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Are Solar Panels Worth It?

A sunny day can improve your mood, but can it also improve your finances? Imagine yourself as a homeowner with a house equipped with a rooftop solar energy system to capture that sunshine, turning it into renewable energy and taking a bite out of your electric bill and reducing your carbon footprint in the process.

A solar energy system could be a great fit for your home but only if the upfront cost of solar panels brings a solid return on investment after energy savings, incentives, and rebates are factored in. If you’re wondering if a renewable energy system might be a right for you, there are a number of things to consider when evaluating a solar panel installation for your home.

Are solar panels worth it?

There are a number of factors (many of which are geographical) that need to be taken into consideration as you consider a solar panel installation. Here are key variables to take into account:

Energy Costs: According to the U.S. Department of Energy, solar energy is the fastest growing and most affordable source of new electricity in America; energybot.com reports that the national average electric bill in the United States is $117. When installing a solar energy system, your expectation is that your solar power savings will be enough to offset a significant portion of your monthly electric bill. How much you can save depends on your location, your typical energy consumption and the average cost of a kilowatt-hour energy in your area. If energy costs in your area are high, every dollar you save using a photovoltaic system will have a bigger impact on your budget and a faster return on your investment.

Location: Solar panels are most effective in areas with ample sunlight, so you’ll need to get an idea of the average sunlight in your area. If you live in a region with routinely high sun exposure, such as Arizona, Florida, Texas or California, solar panels are more likely to be cost-effective. Consider your property, too; your roof orientation and obstacles like trees will impact the efficiency of your solar power system.

Installation Costs: The total cost of your solar panel installation is the most important number to consider, as this is what you’ll be comparing your savings projections against. This can include the cost of the equipment, wiring, inverters, mounting hardware, plus the cost of labor. Modifications to your home may also be required to accommodate solar panel installation. Costs will vary significantly depending on the system’s size, the types of panels you install, whether you’ll include solar batteries, and other factors. Solar panels typically come with a 10-25 year warranty, so homeowners can feel reassured that their solar energy system is covered should a problem arise.

Incentives and Rebates: Government incentives, tax credits, exemptions, and rebates can significantly reduce the upfront cost of installing solar panels and speed up the time it takes you to reach the break-even point. Currently, a nationwide solar investment tax credit (ITC) allows you to claim 30% of your total solar system cost as a federal tax credit; this runs until December 31, 2023. Additional rebates or incentives could also be available in your specific state.

Net Metering: Net metering is a billing arrangement for homeowners with solar panels that allows them to earn credits for any excess energy their panels generate, feeding it back into the grid. This excess energy creates account credits with your local utility company; these credits are used to offset future electricity costs when the system is producing less power than your home requires, such as at night or on cloudy days. Net metering may allow homeowners to reduce or even fully eliminate their electricity bills. States like California, Colorado, Massachusetts, New Jersey and New York are considered some of the best states for net metering, according to FreeingtheGrid.org.

Solar Panel Pros

Adding a solar panel system to your home can offer a wide range of benefits, both financial and environmental, while helping you meet your energy needs. Here are some potential advantages of installing solar panels on your home:

Reduced Electricity Bills: A solar energy system generates electricity from sunlight, reducing your reliance on electricity from the grid. This can lead to significantly lower monthly electricity bills. As well, your solar energy system may generate more electricity than your current energy usage required, resulting in credits on your utility bill through net metering programs.

Environmental Benefits: Solar panels generate clean, renewable energy, reducing your carbon footprint, emissions and reliance on fossil fuels. By going solar, you may contribute to a more sustainable and environmentally friendly energy future.

Energy Independence: Solar panels provide a degree of energy independence from the utility companies, allowing you to generate your own electricity and reduce your reliance on external energy sources. A solar energy system can also help insulate you from future increases in electricity rates.

Home Value: Solar panels are considered a home improvement that can increase the overall appraised value of your property. Studies published in the Appraisal Journal as far back as 2008 found increases of as much as $20 in additional home value for every $1 savings on energy costs. by this calculation, a solar energy system that saves $200 per year would add $4,000 to the value of a home. A 2015 study from the U.S.Department of Energy’s Berkeley Laboratory looking at values of homes with photovoltaic systems found that home buyers consistently have been willing to pay more for homes with host-owned solar photovoltaic (PV) energy systems.

