Like any major investment, installing a solar system is a big decision! But, as the cost of solar continues to decline and new energy bills make purchasing more attractive, this decision is becoming easier and easier: for most people, going solar now represents a smart long-term investment with substantial savings. However, before installing a solar panel system, you’ll want to make sure that you can take advantage of these benefits by first considering a few major factors. In this article, we’ll help you answer the question: “Should I get solar panels?”
Here are a few aspects of solar energy to think about before making an investment:
- Do you own your home, or are you renting?
- Will you sell your property in the next 10 years?
- Is your roof suitable for solar panels?
- How much do you spend every month on electricity?
- The amount you’ll save by going solar will vary based on factors including how much you pay for electricity, how much your installation costs, what rebates and incentives are available to you, and how you choose to finance your system.
- Most property owners will see a return on investment of seven to eight years.
- You can maximize your solar savings by collecting multiple quotes, checking out local installers, and comparing equipment options.
- Visit the EnergySage Marketplace today to see how much you can save.
How much will you save with solar?
The first question you’re probably wondering if you’re considering going solar is: how much money will you save? And for good reason! Afterall, solar is an investment so you’ll want to understand your payback period before making any decisions. Most property owners will break even on their solar investment in seven to eight years – but as you start exploring your solar options, there are a few key questions you should ask to approximate your personal return on investment:
How can you estimate your solar payback period?
The initial costs of solar panels are often the biggest consideration when going solar, leading many homeowners to question whether solar power is worth it. While most homeowners can expect their investment to pay off in under 10 years, you can get a more specific estimate with a few calculations. If you want to calculate a rough estimate for how long it will take for solar panels to pay for themselves, you can use this formula:
(gross solar system cost – upfront incentives)/(annual savings + additional state and/or utility incentives) = estimated payoff period
Here’s an example:
Your new solar system costs $15,000 and you received a tax credit for $3,900 in addition to a $1,500 rebate from your state. In this case, your gross solar system cost is $15,000 with the upfront incentives totalling $5,400. This means that your combined cost is $9,600.
Now, say that your power bill is $100 every month and your solar system produces enough energy to cover your energy needs. Your annual savings is your monthly power bill, multiplied by 12 months, meaning in the first year of having solar, you’ll save $1,200 on your electricity bills. Some states and utilities also provide incentives that pay you extra for the solar energy your panels generate, like SRECs or the SMART program in Massachusetts: it’s not uncommon for those incentives to put an additional $600 a year into your pocket beyond your electricity savings, meaning an annual benefit of $1,800.
By dividing your combined cost of $9,600 and your annual benefit of $1,800, you can get a more realistic estimate of your payback period. In this example, that’s a little less than five and a half years.
How much do you pay for electricity?
Your current electricity bill is the largest factor in determining how much you’ll save by installing solar. You pay your utility company for every kilowatt-hour (kWh) of electricity you use, and your rate varies significantly depending on where you live. In some parts of the country, like the South, you can pay under 12 cents per kWh; in others, like the Northeast, you could pay 20 cents or more. When you go solar, you reduce or eliminate your monthly electricity bill, so the amount you pay for electricity substantially impacts your savings.
If you’re not sure where to start in determining your solar savings, try using our Solar Calculator. Our calculator incorporates local electricity rate data to provide you with a customized estimate of what you can expect to save, and just how quickly your investment will pay off.
How much will your solar installation cost?
There’s a lot that determines the cost of your solar panel system, so you’ll want to do a bit of research first. Some of the biggest factors that will impact your system’s cost – and ultimately how much you save – include:
- System size: the more electricity you consume, the bigger the system size you’ll need – and generally, a bigger system with more panels will cost more than a system with fewer panels.
- Equipment: while cheaper solar panels may feel like the easiest way to save on your solar system, oftentimes your long-term savings will be greater if you invest in high-quality equipment.
- Roof characteristics: if you have a south-facing single roof plane that slopes at a 30-degree angle, it’s ideal for solar! This doesn’t mean solar isn’t worth it if you don’t have a perfect solar roof, but your installation may be a bit more complex (and therefore cost more) and your sun exposure might be less direct (meaning potentially less savings).
- Labor: solar installers can vary substantially in price, even if they’re installing the same equipment. Different installers vary in their labor warranties and skill levels, which is why it’s important to find pre-vetted, high-quality installers, like you can on the EnergySage Marketplace.
- Location: solar prices differ from state-to-state – generally, you’ll see a lower price per Watt ($/W) in warm states and a higher $/W in cold states, but you may need a larger system size in a warm state. Other important factors that impact your solar savings and vary by location are rebates and incentives, which we’ll cover next.
Are solar panels worth it if you’re not in the sunny Southwest?
Solar loves the sun, but you don’t have to live in the sunny Southwest to achieve solar savings! In fact, solar systems can sometimes cost more in these areas because you need a larger system to cover your electricity needs due to air conditioning. Certain climates, even though they can be less sunny than others, are better suited for solar. Many factors go into whether solar is a good fit or not – sunshine is just one of them! Some of the states with the most installed solar in the country (including New York, New Jersey, and Massachusetts) are in the Northeast – even though they’re more famous for their cold snowy winters than their sunny summer days! These areas often have higher electricity costs and better local incentives than other states, leading to greater savings down the line.
What rebates and incentives are available?
