renewable Energy, solar panels are more affordable and accessible than ever before. Although, they can still cost between $10,000 and $20,000 for installation.
How To Determine If Solar Panels Are Worth It
From an environmental perspective, solar panels are absolutely worth it. Solar energy is great for the environment and will play a key role in combating climate change and creating more sustainable cities.
Of course, if you’re asking yourself, “are solar panels worth it?” then you’re probably wondering about the numbers, not the green factor.
When you install solar panels on your rooftop, you’re basically putting a mini power plant on your home that generates electricity for you. Solar panels can significantly offset or eliminate your electricity bill, which can save you a ton of money over a long period of time.
But the equipment and installation are expensive, running anywhere from $10,000 to $25,000. Many homeowners are concerned that the upfront costs will negate any savings on electricity.
There are five steps you can take that will help you determine whether or not solar panels are right for you:
- Review Your Electric Bill
- Estimate Solar Panel Costs
- Determine Financing
- Evaluate Sunlight Exposure
- Review Incentives
[Pro Tip: If you’re thinking about getting solar panels, you must act quickly! Solar energy is getting cheaper every year, so many government tax incentives are being rolled back. We’ll discuss this later on.]
1. Review Your Electric Bill
Here’s a fundamental rule for solar panels: the higher your electricity bill, the more you’ll benefit from solar panels.
If your electric bill is very high, then you’re probably going to save more money with solar panels. If your electricity bill isn’t very high, then you’re less likely to save money.
Take a look at your electric bill, and try to determine how much money you spend on electricity in one year, five years, and ten years. That should give you a pretty good idea of how much you stand to save with solar panels.
Keep one thing in mind: electricity rates can fluctuate sharply. If there are national changes in energy consumption or electricity prices, then the amount of savings can change.
For example, assume that you’re paying 12 cents per kilowatt-hour for electricity. If electricity consumption in your area increases (if more people are using more electricity), then your bill may increase from 12 cents per kilowatt-hour to 20 cents. That would increase your electricity bill, and you may now find it more worthwhile to install solar panels.
The opposite is also true—if electricity prices dropped in your area, you might find solar panels less worthwhile.
Keep an eye on your local housing market and make an educated guess on what your area’s average electricity costs will be over the next several years.
2. Estimate Solar Panel Costs
A solar cost calculator can give you a rough estimate on how much it would cost to install solar panels on your home and how much you could save.
When using a calculator, you’ll have to know how much energy you consume on average. That information should be listed on your monthly utility bill. Your monthly average will determine what size solar system you need to cover your electricity needs.
Depending on the calculator you use, you may be able to factor in tax incentives to get a more accurate picture of your savings (we’ll cover tax incentives later on).
If you want to save the most money, be sure to get quotes from three or four contractors and check the customer reviews for any manufacturer or installation company before you buy. An online marketplace like EnergySage is helpful because it enables you to compare costs in your local area.
3. Determine Financing
You’ll save the most money by paying in cash, but that’s just not an option for everyone. Many homeowners seek financing to pay for their solar panels.
There are a few different types of financing methods for solar panels:
- Solar loan
- PACE financing
- Solar lease (power purchase agreement)
Solar Loans
A solar loan is similar to a home improvement loan. They’re offered by solar panel manufacturers, credit unions, banks, and even local utility companies.
Like any type of loan, solar loans may have different interest rates and terms. Review your finances and think hard about which loan term is best for your budget.
Some solar loans may enable you to repay the loan by selling the excess power that your panels generate—this often requires that you buy a more extensive solar system or live in an area where electricity costs are higher.
PACE Financing
Your local government may offer PACE financing for your solar panels. PACE (which stands for “property assessed clean energy”) financing will cover the upfront cost of your solar panels. You’ll repay the loan by paying an additional fee on your annual property tax.
PACE loans are repaid over a longer period, typically 10 to 20 years, so they’re easier on your budget than other types of financing. It’s also helpful that you only have to make a payment once per year. With good budgeting, you’ll be able to save for that payment throughout the year.
Not all local governments offer PACE financing, so do some research and see if it’s available in your area.
Solar Lease
Instead of buying solar panels, you could lease them. This is known as a “solar lease” or a “power purchase agreement.”
There are significant pros and cons to solar leases.
