Are solar panels worth it? 8 things to consider before you buy

Updated

Solar panels can be one of the best investments for a home. And like any investment, you should consider how to get your money’s worth before making a long-term commitment.

From local electricity costs to choosing a reputable solar installer, there are numerous things you should consider when trying to decide if solar is a good choice for your specific home (and whether or not you’ll save enough money to justify the high upfront costs). 

That’s why we’ve created an in-depth guide that covers the 8 most crucial factors you need to take into account before buying solar panels.

8 things to consider before going solar

    1. Local electricity rates

    You first need to look into whether your home is fit for solar energy. Your location and the amount of your monthly electricity bills are two of the most influential factors when it comes to determining how effective your solar panels will be, and whether or not you’ll see substantial savings. 

    In Massachusetts, for example, the cost of electricity is $0.17 per kilowatt-hour, whereas it only costs $0.11 per kilowatt-hour in Washington. Because homeowners in Massachusetts are paying more for electricity and have higher monthly power bills, they stand to save more by going solar. 

    To put this into perspective, a solar installation that generates 1,000 kWh of electricity in Massachusetts saves $170, while the same solar system would only save $110 in Washington.

    There are also net metering programs in many states, which actually pay homeowners who generate excess solar power (we’ll discuss this further below).

    A quick way to assess whether your home is suitable for solar panels, based on your location and monthly electricity costs, is to use our solar panel calculator

    To give you a general idea of how this assessment works, let’s use Massachusetts again as an example. The average monthly power bill in the state is $153 before going solar. If you install solar panels on your roof, it would generate 600 kWh per month for a 5 kW system. 

    This would result in $102 in savings per month! In this scenario, your monthly power bill would only be $51, compared to $153 without home solar.

    Find out how much you can save on your monthly power bill with solar

    2. How much sunlight does my area get?

    Photovoltaic (or PV for short) solar panels rely on adequate sunlight and prefer clear outdoor conditions for power production. If your area receives four to five hours of direct sunlight every day, then solar panels will be able to generate enough electricity to power your home.

    What if you live in an area that doesn't receive a ton of sun exposure? Believe it or not, solar could still be a great option. On cloudy days, solar panels continue to work - just at lower output levels. To cater to these conditions, you would just need a bigger system to cover your electricity bill.

    For example, a 300-watt solar panel in Massachusetts would typically produce 0.9 kWh per day, while the same panel would produce 2.25 kWh per day in super-sunny Arizona.

    Interestingly, solar panels operate best in moderate temperatures at 77 degrees Fahrenheit or lower. This makes locations with cool, mild weather conditions, like San Francisco, ideal for solar panels.

    3. Is my roof suitable for solar panels?

    For best results, solar panels should be facing south and tilted at an angle, based on your location’s latitude and the season you’re in. Your roof pitch should also be between 30 to 45 degrees to maximize sunlight intake. 

    ideal roof pitch for solar panel installation is between 30 to 45 degrees

    If you don’t have a south-facing roof, it’s not a dealbreaker. In fact, there are many homeowners who don’t, and are still seeing huge savings on their electric bills. 

    Solar panel output also tends to balance out across the seasons, so if your roof pitch is shallow, for example, you can still produce ample power. A shallow roof works better during summer months, while a steep roof generates more output during the winter season. 

    On the other hand, if you happen to have a completely flat roof, you can still install solar panels - find out more here.

    If your roof isn’t suitable for solar panels, you can opt for installing a ground-mount system instead, provided you have the ground space. 

    Learn more: Is my roof good for solar? 4 essentials installers consider and why

    4. How much does a solar panel system cost?

    Costs for solar are on a decline, and this trend is expected to continue in the coming years. The average cost for a residential solar system ranges from $12,000 for a 4 kW installation to $24,000 for an 8 kW unit before incentives and rebates are taken into account. 

    In addition to the physical equipment, you’re also paying for labor and permitting costs associated with the installation. 

    Equipment 

    • Solar panels
    • Battery (should you choose to install one)
    • Mounting, racking, and meters
    • Inverter

    Solar panels 

    One of the main components in a solar-powered system is the solar panel. Costs for solar panels vary, depending on their level of efficiency, technology, and whether they are manufactured by a Tier 1 brand.

    While Tier 1 solar panels do tend to be more expensive than Tier 2 brands, it’s typically worth the price hike. Learn more about the difference between Tier 1 and Tier 2 solar panel brands here.

    Residential solar panels primarily come in two varieties: monocrystalline and polycrystalline. Monocrystalline panels do cost more than polycrystalline, but it’s only about a $.10 per-watt price difference. They also offer better performance and aesthetics, making them the dominant solar panel type on the market.

    Learn more: The best solar panels to buy for your home in 2022

    Battery 

    Batteries are an optional add-on to your solar PV system, and are designed to store energy for use during nighttime, power outages, and any other time your panels aren’t producing power. Solar batteries cost between $200 and $15,000, and their price depends on a handful of factors, from battery technology to capacity

    Mounting, racking, meters 

    Mounting and racking components are used to secure solar panels on your roof at a specific angle to maximize sunlight intake. Hardware refers to the small parts, screws, and attachments that hold the mounting system together. All of these components are bundled together and are rarely bought separately.

