Are Solar Panels Worth It? (Pros & Cons)

Whether you're concerned about rising electricity costs or rising sea levels, you've probably considered switching your home to solar-powered energy. If you live in a solar-viable state, you can become energy-independent while reducing your carbon footprint and utility bill.

Solar power doesn't make sense for everybody. Thankfully, there's a combination of factors that make it incredibly easy to know if solar panels are right for you. We'll cover how solar panels will affect your tax returns, energy costs, and the value of your home, as well as how soon you can expect a return on the investment.

When Are Solar Panels Worth the Investment?

Solar panels don't make sense for every home. In some places, installation costs are prohibitive, or there's a lack of solar subsidies and tax credits. Plenty of streets are completely shadowed by neighboring skyscrapers or dense foliage. Although you may still consider the environmental benefits, there are no strong financial incentives for switching to clean energy in these cases.

If your home hasn't yet been ruled out, there are a few questions you can ask yourself to determine if solar panels are a sound investment for your home. We'll go through the following scenarios in detail, giving you a definitive answer on whether it's time to make the switch. If one or more of the following is true, you'd likely save big with a solar photovoltaic system installed.

• Your city or state has offered sizeable solar incentives
• Your utility bill is high or steadily rising
• You live in an area with excellent sun exposure

Your State or City Offers Great Financial Incentives

If you live in an area with a net metering program, you can get paid for the excess electricity your panels produce. Most U.S. states require net metering by law, so there's a great chance that your city or state will be covered. Ensure that your photovoltaic (PV) system meets all the local specifications for net metering before pulling the trigger on a purchase. You could earn thousands of dollars back at stake, so you want to cover all your bases before the installation team arrives at your doorstep.

You will almost certainly need to own your home and the solar panels, so net metering won't kick in for renters or those only considering solar leases. On top of this, net metering only comes into play if you're generating more electricity than you're using, so you'll need a strong enough system. Calculate your average energy usage and ask an account manager how many solar panels you'll need to offset it.

On top of net metering, thousands of tax exemptions and incentive programs are provided at the state and local levels. Research if your hometown is on the side of solar: homeowners in states like Massachusetts and New Jersey can knock thousands of dollars off of their initial investment, making the switch to clean energy way more feasible.

If you live in a solar-shy area, you still have federal programs to take advantage of. At least until 2034, you can knock 30% off of your total solar purchase through the Federal Solar Tax Credit. Still, in this case, solar panels may only be worth it if your energy bills are getting too high.

Your Electric Bill is High or Rising Every Year

States like Hawaii, Wyoming, and Utah have such expensive electric rates that solar energy is almost always a great investment. If you live in a state like California with time of use (TOU) rates, electricity prices fluctuate and can unexpectedly skyrocket during peak usage. In these cases, we always recommend pairing your new panels with a solar battery. These energy storage systems automatically step in when prices peak and are a great way to shift reliance away from the local electricity grid.

This perk grows extra powerful if you opt for a solar loan or a cash purchase for your solar energy system. Once you've fully paid off the loan, the panels are all yours, and you won't have to pay a dime for electricity. This process often only takes five to ten years. However, there is an important caveat: keep a close eye on the interest rates your solar provider charges, or you could get stuck with surprise charges that disrupt your projected savings.

With utility bills skyrocketing across the U.S.A., the argument for switching to solar has gotten even stronger. The invasion of Ukraine has disrupted the energy market worldwide and drastically increased fuel costs here at home, and there's reason to think this price trend will continue. Natural gas, gasoline, and the wires needed to keep the grid running are all going through supply constraints and labor shortages, so this year's price spike no longer looks like an anomaly.

Your Roof Has Great Sun Exposure

If you live in one of the sunnier parts of the country, that’s good news. Your solar panel system will be doubly effective, drastically cutting down the number of solar panels you'll need to achieve zero net energy. Coupled with the financial incentives we mentioned, homeowners in sun-baked states can rake in thousands in savings.

Places like New Jersey and Texas are in the sweet spot. Both states have hundreds of solar-viable days a year and highly competitive net metering programs. See how viable solar energy is where you live: the National Renewable Energy Laboratory (NREL) has a ton of interactive irradiance maps showing the best and worst places in the country to go solar. 

