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Are Solar Panels Worth It? Opinions of An Electrical Engineer

  • Rooftop solar panels are popping up all over the neighborhood and I’m still paying for the grid power.
  • Am I the only one who has no guts to go solar?
  • What do those people know that I don’t?
  • Are solar panels worth it at all?

I know exactly how you feel because I used to think the same way. 

Solar panels have been around for some time now, and yet people are still not sure if solar is a good investment. 

And, I can’t blame you.

There are many factors that determine whether you will save or lose money. 

As someone who’s been through the process, I’m always ready to help with advice. 

Now, I’ve decided to do something better. 

Using my knowledge as an electrical engineer, I’m going to give you a complete step-by-step guide so you can decide if solar panels are worth the investment in your case.   

How Much Do Solar Panels Cost? (*A Hefty Investment)

Installing solar panels for an average American home costs around $20,424, with the tax credit factored in.  

Before I continue, let’s make one thing clear:

When talking about the cost of solar panels we actually talk about the cost of the whole home solar system that consists of —

  • Solar panels 
  • Solar mounts
  • Inverters 
  • Solar battery (optional)
  • Wiring 
  • Labor costs 
  • Solar permits and inspection fees
  • Grid connection fee 
  • Repair and maintenance costs over the years

All costs included, a 10kW solar panel system can cost between $17,612 and $23,236, with the federal solar tax credit (I’ll explain that in a second).

Naturally, if you opt for a smaller 6kW system, the average cost will be $18,500, and so on. 

The solar panel cost depends on the panel technology (polycrystalline or monocrystalline), the number of cells, power output, and efficiency rating. 

For example, a monocrystalline 340W panel from Panasonic costs $380, a 375W NeON 2 panel from LG costs $507, while a single SunPower A series 390W panel costs more than $1,200. 

So how many panels do you need?

If you’re gunning for a 10 kW system, and, for example, choose LG’s NeON 2 panels, you need to make room for 16 solar panels on your roof.  

The average labor cost for the solar installation is $0.59 per watt, so for a 10kW system, you can expect to pay $5,900. 

And what is that tax credit you’re talking about?

Here’s the thing — the federal government has established the federal solar tax credit that allows you to deduct 26 percent of the cost of installing solar panels from your federal taxes.

This investment tax credit (ITC) will still be available in 2023, but it will drop at 22 percent, while in 2024, a 10 percent tax deduction will be available only for commercial solar. 

So, if you’re thinking about solar panels, make up your mind fast!

But wouldn't it be less expensive if I just lease the panels?

Solar leasing seems an attractive option as you don’t have to splurge on all the hardware upfront. Even the fees and permits are paid by the leasing company. 

However, leasing solar panels definitely doesn't pay off long term.

A purchased solar system pays off in 5 or 6 years, after that everything the panels produce is your savings. 

On the other hand, the cost of leased solar can even increase over the years — a rise that doesn’t necessarily follow the real cost of energy. 

Solar leasing makes sense if you want to reduce your electricity bills and your home’s carbon footprint right away without making a hefty investment. 

Going Solar vs. Sticking With Grid Power — The Cost Analysis 

Solar energy has many undisputed benefits — it’s clean, it’s renewable, and available almost anywhere in the world. However, the high upfront costs of a home solar system still keep many homeowners on the fence. 

The ultimate question is — Are solar panels worth it in 2022?

While there are many factors that can tell you if your home is a good candidate for going solar, I’ll talk about them a bit later. 

Now, we’re interested in hard numbers!

As I mentioned, the cost of a solar system includes all the equipment plus the installation costs, permits, and fees, as well as the maintenance costs over the years. 

These costs are then offset by the solar tax credit, which is still 26% in 2022, and your local solar incentives, if available. 

Even if the sticker price surprises you, you need to understand that by paying for the solar system, you’re paying for at least 25 years of electricity upfront. 

So when thinking about the cost of solar, you also need to think about what you would spend on future utility bills. 

Let’s say you pay $145 for electricity per month. In theory, you could spend $53,250 on grid electricity over the next 25 years if utility rates continue to grow around 1.8% each year. 