Rebates and incentives significantly reduce your cost of solar and can actually put money into your pocket each month, translating to substantial long-term savings. The best solar incentive is the investment tax credit (ITC), which allows you to deduct 26 percent of your solar installation cost from your federal taxes – there’s no cap on its value, but your individual tax liability will determine whether you’re able to take full advantage of this incentive.
Depending on where you live, you may also qualify for other various incentives that help you save more: in addition to the ITC, local incentives like state tax credits, cash rebates, solar renewable energy certificates (SRECs), and performance-based incentives (PBIs) can increase your solar savings up to 50 percent!
What about net metering?
Net metering is one of the most important solar policies and incentives in the residential solar industry. Essentially, it allows you to store any excess energy produced by your solar system in the electrical grid for use at a later time. With net metering, you won’t receive a monthly payment: instead, you will receive utility bill credits for the electricity produced by your solar panels. It’s important to note that not all states offer net metering, so you’ll want to check out the Database of State Incentives for Renewables and Efficiency (DSIRE®), which tracks net metering and other policies.
How will you pay for your solar system?
Whether you choose to buy or lease your solar panels will have a major impact on your savings. If you have enough to make a cash purchase, you’ll save more than with any other option – but even with a zero-down solar loan, your savings could still be in the tens of thousands. While solar leases and power purchase agreements (PPAs) require no money down and promise a maintenance-free option, they come with a trade-off: your total savings will typically be just 10 to 30 percent of your utility electricity bill.
How does this play out in the real world? Check out the EnergySage Solar Calculator to see how your long-term savings will differ depending on whether you choose a cash purchase, a solar loan, or a solar lease – or community solar, if that’s something you’re considering!
Frequently asked questions: what else makes solar panels worth it?
There’s a whole lot more to know about solar than just “are solar panels worth it”. Here are a few other questions people commonly want answers to about the worthiness of solar panels:
As of July 2021, solar panels cost about $20,474 for a 10 kilowatt (kW) system. That includes the generous 26% federal solar tax credit, but not additional local rebates and incentives you may be able to take advantage of.
Most property owners who get solar quotes on the EnergySage Marketplace will break even on their solar investment in seven to eight years. After that, you’ll be generating free electricity and racking up the savings!
Even though the cost of solar panels continues to fall, it’s usually not worth it to wait. The longer you wait to go solar, the more savings (opportunity cost) you’re missing out on. In the long run, it’s worth it to go solar as soon as possible for most shoppers, instead of hoping for a much cheaper price down the road.
There are some situations, such as already low power demands or a home that has too much shade, where a solar system isn’t ideal. In some cases, a home may require extensive renovations to support the weight and needs of a solar energy system.
The biggest cited drawback to solar energy is the upfront cost of installing a solar system, or the administrative tasks required to get a loan. Other drawbacks that are frequently mentioned include the space needed for panels and that they depend on sunlight to power your home.
Many locations work well for solar, but there are some areas in which solar doesn’t make sense for you. Factors such as available incentives, the climate, home size, how much shade there is, and the amount of sun that a region gets all affect whether or not solar power is a good option for you. Take a closer look at your options in our article on benefits of solar.
The short answer is that it depends. There are many factors to take into consideration when investing in solar energy. Every house and every household has different energy needs, so it really depends on the home, climate, and how much energy you need.
How can you maximize your solar savings?
So, most likely you’ll save money by going solar – but how can you maximize those savings? We have a few tips to help you get the most out of your solar system:
Get multiple quotes
As with any big ticket purchase, shopping for solar requires a lot of research and consideration, including a thorough review of companies in your area. By comparing multiple solar quotes, you will get increased competition for your business and transparency, which will ultimately mean a higher quality installation at the right price.
Data from the EnergySage Marketplace shows that when you receive multiple solar quotes through EnergySage, you’ll save 15 to 25 percent on the cost of solar compared to going solar outside of EnergySage. A 2017 report by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) backs up our findings: when consumers compare as many solar options as possible, they typically avoid paying inflated prices.
Check out smaller installers
These inflated solar prices often come from some of the larger solar installers in the industry – so it’s important to consider all of their solar options, not just the installers large enough to pay for the most advertising. The same 2017 NREL report referenced above found that quotes from large installers were typically 10 percent higher than those from mid- and small-sized installers. If you receive quotes from some of the bigger companies in the industry, just be sure to compare them with quotes from local installers so you don’t overpay for solar.
Compare equipment options
Getting multiple solar quotes will also allow you to compare the equipment offered by each of those installers. There are many variables to consider when seeking out the best solar panels on the market. While certain panels will have higher efficiency ratings than others, investing in top-of-the-line solar equipment doesn’t always result in higher savings. The only way to find the best system for your property is to evaluate quotes with varying equipment and financing offers.
To compare the equipment options offered by EnergySage installers, make sure to visit our Buyer’s Guide.
Start your solar journey today with EnergySage
If you’ve decided that solar is worth it for you, check out the EnergySage Marketplace to maximize your savings! You’ll receive up to seven quotes from our network of pre-vetted solar installers, which will allow you to compare installers and equipment. If you’re still not convinced or are unable to install solar on your property, you can also take advantage of solar savings by joining a community solar farm on the EnergySage Community Solar Marketplace.
This article was adapted from a post that originally appeared on Mother Earth News.