What Do Solar Panels Cost and Are They Worth It?
Consider solar panels for your home if you have a high utility bill, live in a prime location and qualify for tax breaks or other savings.
Lauren Schwahn is a writer at NerdWallet who covers debt, budgeting and money-saving strategies. She contributes to the Millennial Money column for The Associated Press. Her work has also been featured by USA Today, MarketWatch and more. Lauren has a bachelor’s degree in history from the University of California, Santa Cruz. She is based in San Francisco.
Tommy Tindall Lead Writer | Consumer debt, saving money, gig economy
Tommy Tindall is a personal finance writer who joined NerdWallet in 2021, covering consumer debt, practical ways to save money and the gig economy. Before NerdWallet, he worked on the marketing and communications team at Fannie Mae. Today, Tommy strives to make the topic of money approachable for all. His work has appeared in The Washington Post, The Associated Press and on MarketWatch. Tommy is based in Bel Air, Maryland.
Courtney Neidel is an assigning editor for the core personal finance team at NerdWallet. She joined NerdWallet in 2014 and spent six years writing about shopping, budgeting and money-saving strategies before being promoted to editor. Courtney has been interviewed as a retail authority by Good Morning America, Cheddar and CBSN. Her prior experience includes freelance writing for California newspapers.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here’s how we make money.
The rising cost of electricity from traditional sources and government incentives to go green make the idea of installing solar panels more attractive for many homeowners.
But the true cost of solar panels, and whether they’ll help you save money. depends on a few key factors.
How much do solar panels cost for homes?
On average, solar panel installation and the system together can run from 15,000 to 25,000, according to the latest information from the Center for Sustainable Energy. Home services booking site Angi bumps that up, putting the normal range for solar panel installation in the U.S. from around 18,000 to 35,000 based on its database of completed projects.
Before you make the leap, learn how your electric bill. location and incentives can impact your wallet over time. Here are five steps to take to determine whether you’ll save more than you spend on solar panels.
Review your electric bill
Solar panels generate their own power and can therefore greatly offset your monthly electricity bill. if not eliminate it. The higher your bill, the more likely you’ll benefit from switching. But be aware that electricity rates and usage — the main charges on your statement — are volatile.
If a utility’s electricity fluctuate, so could the amount of savings, says Garrett Nilsen, deputy director for the U.S. Department of Energy’s solar energy technologies office. Similarly, if energy consumption changes, the amount of savings can also vary.
Electricity rates vary by location. The national average is about 15 cents per kilowatt-hour, according to year-to-date 2022 data from the U.S. Energy Information Administration 
Visit the EIA website to view the most recent per state.
Evaluate your sunlight exposure
sun means more energy produced and a greater potential to save with solar. Certain states, like Arizona and California, average more sunlight hours per day.
Your home’s orientation toward the sun, the amount of shade it gets, and its roof type also affect a solar system’s output. You can estimate the efficiency of panels on your home using this solar panel cost and savings calculator from SolarReviews.
Estimate and compare the cost of solar panels for homes
The brunt of the expense with solar panels is in installation and the purchase of the actual panels.
Minimal long-term costs can make up for the upfront costs. “Most systems don’t require much maintenance and are designed to last for 20 years or more with little change to the amount of electricity produced,” Nilsen says.
When calculating the total price, consider how much energy you regularly consume — your usage is listed on your monthly utility bill — and what size system will generate the amount needed. Some tools, like the SolarReviews calculator, estimate the system size for you.
With installation, an average residential 5-kW system costs from 3 to 5 per watt, according to the CSE, which results in the 15,000 to 25,000 range. That cost is before any tax credits or incentives.
If you know your current energy usage, you can calculate how much you’ll need to pay for solar panels.
Then comparison shop for solar panels as you would other big-ticket items, such as a car or TV, says Vikram Aggarwal, CEO of the solar marketplace EnergySage. Some companies reduce installation costs through rebates and other programs.