First, let’s see what a solar system can cost you over 25 years. 

The average 10kW solar installation with a solar tax credit and all fees and permits factored in costs $20,424.

Your local utility will charge a monthly fee for the right to connect to the grid, which shouldn't be more than $15/month, which means $4,500 over 25 years.

If you use an inverter with a 12-year warranty that costs $1,600 to replace, we’ll take the worst-case scenario in which you’ll have to replace it twice. There’s another $3,200.

When you add all this up, you see that the lifetime cost of owning your solar system is $28,124.

Now let’s find out how much you can save:

cost of electricity over 25 years - lifetime cost of the solar system = your savings

Translated into numbers:

$53,250 - $28,124 = $25,126 in savings over 25 years

How much do you pay for electricity?

We’re coming to the roof orientation and solar index of your location in a minute. But for now, one thing is for sure — your current electricity bill is the largest factor in determining how much you can save by going solar.

Your utility company charges every kilowatt-hour (kWh) of electricity you use, and this rate varies depending on where you live. 

In Louisiana and much of the Southwest, you’ll pay under 11 cents per kWh, while in the Northeast you could pay more than 20 cents for the same kWh.  

Going solar significantly reduces or eliminates your monthly electricity bill, so the more you pay for grid electricity now the greater your savings with solar. 

What if I don’t live in a sunny state?

Solar panels love the sun, but you don’t have to live in the sunny South West or Florida to reap solar savings. 

Actually, you may need a bigger solar system in those areas to offset the increased electricity use due to air conditioning. 

Certain climates and regions can be better suited for solar, even though they get less sun than others. 

Why? 

Because there are many factors that determine whether to go solar or stick to the grid and the amount of sunshine is just one of them. 

In fact, New York, New Jersey, and Massachusetts are more famous for their cold snowy winters than sunny days and yet have the most installed solar in the country. 

It makes a lot of sense when we know that these states have pretty high electricity costs and great local incentives — both of which motivate more people to switch to solar. 

When Should you Expect a Return From Your Solar System?

While it’s now clear that solar panels can secure you considerable savings, let’s see when they start returning the investment. 

The higher your monthly savings on electricity bills from solar, the quicker your initial investments get repaid. 

The amount of money you can save by investing in solar energy depends on where you live, available incentives in your state or town, and the type of system you buy.

Looking back on the cost of electricity and regions, it seems the same solar system would pay itself off quicker in Massachusetts ($0.2111/kWh) than in Arizona ($0.1316/kWh) — simply because grid electricity costs more in the Northeast.  

We’ll consider the same 10kW solar system that costs $28,124 with installation, permitting, and maintenance expenses over 25 years.

If the average consumption of electricity for a U.S. household is 877kW per month, your ROI can be, 

$0.2111 × 877kWh × 12 × 25 - $28,124 = $27,390 in Massachusetts

$0.1316 × 877kWh × 12 × 25 - $28,124 = $6,499 in Arizona

However, you also need to factor in the peak sun hours. 

Factoring In the sun hours …

Massachusetts has 3 peak sun hours a day, while Arizona has 7-8, so it’s possible to generate the same amount of electricity with a 5kW system, which costs much less — around $14,893

So in that case you could save: 

$0.1316 × 877kWh × 12 × 25 - $14,983 = $19,730 with a 5kW solar system in Arizona

Keep in mind these are still raw figures which do not include state tax incentives or solar rebates. 

One way or another, if you’re a residential consumer, you can expect payback in between 5 - 7 years.

The best thing is that once you reach this point, the energy that your solar panel generates for the next 18 - 22 years is almost free. 

There’s also one point that doesn’t get enough attention — unlike other market investments, which are prone to risks, investing in solar gives guaranteed returns. 

Solar panels will keep generating electricity for at least 25 years, which is the warranty period for most manufacturers.

Important Solar Installation Factors (That Streamline the Decision-Making Process)

In the previous two sections I’ve shown you how to calculate the ROI of solar panels or how much you can save by going solar. . 

But before you make a decision, you need to see if your home is a good candidate for solar panels. 

You need to answer the following questions:

Does my house get enough sunlight?

