Are Solar Panels Worth It?

Are Solar Panels Worth It

You may have come across ads touting that solar power installations can save thousands of dollars. When presented in a particular way, this sounds attractive. In fact, it sounds too good to be true. Is that the real story? Are solar panels worth it?

The average price tag of solar equipment with a 10-kW capacity is $20,000. The fact also remains that the federal, state, and local governments and utility companies offer a slew of incentives to offset the high investment cost of solar equipment. Other vital factors to take into consideration are the long lifespan and low maintenance cost of a solar power installation

Factoring various aspects of the solar investment, is it possible to conclude that solar systems are assets? 

Let us examine the advantages and disadvantages of going solar and see whether solar panels are really worth the high investment.

Advantages of going solar

Even among renewable energy resources, solar power has an edge due to its unique features. From green and sustainable energy to energy independence, solar power offers numerous benefits to homeowners. 

Here are the perks of going solar.

1. Clean energy

Climate change is a reality now with many parts of the world suffering from its consequences. Each one of us can do our bit to save our world and installing solar equipment is one such initiative. 

Solar power is a cleaner and sustainable alternative to fossil-fuel-generated grid energy. Not only at an individual level, by switching to solar power, but you can also help the country meet its clean energy goals.

2. Electricity bill savings

Good deeds aside, let us see the benefit offered by solar power in real-world terms. A residential solar power installation can help in reducing your energy bills substantially.

One of the prime factors determining your savings from solar equipment is the energy rates charged by the utility companies in your area. 

3. What are you paying for the electricity?

The energy rates vary from state to state. On average, the rate is in the range of 8-10 cents per kilowatt-hour in most states. In few states, the rate is in the range of 15-20 cents per kilowatt-hour. 

When you install a solar power system in your home, you are effectively generating electricity to reduce your dependence on grid energy. As solar power is cheaper than grid energy, this means, the higher the energy rates in your area, the more the savings from solar equipment.

The savings on power bills also depends on the percentage of your electricity usage you can manage with your solar power system. 

4. Rising energy rates

The energy rates have been increasing steadily in the past years, throwing home budgets out of gear. Being an essential commodity, power bills need to be accommodated in the budget no matter what. This is where a solar power installation comes in handy.

Once the system is installed, the expenditure on it is minimal. Low maintenance and long lifespan are two of the most attractive features of a solar power system. The warranty offered for the system also ensures that the expense for repair or replacement of parts is minimal. This means the system can be run at a low expense during its lifetime. This translates to a nominal rate for solar energy generated.

Even after factoring in the initial cost for the solar panel system, it is estimated that the system pays for itself in 7-8 years because of the various solar incentives offered for domestic installations. This means you get to enjoy the solar energy generated for the remaining years for free. The only expense incurred during this period would be the meager maintenance cost.

When compared with the already existing higher energy rates charged by utility companies coupled with the possibilities of an increase in the rates, installing a home solar energy system looks very appealing.

5. Solar incentives

As an encouragement to install home solar systems, solar incentives are offered by federal, state, and local governments besides rebates from the utility companies. With ambitious clean energy goals to meet for each one of them, solar incentives are their way of ramping up solar installations. It is a win-win situation for all concerned. 

The federal solar tax credit is an attractive incentive aimed at new installations. A fixed percentage of the expenses incurred on a new solar panel system including installation cost is given as tax credit to the homeowner. The tax credit can be adjusted against the tax owed.

At present, it is 26% of the cost of solar power installation. That is, for a 10-kW solar panel system that costs on average $20,000, the tax credit received is $5,200. This tax credit can be brought forward to future years, if not availed fully in the first year.

The solar incentives offered by state and local governments vary vastly. The utility companies also have clean energy targets. In their effort to encourage homeowners to install solar systems, they offer rebates on the equipment.

The array of solar incentives can reduce the burden on its high upfront cost substantially. 

6. Increases property value

Installing a solar panel system is found to increase the value of your home. The trends in the real estate market point to this phenomenon. The reason is easy to understand.

From a homebuyer’s perspective, if the home already has a solar power installation in place, it would eliminate the hassles of solar shopping. It would be no pain and all gain. This trend is more pronounced in the states where solar awareness is high. Others are catching up fast.

As homes with solar installations are deemed more appealing and the demand is high for the same, it is easy to understand that they sell faster. This is a huge relief for homeowners who are considering solar installations, especially for those who are on move frequently. The cost of dismantling, transporting, and reinstalling the solar panel system is too cumbersome and expensive. 

The value addition of solar installations to homes makes them more appealing.

7. Attractive return on investment

There is no denying that solar installations require a huge upfront investment. An average home may need a 10-kW solar panel system which can cost around $20,000. This is not small money.

With the solar incentives and rebates offered for new equipment, some of this investment can be recovered straight away in the first year itself. The remaining investment cost can be recovered over months with savings on the power bills. 

It is estimated that it takes roughly 7-8 years to completely recover the initial investment cost of a solar panel system by availing incentives and through bill savings.

Considering the lifespan of a solar system is 20-25 years, this is great news. This implies that after the system pays for itself within 8 years, the energy generation is practically free during its remaining productive years. 