Aggarwal recommends getting quotes from three to five contractors. EnergySage compiles solar companies’ customer reviews, certifications, Better Business Bureau profiles and other information to help you find reputable providers.
Take advantage of government incentives
A federal law passed in 2022 incentivizes consumers to make clean energy enhancements, like installing rooftop solar. A substantial update to an existing energy-related tax break that was set to expire at the end of 2023, the Residential Clean Energy Credit allows taxpayers who have solar (and other approved clean energy equipment) installed to recoup 30% of the cost in the form of a federal tax credit.
What that means: A solar setup that costs 15,000 would yield a 4,500 credit (30% of 15,000) that you can take advantage of come tax time to reduce any federal taxes owed. The credit isn’t refundable though, meaning any money left over after your full tax bill is covered won’t be paid out to you. But you may be able to apply the remainder of the credit toward taxes owed in subsequent tax years.
The credit applies to eligible equipment installed after Dec. 31, 2021, and remains in effect at the 30% rate through 2032. It decreases incrementally after that.
Depending on your state, you may receive extra incentives like cash back, property tax exemption, waived fees and expedited permits. In some states, homeowners with solar panels can sell excess power to their local utility companies. Look up credits available in your state by reviewing the database of state incentives for renewables and efficiency.
Keep an eye on trade policy
Changes in government trade policy also impact prices. There have been varying tariffs on imported solar cells and panels over the last decade affecting costs and supply. For example, tariffs resulted in a 16-cent-per-watt increase for the average consumer in 2018, which translated to an overall increase of 960 for a 6-kW system, according to EnergySage.
President Biden placed a two-year pause on new tariffs on the solar industry in June 2022.
Is solar panel installation right for your home?
If you live in an area with high energy rates and a suitable solar rating, and if you can afford the initial investment, it’s worth installing solar panels on your home while the 30% tax break is in place — for the good of the environment and your wallet. But don’t expect to eliminate your power bill overnight.
If you decide to purchase solar panels, shop around and search for incentives. Consider financing with a solar loan if you’d rather spread out the cost over time. Keep in mind that you don’t have to buy solar panels — you can lease them, too. Leasing offers a lower upfront cost, though since you don’t own the panels, they won’t raise the value of your home, and you may not be eligible for incentives.
Going solar isn’t the only potential way to save money. Learn more about what you can do to lower your bills.
Residential Solar Panel Systems Complete Renewable Energy Solutions for Your Home
Solar panels are the stars of the residential solar system, gleaming on the rooftop as they tell the world, or at least the neighborhood, that this homeowner cares enough about the environment to ease the household’s carbon footprint while smartly lowering electric bills.
Panels get the glory, but like every star, they wouldn’t be where they are without the supporting cast. In this case, that supporting cast is the critical infrastructure made up of inverters, racking and monitoring systems. These essential parts of your solar power system help make the power useable, connect your system to the roof and let you know how well your system is functioning.
When planning your solar rooftop system and working with your contractor, most of the FOCUS will be on the solar modules themselves as well as labor costs and installation timetables. The inverters, racking and monitoring systems often get lumped together. Innovations in materials and processes in these three areas have resulted in lowered materials and labor costs and even lengthened warranties on the products.
Solar Inverters: From DC to AC Power
If not for inverters, solar panels would be relatively useless for homeowners. Once the solar panels have collected sunlight and changed it into DC power, an inverter is needed to convert that electricity into something more useable, notably AC power.
Here’s why that matters: DC (direct current) power is low voltage and flows in a single direction. AC (alternating current) power moves both forward and backward along a wire, can change between high and low voltage and can more easily be sent long distances over wires. Solar panels make DC power. Most U.S. homes and businesses run on AC power. Thus, the inverter – or inverters, depending on what a homeowner chooses for his solar system.
Breaking Down the Differences
Solar panels are connected in series to form a string. The string connects to one large inverter where the DC power is converted to AC power.
Shading of one panel brings the output of all the panels down
Can’t tell the performance of individual panels, only the system as a whole.