    Meters are devices that closely monitor your system. If you are enrolled in net metering, you’ll have a bi-directional net meter installed to facilitate the process. PV meters are one-way units for tracking generated power, and consumption meters help monitor energy usage.

    Inverter 

    One of the key components of a solar power system is the inverter, and you’ll have one of the following installed:

    • String inverter
    • Microinverter
    • DC power optimizer
    • Hybrid inverter

    They each come with their own set of advantages and disadvantages, and vary in price. You can learn more about each inverter type, as well as which is best-suited for your specific solar system in our solar inverter buyer’s guide.

    Installation 

    Installation costs vary and largely depend on the quality of the solar installer. When choosing a solar company, it’s a good idea to get quotes from local companies, due to the fact that they are the ones that can easily service issues that arise while your system is operating.

    The company you choose for your solar installation matters for many reasons, but perhaps most importantly to ensure you get a thorough installation that lasts for years. Reputable solar installers have usually been around for a long time and tend to offer better warranties for their service, with these benefits translating to peace of mind for homeowners over the long term.

    Check out reviews of solar installers in your area here.

    Permits 

    Permits are the most time-consuming part of the solar installation, and can take anywhere from three days to three weeks to complete. However, the silver lining is that your installer will handle the process for you.

    The specific permits you need vary not just from state to state, but also from city to city! Generally, most solar installations need the following:

    • Electrical permits: Also known as an interconnection agreement, this permit requires approval from your local utility to make sure your system meets National Electric Code standards before connecting to the power grid.
    • Building or structural permits: This permit comes from the Authority Having Jurisdiction (AHJ) for the installation or construction on your roof. In some cases, you’ll need to hire a professional to inspect the roof to make sure it is safe for mounting solar panels.

    Electrical work, such as wiring and power connections, is conducted by a licensed contractor or installer. Homeowners don’t apply for this type of license. Your installer should have the proper certification or license to perform electrical work on your roof. 

    Expect to pay around $300 in total for all permits. Some states, like Colorado, have a $500 cap on residential solar permits to ease these costs.

    Will I have to pay for maintenance and repairs? 

    Solar panels are essentially maintenance-free. 

    If leaves, branches, snow, or dirt accumulate on the panels, you should remove them using a blower, water hose, or soft brush in order to keep the system working smoothly. Most solar panels are lightly cleaned two to four times per year, and you can easily do it yourself. 

    While solar panels rarely need to be repaired, any malfunctions or failures will most likely be covered by the manufacturer’s warranty. 

    5. Does my utility offer net metering?

    Net metering is a program offered by your local utility that allows you to receive credits on extra energy generated by your solar panels. In fact, it’s one of the most helpful ways to speed up your solar payback period and offset your monthly electricity bills. 

    You see, when excess energy is produced by your system, it is sent to the grid. Your local power company then buys that energy from you and you receive credits for the transaction. Most full-retail net metering programs allow you to roll over your credits on to the next month, which is especially useful for reducing energy bills during winter seasons.   

    In the below video, SolarReviews' in-house solar expert Will White explains in more detail how net metering works.

    Net metering rates and policies differ across the country. At the moment, solar net metering is available in 38 states and Washington D.C. Find out if your state participates here.

    6. Am I eligible for any solar rebates and incentives?

    There are several programs available that can help reduce the upfront costs of solar panels, and they include the federal solar tax credit, state and utility incentives, and local rebates.

    Federal solar tax credit 

    Savings in the form of the solar investment tax credit, or ITC for short, are issued by the U.S. federal government for the purpose of easing upfront costs related to solar panels and their installation. 

    You receive a credit equal to 26% of the total costs of your solar installation. This translates to $3,900 in savings for a $15,000 system.

    Unfortunately, the tax credit is set to decrease over time and will eventually be phased out. Currently, all residential systems are eligible for a 26% credit; all systems that are installed after December 31, 2022 will receive a 22% credit. 

    Beginning January 1, 2024, the tax credit will expire altogether, making the best time to install solar now - while the savings are of the highest value. 

    State incentives 

    There are various state-level incentives you can qualify for to further offset the upfront costs of solar panel installations. 

    Some states offer their own tax credit, like Arizona, while others have performance-based incentives, like Solar Renewable Energy Credit (SREC) programs. SRECs are currently available in New Jersey, Massachusetts, Pennsylvania, Maryland, Washington D.C., Delaware, and Ohio.

    Available incentives depend on your location and your ability to qualify for the programs. In some cases, you could qualify for multiple incentives and rebates in your state. 

    For example, one of the best states for home solar is New York, not because of overly sunny weather - it’s actually due to the several solar programs that are available. If you’re a resident of the Empire State, you are eligible for incentives through the NY-Sun Megawatt Block program, NY Solar Energy System Equipment Tax Credit, and the state sales tax exemption. New York homeowners can also participate in full-retail net metering.

