Is Solar Still A Good Investment?
Solar energy has experienced remarkable growth over the past decade. According to the Solar Energy Industries Association (SEIA), solar has grown at an average annual rate of 24% in the last 10 years. Solar Industry Research Data | SEIA. This growth has been driven by falling costs and supportive policies like the federal solar Investment Tax Credit. Residential solar, in particular, has become increasingly popular. Recent surveys show the percentage of U.S. homeowners with rooftop solar panels has risen from 4% in 2016 to 10% in 2022. Home solar panel adoption continues to rise in the U.S. With costs continuing to decline and climate change concerns growing, many experts expect strong growth in residential solar adoption to continue.
Cost of Solar
The upfront cost of installing solar panels on your home depends on the size of the system. According to Forbes, a typical 6 kW system costs $5,400 to $18,000 before incentives and installation https://www.forbes.com/home-improvement/solar/cost-of-solar-panels/. Architectural Digest reports similar price ranges, with a national average cost of $20,650 for a complete solar system https://www.architecturaldigest.com/reviews/solar/solar-panel-costs. The size of the system, the type of panels and inverters, and installation costs can all impact the total price.
Solar Incentives and Rebates
Solar incentives and rebates vary by state, but generally fall into a few main categories. Many states offer tax credits or exemptions for installing solar panels. For example, homeowners may receive an income tax credit based on the cost and size of their solar array. Some states also provide sales tax exemptions on solar equipment. Cash rebates are another common type of incentive, providing an upfront discount on the purchase of a solar system. According to the Database of State Incentives for Renewables and Efficiency (DSIRE), rebates are currently available in states like California, Massachusetts and New Jersey. Additionally, some utilities and municipalities offer rebates or incentives for local residents. These are often funded through public benefits funds, which collect surcharges from utility customers. SolarRenewable Energy Credit (SREC) programs, which provide certificates to system owners based on solar production, act as another financial incentive in states like Maryland, Ohio and Washington D.C. Knowing the specific solar incentives and rebates available can be key to maximizing savings.
Electricity Bill Savings
One of the biggest financial benefits of installing solar panels is the savings on your electricity bills. According to Energysage, the average homeowner can save between $20,000 and $96,000 over the lifetime of a solar panel system, depending on local electricity costs[1]. For a typical 5kW residential solar system, you can expect to save around $100 to $150 per month on your electric bill[2].
Exactly how much you save will depend on factors like your electricity usage, system size, electricity rates, and incentives in your area. But most homeowners see their electric bills drop by 50% to 90% when they go solar[3]. In areas with high electricity rates like California and Hawaii, savings can exceed $200 per month.
While your upfront costs for solar panels may seem high, the long-term savings add up quickly. According to MarketWatch, a typical 6kW home solar system could save you around $1,432 per year on electricity costs[4]. Over a 25-year lifespan, that equates to over $35,000 in savings. Going solar locks in low electricity rates for decades, shielding you from utility rate hikes.
[1] https://www.energysage.com/solar/much-solar-panels-save/
[2] https://blog.ecoflow.com/us/how-much-solar-panels-save-on-electricity-bill/
[3] https://www.energysage.com/solar/much-solar-panels-save/
[4] https://www.marketwatch.com/guides/solar/savings-with-solar-panels/
Payback Period
The payback period is one of the most important factors when considering solar panel installation. This refers to the length of time it takes for the savings generated by solar panels to cover the upfront system costs. The payback period for solar panels can vary significantly based on your location, system size, electricity costs, and incentives or rebates available.
According to a report by Sunrun, the average payback period for solar systems in the U.S. is 8-12 years.1 However, this can be much shorter in states with high electricity rates and strong solar incentives. For example, the average payback period is only 2.4 years in New Mexico and 2.5 years in Hawaii.2
Some additional state-by-state payback period estimates include:
- Arizona: 12 years
- California: 6.4 years
- Colorado: 9 years
- Connecticut: 7 years
- Georgia: 12.5 years
- Hawaii: 7 years
- Idaho: 12 years
- Illinois: 8 years
In general, solar panels in states with high electricity rates, strong solar resources, and generous incentives will have the shortest payback periods. When considering solar, use a solar calculator tool to estimate your specific payback period based on your own electricity usage, location, and system details.