A central inverter can only have a certain number of solar panels, so adding panels later can be a problem.
Solar panels must be lined up in the same orientation to the sun to produce similar current.
If the one inverter breaks, the whole solar system shuts down.
The most used inverter configuration.
As they handle the entire electric load, central inverters last 10 to 15 years.
Each solar panel has its own small inverter attached to its backside. The DC power is converted to AC power at the panel level.
Panel outputs are independent of one another, so shading on one panel does not impact the output of the others.
Individual monitoring of each panel allows for easy identification of where a problem is.
solar panels with micro inverters can be added to the array easily.
Because the panels perform independently of each other, they can be oriented differently without impacting the system.
If one panel’s micro inverter breaks, the other solar panels can continue to produce power.
Catching up to central inverters, used in 41% of residential systems in 2014.
Used with a central inverter, power optimizers are attached to each panel in the array. They condition the DC power at the panel level before it moves on to the inverters.
Similarly to micro inverters, the power output is individual to the panel so shading or other problems with one panel don’t bring down the whole system.
Similarly to micro inverters, power optimizers allow for individual monitoring of each panel.
Can only have the number of panels the central inverter can handle.
No need to match panel orientation.
If one panel’s power optimizer breaks, the others can continue to produce power. But if the central inverter all the panels are connected to breaks, the whole system shuts down.
Gaining traction in the module-level power electronics sector due to lower cost.
Don’t skimp when it comes to the inverter just to save money. Some experts even suggest getting an inverter that can handle more than expected in case you want to add panels later.
Solar Mounting Systems: Maximizing Energy Production
No matter the weather, your solar panels need to stay solidly on your roof. That’s where the solar panel mounting system comes in.
Traditional Rooftop Mounting System
Rooftop installation costs can vary quite a bit based on the type of roof and its substructure, solar array design and from region to region, based on typical wind and snow conditions.
Generally speaking, roof mountings are more complex than ground or pole mounts. However, residential installations tend to be roof mountings because that is the highest and largest clear space on the property. Roof mounts are fixed mounts, which means that the panels do not move with the sun.
But the mounting system, also called the racking system, does more than merely hold your solar panels in place at a 30 to 45-degree angle. The mounting determines the solar modules’ alignment with the sun. The better aligned the panels are, the higher the power production.
The parts of the mounting system typically are included in what’s called the balance of system costs. Each mounting system has to be customized to fit the project. Efficiencies have lowered these costs to around 0.17/w. Declines in the cost of aluminum as well as optimized designs have contributed to the drop in mounting costs, according to studies by the National Renewable Energy Laboratory. The installation of the mounts and modules take up about 70 percent of the total installation time.
In the past, mounts have primarily been rails that are attached to the roof. Then the panels are attached to the rails. Now, rail-less systems are becoming more common, so much so that rails are expected to become a thing of the past.
Expected Growth of Rail-less Mounting Systems in U.S. Residential Solar Market
Rail-less mounting systems remove the extra step of putting on rails, which is more costly because of materials and labor costs. Because there are fewer parts to install, costs are lower in rail-less systems.
The type of roof that the mounts will be attached to can make a difference in the mounts that are used.
Mounting solar panels to the more brittle shake or Spanish tile roof will be more expensive than installing panels on a composition roof because different materials will be needed and more care will be needed by workers walking on an easily breakable tile roof.
Properly installed solar panels should not invalidate your roof warranty. However, before installing solar, take a look at your roof paperwork. If the warranty is nearly expired, you might want to replace the roof, and therefore the warranty, before adding solar panels. Otherwise, if you unfortunately spring a leak, it will be much more expensive to repair.
Monitoring Your Solar Panels Performance
Solar panels silently go about their business of gathering sunlight and producing energy, which makes it hard to tell how effectively they are working. If a panel on your string inverter gets shaded, the entire string will be affected and won’t produce the energy you were expecting. Unless you want to wait until your utility bill gives you the bad news, a monitoring system can be invaluable.