    On the far end of that scale, Louisiana and Oklahoma offer very limited incentives for going solar. In these states, the only available incentives are federal tax credits and net metering (not at full-retail rate). Therefore, installing a residential solar system in these states may not make too much financial sense.

    Find out what state incentives you are eligible for

    Utility incentives and local rebates 

    In some states, local utility companies offer various performance-based incentives (or PBIs) to promote solar ownership. This type of incentive is based on the amount of solar power generated by the system; it does not matter if the energy is used by your home or exported to the utility. 

    Upfront rebates from manufacturers or city-level programs provide even more savings for purchasing solar panels. However, these benefits are becoming less common nowadays, as prices for solar continue to decrease and the number of installations steadily increase. 

    Local incentives and rebates vary depending on your state. For more information on available solar incentives in your area and how to claim them, check out our solar panel rebate guide.

    7. What are my financing options?

    There are four primary ways to pay for a solar system: a lease, power purchase agreement, solar loan, and cash.

    lifetime savings with solar for different financing options

    Lease 

    A solar lease provides a quick way to get solar panels on your roof so you can start reducing your monthly electricity bill through net metering. The drawback with this financing option is you don’t own the system, therefore, you wouldn’t be eligible for federal tax credits or local incentives. 

    Not only that, a solar installation under a lease does not increase the value of your home, and you may actually find it difficult to sell if buyers aren’t interested in the system (and taking the lease off your hands).

    You also don’t get to save as much over the long term. Like a traditional lease, you must make fixed, monthly payments to the local solar installer or company. In order for a lease to make financial sense, your monthly lease payments would need to be lower than your monthly electricity bill.

    With that said, there are no upfront costs associated with getting solar panels through a lease, so if you do not qualify for a loan or cannot pay in cash, a lease would be a viable option.

    Power purchase agreement 

    A power purchase agreement or PPA is similar to a solar lease, in that there are no upfront costs associated with the installation and you don’t get to own the system. 

    With a solar lease, your monthly payments are fixed based on the terms of your contract. In a PPA, your payments fluctuate every month, based on energy generated by the panels. 

    PPA contracts range from five to 25 years, and PPA rates are paid per kilowatt hour. So for this option to work for you, the PPA rate needs to be lower than the kilowatt-hour rate of your local utility company. 

    Compared to other financing options, a PPA offers notably lower lifetime savings. You should only consider this option if you can’t qualify for a solar loan or the federal tax credit. 

    Loans 

    Solar loans allow you to finance your system - in some cases without a down payment. 

    There are a handful of advantages that come with financing solar panels through loans. They reduce the upfront costs of solar ownership with minimal impact on your household budget. And with a solar loan, you would still be eligible for federal tax credits and relevant local incentives, allowing you to offset your loan amount. 

    Being eligible for credits and incentives is something that is unique to loans and cash purchases only. 

    Compared to solar leasing programs, a solar loan generates three times more savings over a 25-year period. This is because with a solar loan, you eventually stop paying towards the system and fully own the unit. As mentioned above, with a solar lease, you never get to own the system and will continue making payments towards it until the end of the contract. 

    Cash 

    Using cash to fund your purchase will provide you with the most savings. At 25 years of ownership, you would save almost two times more compared to solar loans and five times more than a solar lease. 

    Cash provides the best savings for solar panels because it maximizes the length of ownership and does not carry additional charges, like interest rates in solar loans. You’ll really see your savings take off and surpass other financing options after 10 years. For this option to work for you, it is important to purchase and commit to your solar installation for 25+ years. 

    8. How long does it take to pay off solar panels?

    A residential solar panel system usually takes between eight and 12 years to fully pay off, and the length of time required to get back the initial costs is called the solar panel payback period

    There are several factors that affect the solar payback period for your system, such as:

    • Cost of solar panels
    • Local electricity costs
    • Terms of the solar loan (if applicable)
    • Available credits and incentives

    The good news is, solar panels are designed to last at least 25 years, which is longer than the estimated solar payback period for an installation. 

    For more information, check out our in-depth guide: How long does it take for solar panels to pay for themselves?

    So, are solar panels worth it for you? 

    For the majority of U.S. homeowners, solar panels are a great long-term investment that can add boatloads of value to their home. In fact, depending on where you live, solar systems provide a better and more stable return on investment than the S&P 500 - with the added bonus of powering your home with clean energy.

    When assessing whether solar panels are worth it for your home, first consider your location and your monthly utility bill. You'll also want to focus on easing upfront costs and speeding up your return on investment through incentives and credits.

    In the world of solar panels, remember that cheaper isn’t always better - and finding a balance between value and quality when committing to a solar installer is the key to a smooth, hassle-free experience for many years.

    Local solar companies are the best option when it comes to transitioning to clean solar power and lowering your energy costs. Check out our list of the top solar companies in your area to find a vetted, reputable solar installer near you.

     - Author of Solar Reviews

    Michael Cheng

    Content writer

    Michael is a content writer at SolarReviews. He has more than six years of experience in industrial manufacturing and legal documentation, covering electrical safety, large-scale infrastructure and maritime legislation.

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