If you live in a region that gets a lot of sunlight throughout the year, you’ll definitely get more yield from your solar panels. 

The number of peak sun hours during the day can actually allow you to go with a smaller and less expensive solar system and achieve similar savings, as we’ve seen on the Massachusetts vs. Arizona example above. 

Available sunlight seems to be a major decision-making factor, however, the exposure doesn’t depend only on the location. 

If your home is in shade from trees and other buildings for a part of the day, your solar panels probably won’t generate enough energy to justify the investment. 

Do I have enough space on my roof?

A full-on home solar system consists of at least 15 solar panels, which means plenty of real estate on your roof. 

Chimneys, skylights, gables, and other fixtures make it difficult to set up enough solar panels to make it worth the investment. 

If you have a small roof you can still install enough solar power but, you need to go with the most efficient solar panels, which are regularly the most expensive option. 

Roofs with steep slopes are also more difficult to work on, so installers may give you higher quotes for the labor. 

If your roof doesn’t qualify, you can still install solar panels on ground mounts. However ground-mounted panels are more likely to get into a shade during the day. 

Are Solar panels worth it

Does my roof face the right direction?

Homes with roof slopes that face south, southwest, or west receive more direct sunlight in the northern hemisphere (it’s N, NE, and E below the equator).

This means that solar panels will generate more energy for the same period of time. 

When you ask for a quote, most solar companies will use your address to evaluate the angle and orientation of your roof using satellite imagery. 

Next, they’ll compare it against irradiation maps to give you an estimate of how effective a solar system would be for your home.

Do I pay a lot for electricity?

The amount of money you give each month to the utility company is directly proportional to the amount you could save by going solar. If you live in a country or a part of the country where the electricity price is high, you’re a prime candidate for going solar. 

Here’s a table of electricity rates in the U.S. just to see how wildly they can differ. Hawaii seems to be in the red zone!

Price of electric energy in December 2012 per kWh:

State

Cost per kWh

Alabama

$0.12

Alaska

$0.23

Arizona

$0.13

Arkansas

$0.09

California

$0.19

Colorado

$0.12

Connecticut

$0.22

Florida

$0.11

Georgia

$0.12

Idaho

$0.11

Illinois

$0.13

Indiana

$0.12

Iowa

$0.14

Kansas

$0.12

Kentucky

$0.11

Louisiana

$0.09

State

Cost per kWh

Maine

$0.16

Maryland

$0.14

Massachusetts

$0.21

Michigan

$0.16

Minnesota

$0.14

Mississippi

$0.11

Missouri

$0.13

Montana

$0.12

Nebraska

$0.11 

Nevada

$0.12 

New Hampshire

$0.19 

New Mexico

$0.13

New Jersey

$0.16 

New York

$0.19

North Carolina

$0.11

North Dakota

$0.12

State

Cost per kWh

Ohio

$0.13

Oklahoma

$0.11

Oregon

$0.11

Pennsylvania

$0.14

Rhode Island

$0.19

South Carolina

$0.13

South Dakota

$0.12

Tennessee

$0.11

Texas

$0.11

Utah

$0.11

Vermont

$0.18

Virginia

$0.12

Washington

$0.09

West Virginia

$0.11

Wisconsin

$0.14

Wyoming

$0.12 

Does my state or city has solar incentives, rebates, or tax exemptions?

Apart from the federal solar tax credit, individual states or even cities may offer solar incentives that help homeowners reduce their energy use. 

These incentives cover projects like home insulation, window retrofits, roof repairs, and solar installations. 

Make sure to do your homework and check your municipal and state energy websites for solar rebates or tax exemptions. 

Net metering is an especially interesting option, as it allows you to sell the surplus of your solar power to the utility company, maximizing your returns. 

Do I want to increase my property value?

Adding solar panels to your home not only reduces your electricity bill and the environmental footprint — it can also increase the value of your property. 

For homebuyers, a home with a solar system up and running is an investment within an investment, so they are ready to pay more. 

According to research from Zillow Real Estate Market, homes with solar panels sell for 4.1% more on average than homes that use utility power.