Monitoring systems help you to measure and track how much electricity your system is producing and identify and promptly fix any performance issues so that you are maximizing the production of electricity from your solar system.
MICRO Inverter Display
There are two basic types of monitoring systems: on-site and remote. They are just as they sound. The on-site system is physically located on your property and recording the requisite data. A remote monitoring system involves the PV system transmitting data to a monitoring system that you can access online or by phone.
Monitoring systems can be as simple or elaborate as you want and can afford. Some homeowners might find the inverter’s basic display gives enough information. The display is on the front of the unit and includes basic data, such as power output and daily and total energy production. Many inverter manufacturers also offer free data-monitoring software that you can download from the company and run on a computer connected to the inverter by a cable. sophisticated monitoring systems, which can range in price from about 400 to 1,300, will show problems that occur at the module, string and system levels and can include:
- Real-time performance data for individual modules and the system overall
- Immediate fault detection
- Dollar value of the energy produced and site profitability analysis
- Interactive charts and playback features showing the harvested power of your installation during a specific time
- Pounds of CO2 saved
Most small-scale systems do not require a large amount of data collection, however, data junkies and solar geeks will appreciate the amount of data they can pull.
Some companies, such as Solar World, offer a monitoring system that includes a portal in which users can publically display the data from their solar modules so they can compare it with others. In addition, certain systems allow installers to monitor performance as part of a maintenance agreement.
Solar Cheat Sheet: Your Complete Guide to Getting Solar Panels at Home
Here’s where you can find the answer to all your solar panel questions, even those you didn’t know you had.
Andrew Blok has been an editor at CNET covering HVAC and home energy, with a FOCUS on solar, since October 2021. As an environmental journalist, he navigates the changing energy landscape to help people make Smart energy decisions. He’s a graduate of the Knight Center for Environmental Journalism at Michigan State and has written for several publications in the Great Lakes region, including Great Lakes Now and Environmental Health News, since 2019. You can find him in western Michigan watching birds.
Stephen J. Bronner is a New York-based freelance writer, editor and reporter. Over his more than a decade in journalism, he has written about energy, local politics and schools, startup success tips, the packaged food industry, the science of work, personal finance and blockchain. His bylined work has appeared in Inverse, Kotaku, Entrepreneur, NextAdvisor and CNET, and op-eds written on behalf of his clients were published in Forbes, HR Dive, Fast Company, NASDAQ and MarketWatch. Stephen previously served as contributors editor and news editor for Entrepreneur.com, and was the VP, Content and Strategy, at Ditto PR. He enjoys video games and punk rock. See some of his work at stephenjbronner.com.
Over the past few years, the stars (particularly that big one at the center of our solar system) have aligned to make residential solar panels increasingly appealing for meeting your home’s energy needs.
The rising costs of energy across the US, along with falling for solar panels aided by federal tax incentives, have simply made the economics of solar power not only attainable but beneficial for homeowners in the long run.
If you looked at solar just a few years ago, costs have continued to come down since then, said Ben Delman, communications director at Solar United Neighbors. It depends on your situation, but more and more homeowners and families are deciding that solar makes sense for them as a way to save money by taking control over where their electricity comes from.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
Below, we’ve collected CNET’s expert advice to get you through the solar panel purchasing process.
In this article
- How do solar panels work?
- Is there a solar panel option that works for me?
- How much do solar panels cost?
- How much money will solar panels save me?
- Can I install solar panels myself?
- Where should I shop for solar panels?
- How do I maintain solar panels?
- Does solar work where I live?
- Do I need a backup battery?
- Does solar increase the value of my home?
- Are solar panels a scam?
- What is net metering?
- Should I go solar?
How do solar panels work?