Pros:
- You can have solar panels installed at no cost
- When your lease expires, you can choose to purchase the panels outright, or you can renew the lease
- If you sell the property, the solar lease can be easily transferred to the next homeowner at no cost
Cons:
- The panels will only cover about 10 to 30 percent of your electricity bill (the leasing company sells the rest of it to make a profit)
- You won’t own the panels, so you can’t collect on any solar tax incentives
- A solar lease may be a good option for you if you want to reduce your electricity bill, but you don’t plan on owning a property for more than a few years
4. Evaluate Sunlight Exposure
The amount of sunlight that your solar panels are able to absorb will have a direct impact on how much energy they can produce. And, in turn, the more energy your panels can produce, the more money you can save on your electricity bill each month.
That being said, it is worth noting that certain states – such as California, Arizona, and Nevada – tend to receive more hours of sunlight on average than other parts of the country. As a result, solar panel systems tend to be more efficient in these types of locations. However, it is important to note that you do not need to live in a sunny area in order for your solar panels to function properly or yield significant financial savings. In fact, New York, New Jersey, and Massachusetts – which experiences more overcast weather – have a higher number of solar panel installations per capita than many other states.
The reason for this is simple: the cost of electricity is typically higher in these areas. Additionally, the orientation of your home in relation to the sun will also affect the efficiency of your solar panels. If trees or taller buildings shade your rooftop, your solar panels might not be able to absorb as much sunlight. As such, it is important to take all of these factors into consideration when determining whether or not solar panels are right for you and your home.
5. Review Incentives
Homeowners who are considering solar panel installation should be aware of the numerous tax incentives that are currently available. The most significant incentive is a federal tax credit that allows homeowners to claim 26 percent of installation costs for systems put in between 2020 and 2022. For systems installed in 2023, the credit decreases to 22 percent.
There is no maximum claim amount, making this an extremely beneficial opportunity for homeowners. In addition to the federal tax credit, many states also offer tax incentives for solar panel installation. However, it is important to note that these benefits are set to expire at the end of 2023. While there is a possibility that Congress will renew the savings opportunities, homeowners should avoid waiting to invest if they want to maximize their potential savings.
Some state governments also provide incentives, like:
- Cash back
- Property tax exemption
- Waived fees
Additionally, some states may allow homeowners with excess power to sell it to their local utility company.
Tips For Buying Solar Panels
Let’s go over a few extra tips for buying solar panels:
- Finding the Best Price: The larger, more established installation companies are usually more expensive. Smaller installation companies offer the best prices.
- Find a Middle Ground: The best equipment doesn’t always mean the best savings. Knowing your home’s energy requirements, try and find the right balance between equipment quality and savings.
- Consider Net Metering: Are you thinking about installing solar panels on a seasonal house? Remember that energy costs are typically lower during spring and fall and higher in summer and winter. Thus, solar panels may be most optimal for summer or winter homes. With a seasonal home, you should also make sure to get panels that enable you to store your excess energy on a grid or sell it to a local utility company (this incentive is called “net metering”).
- Don’t Be House Poor: If you just purchased a home, you might not have a lot of money leftover to buy solar panels. Don’t go house poor for the sake of solar energy. Consider getting a solar lease if you want to reduce your utility bill on your new home.
- Don’t Forget About the Rooftop: Solar panels require a roof that’s in good shape. You might want to delay getting solar panels if you need to do a rooftop renovation. You could also try and get a home improvement loan for both your rooftop and your solar panels—knocking out two birds with one stone!
Last but not least, consider how long you plan on keeping your home. Most households break even on solar panels after eight years. Do you plan on owning the home for that long?
- If you plan on selling the house before you break even, you might want to lease the panels or forgo installing panels altogether—however, solar panels also tend to increase property values, so they might be a good option for you if you want the property value to appreciate more quickly
- If you plan on owning the property for a longer period, or if it’s your primary residence, you’ll benefit most from buying solar panels
- If you’re an investor, you might think about installing solar panels so you can earn the federal tax incentive—very helpful if you’ve sold assets in 2021 and owe a significant amount of capital gains tax
Summary
A working knowledge of solar panels is becoming increasingly important for homeowners as the technology continues to develop and become more affordable. Are solar panels worth it for you? The answer may depend on a number of factors, including your electric bill, the amount of sun your home gets, and any state or federal incentives you might be eligible for. Use a solar cost calculator to get a ballpark estimate of the upfront costs and compare that to the amount of money you currently spend on electricity. In some cases, solar panels can actually increase the resale value of your home, so if you’re planning on selling in the future, take that into account as well. Ultimately, whether or not solar panels are worth it for you comes down to a question of cost versus benefit— but with a little research, you should be able to make an informed decision
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