Financing Options for Getting a Solar System: A Case for Solar Systems 

Now I’m going to explain different financing options you may want to consider. 

Buying Solar Panels

If you have the cash at hand, you should buy solar panels. This is the simplest and the cleanest option, without clauses or fine prints. 

You own the system the moment you turn it on, and more importantly, you don’t have to make monthly payments to anyone, so you can sit back and watch your investment returning from day one.

Your home’s value increases the moment you install the panels, but only if you own them. Data from the National Bureau of Economic Research says solar panels can add a $20,000 value premium to the sales price of a home from the mid-$500,000 range.

In the end, when you own the solar panels on your roof, you become eligible for state solar rebates and federal tax credits that can pile up to almost 30% of the whole system cost.

Private or Bank Loans

With this option, instead of paying everything up front, you pay smaller monthly installments over an agreed period. 

Just as you’d apply for a car loan, you can get a loan for solar panels through a bank, credit union, and sometimes even through the utility or state programs. 

Your utility may even offer on-bill financing, where you repay the loan through your monthly electricity bill. 

However, keep in mind that if you sell a house with solar panels installed, the loan is still tied to you. In this case, you have two options: To pay the remainder at once or to include the remaining balance in the home sales price. 

Financing options for installing solar panels

Solar Loans

Although the price of solar panels is dropping every year, even with government incentives and tax credit, the amount is still high for many homeowners. 

If you don’t have that kind of money and don’t want to deal with banks, you can try to qualify for a solar loan, as many solar installers partner with lenders to provide low-interest financing at competitive terms.

But the devil is in the details so make sure to read the complete terms & conditions. When I was exploring the financing options I could always find better rates if went to banks and credit unions directly.

Leasing Solar Panels

Leasing is different from owning solar panels in that you pay to use the solar system installed on your roof

In this option, you don't own the solar installation. Instead, you get the right to use the solar installation on your property for a monthly fee. 

There are many benefits to leasing solar panels. The upfront costs are much lower and, in some cases, you don’t even have to pay anything. 

Besides, the maintenance and liability are on the solar company so you don't have to spend a single cent on servicing and repairs. 

On the other hand, you are giving up all the tax incentives and government rebates to the solar company. 

But perhaps the biggest downside of leasing is that your monthly payments are likely to increase to match the current market prices, which eats away your savings. 

Power Purchase Agreement (PPA) — Not Same as Leasing

Both solar power purchase agreement (PPA) and solar leasing have zero upfront costs and in both cases, you’re not the owner of the solar system on your roof. 

But that’s where the similarities end.

With a PPA, you enter a contract with a solar developer to pay for the solar energy that the system on your roof produces.  

Remember, with solar leasing you pay to use the panels, while in a PPA you pay for the kilowatt-hours that the panels produce. 

The idea is that a kilowatt-hour of solar costs less than a kilowatt-hour of utility energy. 

The good thing is that in areas where PPA is available, the utility pays you for the excess solar energy that you don’t use. 

When the contract expires, which is between 5 and 25 years, you can choose to renew the contract, have the panels removed, or buy out the panels at their real market value.

The last option is probably the worst because you don’t get to choose the panels. You have to go with the solar company’s choice — and still pay a considerable sum on top of monthly solar bills. 

What Exactly is PACE Financing?

The Property Assessed Clean Energy (PACE) financing is a relatively new model of financing solar panels. 

In a PACE program, you agree to finance the upfront cost of the solar system with bonds that local government issues to fund energy efficiency improvements.

The lender pays for your solar system, and you repay the bonds over time through your property tax bill. 

An important difference between PACE and solar loans is that in a PACE program, the bond is attached to the property, and not to you.

If you happen to sell the house, the new owner continues to repay the bond through the tax statement. 

How Long Do Solar Panels Last? 

Most solar panel manufacturers follow the industry standard and guarantee a productive lifetime of 25-30 years. However, your solar panels won’t stop working after 25-30 years.

They’ll still be producing electricity but at a lower rate. 

But if they degrade over time, is solar power worth it?

Definitely, but this panel degradation rate is important if you want to understand the upfront cost of going solar.

