Are Solar Panels Worth It? Facts You Need To Know
Solar panels are something to consider if you’re looking for ways to go green and cut down on utility costs. However, just because solar panels are a renewable energy source doesn’t necessarily mean that they are a good fit for your home. There are many different factors to consider when deciding whether or not to install solar panels.
This article will explore all the points you should consider before answering the question: are solar panels worth it? From the impact on your energy bill to navigating the different incentives for installing solar panels, by the end of this piece, you'll have a good grip on whether or not investing in solar power makes sense for you and your property.
When Are Solar Panels Worth It?
Financing a solar panel setup for your home can cost thousands of dollars. When trying to determine if this is a good investment for your particular circumstances, you should consider three main criteria. Start by investigating the answers to these questions:
- Do I have consistently high energy bills?
- Are there incentives for installing solar panels in my area?
- Does my roof get a lot of sunlight?
Depending on your answers, solar panels may or may not be a worthwhile investment.
High energy bills
The first thing to look at when you’re weighing whether or not the high upfront costs of solar panels are worth it is how much you’re paying for electricity throughout the year. Electricity rates and usage vary greatly depending on where you live. Solar panels make the most sense if your monthly utility bills are consistently high.
Review the monthly bills from your utility company for the past year or so and calculate the average cost to decide if the potential solar savings you could receive are worth the price of installing solar panels.
Suppose you notice that you’re spending a lot of money to run heating and cooling systems throughout the year. In that case, solar panels can definitely help offset those costs and significantly reduce the average cost of your utility bill.
Solar incentives
If you consistently have high utility bills and use a lot of energy heating and cooling your home throughout the year, then the cost of transitioning to renewable energy might be worth it. In this case, the next thing to consider is what government incentives and other incentives are offered for installing solar panels in your area.
For example, in the US, the federal government offers a residential federal tax credit for homeowners with solar panels. This tax credit allows you to claim up to 26% of the solar installation costs as a tax reduction.
Besides federal tax credits, certain areas offer additional incentives for solar installation. These can come in the form of state property tax exemptions or even cash back from the local government.
In some areas, utility companies will even buy excess energy produced by your solar system. This is a great incentive to look for if there are certain times of the year when you don’t use a lot of electricity because you can make money off the excess power your solar panels generate.
Sun exposure
The third most important thing to consider when deciding whether or not to invest in solar panels is how much sun exposure your roof gets. The more hours of sunlight it gets, the more efficient your solar system will be.
Several factors influence how much sunlight your roof gets, including its orientation, where you live, and whether there is anything nearby that shades it.
South-facing rooftops that are entirely open (i.e., not shaded by trees, nearby buildings, or other objects) have the most potential for generating solar energy. In the US, states like California, North Carolina, Texas, Arizona, and Florida are some of the best areas for solar power production.
How can you determine solar savings potential in your area?
Fortunately, easy-to-use online tools can make estimating your property’s solar potential a breeze.
A quick Google search for something like “solar calculator” will pull up a number of options. Choose one, then enter information about your home to estimate how much installed solar panels could save you on your annual energy costs.
Some tools require as little information as your zip code and the name of your local utility company. In contrast, others may use your exact address to look at things like your home’s orientation and analyze whether or not it gets too much shade to make solar panels worth it.
When You Shouldn’t Install a Solar Panel System
Now that you have a better idea of factors that make solar panels worth the initial investment, let’s look at some of the scenarios when they may not be a good investment.
When solar panel installation isn’t worth it:
- You already have low electricity bills
- There are no incentives in your area
- Your roof is very shaded
- There’s nowhere to mount solar panels
- You want to move or sell your home soon
If any of the above is true for you, solar panels may not be worth the cost. Particularly if your home experiences a lot of shade from trees or other buildings, they won't be able to generate enough energy to offset the cost of installation.
Low electricity costs
If you don’t have consistently high utility bills for most months out of the year, the solar savings you could generate probably aren’t high enough to validate the initial investment it takes to get set up with solar panels.
No solar energy incentives
Incentives like deductions on federal taxes, state tax credits, cash rebates, and property tax breaks go a long way towards reducing the cost of solar panels. However, if no incentives are available in your area, you should really consider whether the initial investment makes sense.
Not enough sunlight
If your roof is too shaded or oriented so that it doesn’t get much sunlight throughout the year, solar panels won’t generate electricity in significant enough amounts to make them worth it. Generally, roofs facing south, southwest or west (in the northern hemisphere) receive more direct radiation from the sun, so the panels will generate more solar energy.
Nowhere to install solar panels
Not every roof type is suitable for solar panels. For example, there may be a limited amount of space or the roof might be too old to support the panels. A solar installation company will be able to inspect your roof and let you know if it’s adequate for solar panels.
If not, ground-mounted solar panels may be an option. Because of the amount of space required for this, ground mounting isn’t typically a realistic option in cities and suburbs. It is more suited to large rural properties, such as farms and country homes.
Alternatively, if you have other structures on your property, it may be possible to mount solar panels there. For example, if you have a detached garage, a large storage shed, a barn, or another building with a large rooftop, those can be options.
Plans to move and sell your home soon
Finally, if you plan to move or sell your property in the near future, it probably isn’t the best time to invest in a solar system. This is because it can take years to generate enough solar savings to pay off the initial investment.
Solar panels can raise the value of your property over time if you want to sell it down the road, but renewable energy sources don’t instantly make your home’s value shoot up.
So, if you want the investment to pay for itself and even make you money, make sure you’re planning to stay put for a while, as solar is really a long-term investment.
How Much Do Solar Panels Cost?
The cost of solar panels varies depending on where you live, how much local installers charge, the system size, and the system's quality.
The average installation costs in the US, including equipment and labor, usually fall somewhere between $15,000 to $20,000. Note that discounting incentives from the system’s cost can lower the net cost.
To determine installation costs in your area, contact local installers and get a few different estimates and compare them.
What if you can’t afford solar panels?
If you want to switch to solar, but there’s no room in your personal finance plan for the upfront costs, you can try looking for a solar loan. Many lenders offer loans specifically for solar system installation to help people switch to clean energy.
These types of loans typically require you to make minimum monthly payments, but you can usually choose the length of the payback period. For instance, you could pay the loan back in as little as two years or up to 12+ years.
Most homeowners find that their solar systems pay themselves off in energy savings in about eight years. If you’re interested in getting a loan to cover solar panel installation, do some research online and talk to lenders in your area to find something that works for you.
If you can’t find a solar loan, you may also be able to take out a less specific home improvement loan or a green mortgage loan against the value of your real estate.
3 Things to look at when comparing solar loans:
- Payback periods
- Interest rates (APR)
- Qualification requirements
- Upfront fees (or Dealer Fees)
Don't give up if you still don’t think solar panels are a sensible investment for you right now. The cost of solar equipment is going down and will continue to do so as solar electricity becomes more and more common, so you might be able to make the switch in a few years.
Key Takeaways
Investing in solar panels can significantly affect your personal finances, so it’s essential to consider all the factors before committing to solar energy.
Solar panels can significantly reduce your monthly electricity costs and provide long-term savings in the right conditions. They can even make you money if you have the opportunity to sell back surplus electricity produced to your local utility provider or because of the added real estate value if you decide to sell your home down the line.
The initial steep cost of high quality equipment and labor means that solar panels aren’t always the right option, especially if your property doesn’t have high potential for generating solar electricity.
If solar panels don’t seem worth it for you, don’t worry — there are always other ways to save money on your utility bills and live a more sustainable lifestyle. If you’re looking for other ways to help counteract climate change and contribute to the environment in a positive way, consider switching to a green bank like Atmos.
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