The exact increase in the value of your home will depend on factors like the size of the solar installation, the local real estate market, and the perceived value of reduced energy costs. Of course any increase in home value could also result in an increase in your property taxes, too.

Solar Panel Cons

While there are numerous benefits to installing solar panels on your home, it's also important to consider the potential downsides and challenges associated with solar panel systems:

High Initial Cost: The upfront cost of purchasing and installing solar panels can be substantial. While there are incentives and financing options available to help mitigate overall costs, the initial investment can still be a barrier for some homeowners. And, while the math may show that you’ll eventually break even, that time could be several years in the future.

An alternative to purchasing your own solar energy system might be to enter into a Power Purchase Agreement (PPA), where a third party installs and operates the system, providing you with low or no-cost power, but these of course can have advantages and drawbacks, too. These agreements may not be available everywhere and can be complicated. If available, you’ll want to review your choices carefully. You can see and review a model PPA agreement here.

Intermittent Energy Generation: Solar panels rely on sunlight to generate electricity, so their energy production is not constant. They don't produce electricity at night or during inclement weather. This means you'll still rely on the grid during those times or need to invest in energy storage solutions like solar batteries.

Installation Challenges: The solar panel installation process can be complex, involving electrical work, structural considerations, and permitting. It's essential to hire a reputable solar company to ensure a proper and safe installation. You’ll also want to check with your HOA to see if there are any covenants that would prohibit you from installing a solar panel system.

Aesthetic Considerations: Some homeowners find solar panels aesthetically unappealing. The appearance of solar panels on your roof may not align with your design preferences, local architectural standards, or HOA guidelines.

How much can I save with a solar energy system?

Figuring out how much you can save with rooftop solar panels only requires some simple arithmetic. First, you’ll want to determine the total cost for the solar panel installation. Be sure to factor any costs incurred such as fees or interest costs if you’ll be taking out a loan to pay for the project. Then, subtract all tax credits, rebates, or other incentives that you’ll receive. Next, estimate the savings on your energy bill with the help of information provided by your chosen solar company. Take the net upfront installation costs and divide that by your annual energy bill savings and you’ll now have the number of years for your payback period.

For example, if the total cost of installation is $25,000, and incentives like ITC (Solar Investment Tax Credit) plus any state incentives total $5,000, you’re left with a net installation cost of $20,000. If you’ve been provided with an estimate of $2,400 in annual energy savings, it will take about 8 years to make it through the payback period, after which you’ll begin to enjoy ongoing savings.

How to Pay for Solar Panels

As mentioned previously, while your regular electricity costs should see a significant drop, the high upfront cost of solar panels are likely to be the most prohibitive factor in your move to clean energy. The good news is there are several options that can help break down installation costs into manageable monthly payments and you can still potentially qualify for federal solar tax credits.

Take out a Solar Loan: A solar loan is a type of financing specifically designed to help homeowners or businesses fund the purchase and installation of home solar and solar panel systems. These loans are intended to make solar energy more accessible by providing affordable and flexible options for covering the upfront costs of solar installations.

Sign a Solar Lease: A solar lease is a financing arrangement that allows homeowners or businesses to install a solar panel system on their property without the upfront cost of purchasing the system. Instead of owning the solar panels, the homeowner or business enters into a lease agreement with a solar company or third-party financier.

Use a Home Equity Loan: As a homeowner, you may have equity in your current property. A home equity loan is one option for accessing that equity to help you pay for the cost of the solar panel installation. You might also consider a home equity line of credit instead.

Do a Cash-Out Refinance: This is a type of mortgage refinance in which a homeowner replaces their existing mortgage with a new one that has a larger loan amount, receiving the difference between the two loans in cash. This allows you to tap into the equity you've built up in your home and convert it into usable funds. The value of your home may have increased considerably in the last few years, and if you’ve been one of these fortunate homeowners, you might consider using some of your home equity to reduce future electric bills by investing in a renewable energy project.


Having solar panels and systems installed can be a big financial decision for homeowners to make. Find reputable, well-reviewed solar power installation companies in your area so you can compare their estimates on installation and system costs, review solar power system options, and potential energy generated by your system size. You’ll also need to research what solar incentives and tax credits are available to you, and determine the best way to pay for your solar panel system. If you proceed with a solar power system installation, it may be that the next sunny day will both brighten your mood and pay your utility bill for you, too.

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