Even when operating with reduced output, solar panels can work for many decades, primarily because they have no moving parts that can wear out or break. 

Provided they are not damaged by wind, debris, or bad weather, solar panels rarely break down. 

So is that something to worry about?

A 2012 study by the National Renewable Energy Laboratory (NREL) found that solar panel output drops by 0.8% each year on average. This is called the solar panel degradation rate.

Keep in mind that this is an average value — when I was shopping for solar I found out that premium manufacturers like SunPower offer panels with degradation rates as low as 0.3%.

The good news is that solar degradation rates are constantly improving, as solar technology advances over the years. For now, anything below 1% is the industry standard and should give you plenty of energy and savings over the course of 25-30 years.  

Let me show you:

If the degradation rate is 0.8%, in year two, your panels will operate at 99.2% of their factory output. By the end of year 25, they will still be operating at 82.5% of their original capacity. 

And to keep you safe, manufacturers offer warranties from manufacturing defects as well as performance warranties that your panels will produce a certain amount of electricity.    

Going Solar Is The Best Option if…

Solar panels might be a smart investment if you meet the following criteria. 

My house receives a lot of sunlight

This is the first and foremost criterion. Geographically speaking, the closer you’re to the equator, the better. However, there are other factors you should consider, such as the number of sunny days, as well as micro-factors, such as shade from trees and other buildings. 

The National Renewable Energy Laboratory (NREL) has developed several maps for the U.S. showing solar irradiation levels. So you can see how your location ranks in the sunshine department. 

Hint: If you’re in deep red, your location is ideal.

My roof has an ideal shape and orientation

But not everything is in the amount of sunlight. Your roof needs to be of the right shape and face the right direction. This means S, SW, or W in the northern hemisphere and N, NE, or E in the southern hemisphere. 

In an ideal case, your roof needs to be flat, moderately sloped, and free from architectural and utility features like chimneys, dormers, and skylights. 

Most importantly, it needs to be spacious enough to support 15+ solar panels. 

OR you can mount the panels on external supports and set them up away from the house. In that case, you’ll have additional costs for extra cables and hardware. 

Otherwise, if your roof dots all the i’s, you are safe to proceed. 

My location has solar incentives or tax exemptions

This factor can be your wild card if your region is not among the sunniest in the country. The cold and rainy Northeast has a disproportionately large number of home solar installed.

Why? 

Because those states have favorable solar incentives, rebates, and tax exemptions, in addition to the federal solar tax credit of 26%. 

Another advantage is if you can sell the excess solar-generated electricity to utilities through a net-metering plan. This works great in offsetting power consumption at other times, which will definitely show on your monthly electricity bill. 

Check out the Database of State Incentives for Renewables & Efficiency (DSIRE) website and contact your utilities to find out more about local solar incentives.

I pay a lot for the grid energy

As we’ve seen above, the cost of grid electrical energy varies from state to state. You can be paying as low as $0.09/kWh in Arkansas or Louisiana or as high as $0.33/kWh in Hawaii. 

If you pay top dollar for the grid electricity you use, you should definitely consider switching to home solar panels. 

But now listen to this:

Between 2005 and 2020, the number of telecommuting employees has grown 173%. As a result of the pandemic, electricity usage and home utility bills will only continue to grow as more people shift to working from home.

Adding solar panels to your home can help you offset increased energy costs, helping you save money while working remotely. 

I want to reduce my environmental impact

Solar panels allow you to harness the energy of the sun and run your home on clean power, without adding up to the local air pollution. For the most part, electricity in the U.S. is still generated by burning natural gas and coal — 59.6% of the nation’s energy portfolio. 

By installing a solar system on your home, you’re taking the energy future into your own hands, while contributing to a cleaner environment and a more resilient electrical grid. 

However, there is one hidden benefit of thinking green. 

The green living trend caused a growing demand for homes that have a smaller carbon footprint and are powered by renewable energy. 

For homebuyers, a home with solar panels means the green investment is already financed  through the mortgage, and for the homeowner, it means they can ask for a higher selling price. 

When Going for a Solar DOESN’T Make Any Sense? 