Remember that weather isn't the only factor in determining sun exposure. Shade caused by neighboring buildings or trees will seriously dampen your power output, and it will hardly matter how sunny the area is. Roofs slanted at an angle of 30° to 40° are optimal, but it's more important that your roof is structurally sound than anything. Panels last 25 - 35 years, so ensure that your roof won't need major repairs during that time. A quality company will ensure your roof is safeguarded before installing solar panels.

Of course, other good options exist if your roof isn't big enough, isn't weatherproofed, or isn't super sound. Most solar installers can build a ground mount in your yard if you don't mind the imposition on your outdoor space. These projects will have a higher up-front cost, but you'll have way more flexibility in placing and angling your system. This extra optimization means you won't need to buy as many solar panels.

What Are the Main Benefits of Going Solar?

Whether you've come to solar for the savings on your electric bill or to save the planet, the consequences are the same. Homeowners investing in solar technology pay less for electricity while reducing their environmental footprint.

We'll review the five biggest benefits of going solar and a few clear ways of discerning whether it's the right call for your home.

Featured Video: This Solar Owner Reviews His Costs & Savings After 12 Years of Ownership

Are There Any Drawbacks of Installing Solar Panels?

The initial cost is the biggest downside to investing in a solar panel system. With an average price tag of $13,000 after factoring in the Federal Tax Credit, this decision cannot be taken lightly. Consider your savings, credit score, and money goals before finalizing a deal: clean energy is not worth putting yourself in a precarious financial position.

Another possible downside only affects homeowners with low energy usage but is still pivotal to check against before pulling the trigger. Households that scarcely use any electricity will easily produce enough solar energy to become energy-independent. However, these households have such low utility bills to begin with that the possible electric bill savings are severely limited, and they may never make enough to justify the high cost of installation.

Finally, it's important to note that the efficiency of your solar panels is weather-dependent. If your panels have good energy efficiency, your electric bill should drop, but there's no guarantee against a month of cloudy weather.

How To Determine When You Will Break Even On Your Solar Investment

A solar buyback period is the amount of time it takes for your electric bill savings to surpass the overall cost of the system. This is the magic number: once your solar loan is paid off, you'll be free from energy costs for as long as the panels last.

On average, it takes between seven and twelve years to break even on installation costs. With most panels lasting 25 - 35 years, this leaves more than a decade for you to reap the rewards of solar energy.

It's worth emphasizing that the cost of solar panels can fluctuate wildly depending on where you live, how much energy you hope to offset, system size, and the financing option you decide on.

Like any asset, your solar panels come with the promise of a return on investment. To more precisely calculate your solar payback period, go through the following steps:

1. Add up the combined costs of going solar: factor in extra maintenance and permitting fees, as well as tax rebates and solar subsidies.
2. Total your yearly savings from switching to solar: in the next section, we've laid out the math on expected utility bill savings over the years.
3. Divide your annual costs by your savings: this will give you your solar payback period and a guideline of how many years it will take for the money to come back into your pocket.

How Much Can You Save By Going Solar? (With Steps to Calculate)

The average U.S. household will consume 886 kilowatt hours (kWh) of electricity in one month. With each one of these kWh costing you approximately 16 cents, we can calculate an average monthly electric bill of $143. This number will change depending on your energy needs.

This means that your solar panels only need to cover 75% of your electricity usage to give you $1,287 of yearly savings. In 25 years, this number can be as high as $32,000, more than offsetting the initial purchase cost.

In reality, solar panels degrade by around 1% a year, so this number won't be quite as high. However, some of the best solar companies in the country make power production guarantees and will reimburse you if energy efficiency dips below 90% in the first ten years.

To see how much you can save by going solar, go through each of the following steps:

1. Determine your home's monthly energy consumption: this number should be printed on your electric bill and is measured in kWh.
2. Calculate projected energy production: this is how many kW your chosen solar panels can expect to produce in a month.
3. Subtract your solar power production from your usual energy consumption: this number is how much electricity you'll still need to buy from the local grid.
4. Multiply this by the cost per kWh of electricity in your state: this is how much you'll pay for energy now.
5. Subtract this number from your regular utility bill to see how much you can expect to save each month.

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