Is Solar Panels Actually Worth It?

The solar energy industry has experienced exponential growth in recent years. According to the Solar Energy Industries Association (SEIA), solar has seen an average annual growth rate of over 20% in the last decade alone. SEIA reports that solar accounted for 43% of all new electricity generating capacity added in the United States in 2021.

With such rapid expansion, many homeowners are considering installing solar panels on their properties. But the big question is – are solar panels actually worth the investment? In this article, we’ll analyze the costs and benefits to find out.

Table of Contents

Cost of Solar Panels

The cost of purchasing and installing solar panels for your home has dropped significantly over the past decade. According to Forbes, the average cost for a residential solar system today ranges between $4,600 and $16,000 after claiming the federal tax credit [1]. The large range depends on the size of your system, your location, local electricity costs, and available solar incentives.

For a typical 5 kW solar system, the upfront costs tend to fall between $17,430 and $23,870 before tax credits, according to Architectural Digest [2]. This covers the solar panels, inverter, racking and mounting hardware, wiring, permits and labor for installation. Larger systems above 5 kW will be more expensive, while smaller systems can reduce the costs. Location is also a major factor, as permits, labor, and regulations vary significantly across different states and cities.

When budgeting for a new solar system, it’s important to get multiple quotes from installers. This allows you to compare pricing and find potential savings. Be sure to understand what is included in each quote to accurately compare bids.

Federal and State Incentives

There are a variety of federal and state incentives available to homeowners who install solar panels, helping to offset the upfront costs. The main federal incentive is a 26% tax credit for systems installed through 2032, which will decrease to 22% for systems installed in 2033 (Source: https://www.forbes.com/home-improvement/solar/solar-tax-credit-by-state/). This tax credit applies to both residential and commercial solar installations. Many states also offer additional tax credits and rebates. For example, North Carolina offers a property tax exemption for residential solar systems (Source: https://www.bankrate.com/homeownership/solar/tax-incentives-by-state/). Solar renewable energy credits (SRECs) are another incentive in certain states – utilities must purchase a certain amount of SRECs each year, creating a market for homeowners to sell credits generated by their solar panels. The availability and value of SRECs varies greatly by state.

Electricity Bill Savings

How much solar panels can reduce a typical home’s electricity costs depends on several factors like location, system size, electricity rates, and amount of sun exposure. On average, residential solar panels in the U.S. can reduce electricity bills by 50-90% (Source: https://www.energysage.com/solar/much-solar-panels-save/).

For a 5 kW system, expected monthly savings range from $100-$150 on average across the U.S. In states with high electricity rates like California and New York, savings can exceed $200 per month. Over the 25+ year lifespan of a solar system, homeowners can save $20,000 to $30,000 on electricity costs (Source: https://blog.ecoflow.com/us/how-much-solar-panels-save-on-electricity-bill/).

The actual bill savings depend on system size, sun hours, local weather, electricity rates, and financing options. However, most homeowners with solar panels see their utility bills dramatically reduced or even eliminated within the first year of installation.

Payback Period

The payback period for solar panels refers to the amount of time it takes to recoup the cost of installing the system through electricity bill savings. According to EnergySage, the average payback period for a residential solar panel system is 8-12 years.

The payback period can vary widely depending on factors like the cost of electricity in your area, the amount of sunlight your location receives, solar panel system size, and available tax credits and incentives. Areas with high electricity rates and plenty of sunshine will have faster payback periods of 6-8 years, while less ideal areas may be closer to 12-15 years.

To calculate the payback period specifically for your home, you’ll need to consider the upfront cost of the system, your average monthly energy usage and rates, and any solar incentives you can take advantage of. There are also solar calculators available online that can provide a personalized estimate.

While the payback period is important to consider, it’s also key to remember that high-quality solar panels can continue generating electricity for 25-30 years. So after the payback period, the rest of those years will provide “free” electricity from the sun.

Environmental Benefits

Solar power provides significant environmental benefits compared to fossil fuel-generated electricity. Since solar panels produce electricity without any air or water emissions, they greatly reduce greenhouse gases and other pollutants. According to the U.S. Energy Information Administration, solar energy technologies and power plants do not produce any air pollution or greenhouse gases when operating [1].

Solar energy is a clean, renewable source of power that reduces dependence on finite fossil fuels. Widespread use of solar can lower the environmental impact of electricity generation. However, the manufacturing process for solar panels does currently involve some hazardous materials. Still, research is underway to develop more eco-friendly manufacturing techniques. Overall, solar power remains far less detrimental to the environment compared to conventional energy sources.

Maintenance Costs

Solar panels typically require very little maintenance. The main task is cleaning the panels 1-2 times per year, which usually costs $150-300 per cleaning according to Roof Gnome. Solar panels are designed to last 25-30 years, so major repairs or replacements are rarely needed during the system’s lifetime. Routine inspections cost $100-200 and should be done every 5 years to check for damage, though most manufacturers include a 25 year warranty that covers repairs. Overall, expect to budget $300-500 per year for basic cleaning and inspections of a typical residential solar panel system.

Warranties

Solar panels and other system components typically come with generous warranties that protect against defects and degradation. Manufacturers usually provide a warranty ranging from 10-25 years that guarantees the panels will maintain a minimum level of performance. For example, a 25-year warranty may state that the panels will operate at 80% efficiency for the first 10 years, and then decline in performance by no more than 0.5% per year for the remaining 15 years.

In addition to the manufacturer’s warranty, solar installers will provide their own workmanship warranty, typically for 5-10 years. This protects against any defects caused during the installation and ensures the installer will fix any issues that arise. When getting quotes for a solar system, homeowners should ask installers about the specific warranties they offer from both the manufacturer and their company.

These generous solar panel warranties provide peace of mind to homeowners. If any issues arise with the solar panels or installation within the warranty periods, the responsible companies are obligated to resolve the problems at no cost to the homeowner.

Increase Home Value

Solar panels can increase the appraisal value and resale value of a home. According to a study by Zillow, homes with solar panels sell for 4.1% more on average compared to similar homes without solar panels. The increased home value varies based on location, with solar homes in California seeing larger premiums of around 4-5%.

There are a few reasons why solar panels boost home value:

Lower utility bills from solar energy can make the monthly costs of owning the home cheaper, so buyers are willing to pay more.
Solar panels signal that a home is upgraded and environmentally-friendly.

For new homes, solar can help meet net zero energy standards.

According to real estate agents, factors that influence the value boost from solar panels include the age of the system, visibility of the panels, and the local real estate market’s recognition of solar value. Newer systems and panels on visible rooftop areas result in higher premiums. In markets like California where solar adoption is high, value premiums are larger as buyers understand and desire solar.

Conclusion

In summary, installing solar panels can be a significant upfront investment, but the long-term savings and benefits often make it worth it for many homeowners. The payback period varies based on system size, electricity costs, and incentives, but is often between 5-8 years. After this payback period, your solar panels can provide electricity for another 15-25 years essentially for free. This results in thousands of dollars of savings over the system lifetime. Not to mention the environmental benefits of solar and increased home value. While solar panels require some maintenance and repairs over their lifetime, warranties help protect against major issues. Overall, for those that can afford the upfront costs, solar panels can be an excellent way to take control of your electricity bills while benefiting the environment.