Now I’ll explain some of the cons of solar energy, or when going for solar is not a good idea. 

Your roof can’t take solar panels

When you put solar panels on your roofs, they are pretty much not going anywhere. So if your roof isn’t up to the job you should think twice about solar installation. 

If your roof is weak or already damaged, adding extra 800 pounds up there won’t make it any better. 

This is why you should always first hire a building inspector or an engineer to evaluate the structural health of your roof. 

If your roof is already due to repairs or replacement, you better hold on with solar panels until all the work is done. 

On the other hand, your roof can be good as new, but if the slopes are not facing the sunny side, you’d never be able to make the most out of your solar panels. 

The same applies if there are a lot of trees around your house. 

You can’t put them in your yard

OK, if the roof isn't an option I can always use a ground mount, right?

That is true, but you need a pretty big yard. Ground mounts can be an option for farms and open spaces, but it gets tricky in cities and suburbs.

There are just too many objects that make shade and prevent you from using all the peak sun hours you get.  

Also, keep in mind that solar panels would cover quite a large area, so you have to ask yourself, is it worth giving up most of your backyard?

You plan to move or sell

If you plan to move or sell your home in the next few years, I’m not sure that solar panels are worth the cost. 

If it comes to it, you technically can remove solar panels from your roof and reinstall them on a new one. 

But your new home may not be as suited as the old one for a number of reasons. 

In some cases, the local building codes in your new location may even prevent you from relocating an existing solar installation. 

And even if you do that, the costs of such an operation may not justify the effort. 

Yes, having panels installed on your home can increase its listed price, but if the power system hasn’t yet paid for itself, you may actually lose money. 

You already pay low electricity

Finally, if our electricity bills are already low, is solar worth it?

A survey by Pew Research Center shows that 96% of homeowners have installed solar or are considering solar panels to reduce their utility bills. 

This makes a lot of sense, as many households spend hundreds of dollars every month on their power bills. 

However, if you have a small home, small household, use energy-efficient appliances and lighting, or already enjoy cheap electricity from your utility, you may not have a real need to go solar. 

The rule of thumb is, if you pay $50 or less a month for electricity, a full solar system will have a tough time paying for itself. 

Are Solar Panels Worth It? Let’s Summarize The Pros and Cons

It’s time to draw a line and see what solar panels bring to the table. Here’s a list of pros and cons of solar panels:

Pros

  • Solar power is renewable and free
  • Available almost anywhere
  • Solar panels reduce the environmental footprint 
  • Solar power lowers your electricity bill
  • You can sell electricity to the utilities
  • Solar system increases the property value
  • Guaranteed return of investment 
  • Plenty of financing options
  • Solar upgrades are eligible for tax credits
  • Solar technology is improving & becoming more affordable 

Cons

  • Your location needs plenty of sunlight throughout the day 
  • You need a proper roof size and orientation 
  • Ground mounts are tricky to install in cities and suburbs
  • Steep upfront costs
  • More or less attached to the property
  • Hard to justify if you already pay low electricity rates

Final Thoughts 

Even in 2022, solar power is still a hefty investment.

But are solar panels worth it? 

In my opinion as an electrical engineer, solar panels definitely pay off in the long run.

Once you set them up, solar panels can drastically reduce or even eliminate your electricity costs, especially if you add a solar battery to the system. 

An average solar installation pays for itself in 5-7 years, after which everything panels produce is pure savings. 

Besides, you can return your investment even sooner by selling any excess energy the panels produce through net metering.  

With plenty of financing options to choose from, solar panels are more affordable than ever, especially when the government is offering a federal tax credit of 26%. 

Solar panels also help you reduce your home’s environmental footprint and allow you to live more sustainably, without adding on to the local air pollution and global warming.  

Would you install solar panels on your roof? 

Please share your views and comments on this hot environmental topic.

As always, feel free to ask any questions. 

Nikola uses his background in electrical engineering to break down complex sustainability topics for GreenCitizen's readers. He is a firm believer in environmental conservation, which he practices daily through recycling and home-grown food. He enjoys hiking, engaging in white-water sports, and collecting pocket knives.


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