It is hard to find another home installation with a comparable return on investment.

Disadvantages of going solar

It is impossible to find anything with only positive features. Residential solar power also comes with its own limitations and drawbacks, albeit fewer in numbers.

Here are the downsides of a solar system.

1. High upfront investment

One of the major impediments of a home solar power installation is its prohibitive cost. The high upfront investment it requires makes prospective buyers analyze its pros and cons and rethink the investment. Not many homeowners have this kind of money readily available in the bank account to make the purchase.

Is it too expensive for what it’s worth?

To counter this negative aspect of the solar panels, attractive incentives are offered for new equipment. By availing them, some of the investment costs can be recovered in the first year itself. The rest can be recovered over months as savings in the power bills.

A rough estimate points to 7-8 years as the period for the solar equipment to pay for itself. This is good enough as the lifetime of the panels is 20-25 years.

2. Weather dependent

Another limitation of solar panels is the availability of sunshine. Without a few hours of direct sunlight daily, solar power is not feasible. Though it may work with indirect sunlight, the efficiency level will be low and the equipment may not be able to generate electricity to meet the energy demand expected from it.

This leads us to the question:

Are solar panels worth it in less sunny locations?

It is a fact that solar systems are at their efficient best in sunny climates but it doesn’t mean they will not be able to generate electricity even with indirect sunlight and in less than favorable circumstances. This being the fact, it depends on other factors to decide whether solar installations are worth it in less sunny locations.

You can safely conclude that solar equipment is worth the investment if it can satisfy your energy demand and help you save on power bills. The Northeastern states of New York, New Jersey, and Massachusetts are known for their cold winters. Despite this, these states have a high density of solar installations. The explanation is simple.

The electricity rates in these states are so high that solar systems functioning at lower efficiency levels are also profitable. Another reason could be the attractive solar incentives offered by local governments.

However, in such less-than-ideal locations, to generate sufficient electricity to meet the energy demand, more solar panels need to be installed. If the savings on the bill is enticing enough, even this additional expenditure is not a deterrent. It would be worth it.

3. Needs space for installation

Solar installations require maximum exposure to sunlight to be at their efficient best. This means the solar panels need to be placed on rooftops at an angle. This may be a constraint for those living in congested cities or apartments with no access to rooftops. 

Do space constraints make solar less than desirable?

Not exactly. The lack of ideal space for solar installations can be overcome in several ways. And, none of them compromise on the advantages that solar power commands.

One of the best solutions for the lack of space is community solar or solar sharing. This arrangement is also ideal for tenants who do not own their place of residence and those who are on the move frequently. 

Solar farms can be owned or leased individually or as a group. Even as you get to draw electricity from the solar farm, the credit is shared among the members based on their initial investment. 

Shared solar is not available everywhere. New York, Massachusetts, Minnesota, Illinois, and Colorado are the pioneers in this field. Again, shared solar comes in different models. Utility companies and private players are also venturing into this territory, making it more competitive and beneficial for energy users. 

How to calculate if solar is worth it in your location?

As we have seen, there are many factors involved in determining the feasibility of solar installations in a given location. Its high upfront cost and requirement of sunny weather cannot be considered as setbacks when these are offset by other favorable factors like high power rates and attractive solar incentives.

Instead of looking at these factors separately, they need to be considered collectively to decide the worth of solar installations in a particular location.

The main factors in determining whether solar panels are worth it are:

While some of the factors listed above are limitations that can potentially discourage solar buyers, when considered together with the positive factors, they are no longer impediments. 

For example, the high cost of solar systems. On its own, it acts as a put off for potential solar buyers. However, the array of incentives available for a new solar energy installation is aimed at reducing the burden imposed by the high cost of solar equipment.

Incentives in the form of tax credits and rebates can help in financing solar equipment. 

Those who find solar installations unaffordable even with the incentives may consider solar leasing or solar Power Purchase Agreements (solar PPAs). These are like renting solar equipment. While some require zero down payment, others may ask you for a small upfront payment. As you do not own the equipment, you are not eligible for tax credits under both these arrangements.

The lack of sunlight and the resulting lower efficiency of the solar equipment are negated by high electricity rates for grid energy in the area. The lack of space for installation may be offset by solar sharing arrangements. 

Ultimately, for a given location, all the factors need to be considered together to see if solar panels are a good investment. Locations that are less suitable for solar installations offer better incentives to make them more appealing for potential solar buyers. 

In general, it can be said that solar installations are worth it.

Bottom line

As with any big purchase, solar shoppers need to do some research before the actual purchase. Make a list of at least three best installers in your area and ask for quotes for installing equipment. This method is found to be effective in saving money. 

Another crucial point to remember – don’t fall for big brands or fancy adverts. The bigger the brand, the more expensive they are. A recent report tabled by the U.S. government states that big-time installers are $2000 to $5000 costlier than their smaller counterparts. Again, this doesn’t mean go for the cheapest irrespective of their track record. 

Most large installers not just price their products more, they also offer fewer choices in solar equipment. It is vital to choose solar equipment that is ideal for your home rather than buying one with a higher rating and better reviews.

Related article: The Pros and Cons of Solar Energy

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