Environmental Benefits
One of the biggest benefits of solar panels is their ability to reduce carbon emissions and combat climate change. According to the IPCC, the carbon footprint of rooftop solar panels is roughly 12 times less than natural gas and 20 times less than coal. Each kilowatt hour (kWh) produced by a solar PV system results in avoided emissions from fossil fuel power plants. For reference, the average US home uses about 10,700 kWh per year (Source: https://news.climate.columbia.edu/2022/10/26/solar-panels-reduce-co2-emissions-more-per-acre-than-trees-and-much-more-than-corn-ethanol/). This means installing a sufficiently-sized solar array can help offset over 10 tons of carbon emissions annually. Whether looking from an individual home or community level, solar energy production provides a powerful way to shrink your carbon footprint and environmental impact.
Maintenance Costs
The maintenance costs for solar panels are relatively low compared to other home systems. According to RoofGnome, the average cost of solar panel maintenance is $570 annually, with costs typically ranging from $400 to $740 per year. This maintenance includes inspecting the panels and connections, cleaning the panels, and trimming any overgrown vegetation. Most solar panel manufacturers provide a 25-year warranty, so major repairs are unlikely during that time. Still, it’s important to budget for annual inspections and cleaning to keep the system operating at peak efficiency. Overall, solar panel maintenance costs are reasonable, especially considering the system has no recurring fuel costs.
According to Fixr, most homeowners pay around $400 to have a 10-panel, 2kW system inspected and cleaned. They estimate total maintenance costs ranging from $300 to $700 per year. Factors like panel tilt, climate, and tree coverage impact how much maintenance a particular system will require. Homeowners may also choose to clean panels themselves to save on maintenance costs.
Grid Resilience
Solar energy can play an important role in increasing the resilience and stability of the electrical grid and the communities served by the grid. According to the U.S. Department of Energy, “Solar Resilience: Keeping Communities Connected”, solar energy with storage and microgrids can provide electricity even when the larger grid goes down. This keeps essential services running and avoids the costs of power outages.
While residential solar panels alone cannot make a home fully resilient, they can contribute to grid stability. As explained by the Department of Energy’s “Solar and Resilience Basics” page, solar systems feed excess electricity back to the grid, reducing strain on grid infrastructure during peak demand times. Local solar generation also reduces the risk of widespread outages when transmission lines are damaged.
Overall, increasing solar capacity, paired with energy storage, can significantly improve the resilience and reliability of the electrical grid during emergencies and disasters. Solar helps decentralize energy production, easing pressure on centralized power plants, according to an article from Arka 360 titled “The Impact of Solar Energy on Grid Stability and Reliability”.
Future Outlook
The future looks bright for solar energy in the United States. According to the Solar Energy Industries Association (SEIA), the U.S. is expected to add a record 33 gigawatts (GW) of solar capacity in 2023, with annual growth projected around 20% through 2030. By 2030, the SEIA predicts the total operating solar PV capacity in the U.S. will quadruple to nearly 400 GW.
This growth is being driven by rapidly declining costs. According to SEIA data, the average total installed price of solar has dropped nearly 70% over the last decade. Utility-scale solar project costs are forecasted to drop another 40% by 2030. As prices fall, solar becomes increasingly cost-competitive with fossil fuel generation.
Major growth markets for the future include large-scale utility installations, community solar, and commercial/industrial rooftop solar. The residential market is maturing but is projected to grow steadily as well. Emerging solar technologies like building integrated PV and floating solar will open up new markets.
While future policy incentives remain uncertain, solar power has reached an inflection point where it can compete economically with conventional power in many regions of the U.S. even without subsidies. With solar on track to become the nation’s largest source of new generating capacity over the next decade, the industry outlook remains very positive.
Conclusion
In conclusion, solar panel installations still offer tremendous value and savings for homeowners in most cases. The upfront costs of solar have dropped significantly, helped by federal and local incentives in many areas. At the same time, electricity rates continue to rise across most of the country. This combination results in faster payback periods of 6-8 years on average. Once the system is paid off, homeowners enjoy free electricity for another 10-15 years or more. There are also environmental benefits to generating clean energy and increasing grid resilience locally. While solar requires periodic maintenance, costs are minimal. Given the many benefits and increasing affordability, solar remains a smart investment that can provide decades of electricity cost savings.