Buying a solar panel system means buying a lot of equipment the average person doesn’t have reason to know about. In the most basic terms, photons from the sun are absorbed by the solar panels and converted into direct current, or DC, electricity. For this energy to be used in American homes, it has to go through an inverter attached to the solar array to become alternating current, or AC, electricity.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
Read up on what you’ll actually be buying with the stories linked below:
- The Most Efficient Solar Panels
- Solar Energy Basics: The Magic of Photovoltaic Panels
- How Sand Becomes Solar Panels
- Here’s How Solar Panels Turn Light Into Power
- The Solar Panel Angle That’ll Generate the Most Energy Possible
- Solar Panel Efficiency: What Is It and Why Is It Important?
- What You Need to Know About Solar Inverters: Essential Solar Equipment
- Solar Cell, Module, Panel and Array: What’s the Difference?
- Bifacial Solar Panels Generate Electricity, but Not When You Put Them Here
- What’s a Virtual Power Plant? Should You Join One?
- How Much Energy Does a Solar Panel Produce?
Is there a solar panel option that works for me?
Fortunately for the solar-curious, many options exist for homeowners and even renters to get some or most of their electricity needs met with energy from the sun.
The most common way to go solar for homeowners is the installation of panels on their roofs. These systems can be purchased directly through an installer (or assembled for the DIYers) as a large cash purchase or through relatively affordable financing (such as a 1.99% APR 15-year loan). There are also options for rooftop solar for those who may not have the capital to get a project started. These are solar leases, where a homeowner pays a fixed monthly cost to a company who retains ownership of a solar system; or a power purchase agreement, in which a homeowner pays for the electricity generated by solar panels rather than the system itself.
Finally, both homeowners and renters in many places have access to community solar. This option allows people to opt in to a nearby solar farm to enjoy some energy savings.
How much do solar panels cost?
The costs of solar panels will depend on a few factors, including where you live, how much of your energy needs you want the system to cover, whether you install it yourself and whether you want a battery (which could cost as much as the system itself). The average cost was about 3 per watt in 2022 for an 8 kW system through an installer, according to the consulting firm Wood Mackenzie.
The way you pay for your system is vital. You’ll notice the biggest hit to your bank balance by paying for solar outright, while financing will spread the expense out over years but with added interest. A lease or PPA is most friendly to the budget-minded, but you won’t enjoy the long-term benefits that come with owning a system outright.
How much money will solar panels save me?
If you’re buying a system outright or financing it, you’ll receive a 30% tax credit through the Inflation Reduction Act.
To get a better idea of when to expect a return on investment, look at how much energy you’ve consumed in the past year or two and how much it cost you. Then, working with an installer, figure out how much of your energy you’d like to offset with solar and how much the system will cost. Eventually, the savings from not having to buy electricity from your utility will be greater than the cost of the solar system itself.
In terms of payback, broadly seven to 12 years is a decent average when you see returns from investment in solar after purchasing a system, Delman said.
Can I install solar panels myself?
It is possible to install most of a solar panel system yourself.- mounting the panels on your roof and connecting them to each other. But if your home is connected to a grid, you’ll need to hire a licensed electrician for the final connection needed to feed electricity to your utility.
Another thing to keep in mind if you’re doing it yourself is whether the warranties for the panels that you purchase require them to be installed by a professional, Delman said. Often when people do it themselves, they’ll hire an electrician to do the finishing work so it can get certified. It’s also good if you’re not an expert to have somebody with expertise to just go over the wiring and make sure that everything is where it should be.
Where should I shop for solar panels?
If you want to buy panels directly, most hardware stores and larger retailers have them available. If you’d like to get them through a professional, a good place to start, according to Delman, is the website of your local solar industry association (for example, the New York Solar Energy Industries Association). These organizations should have a list of its members, which will often include installers and suppliers. Typically, installers work with one or two solar panel brands.
Look for an installer who’s experienced, particularly with the kind of situation you have at your home, Delman said. Have they worked with the same roofing materials? Do you want a ground mount system installed? Check reviews on Yelp, Angie’s List, Google and others, and get references too. (Solar United Neighbors also offers resources for going solar, free of charge.)
The best way to make sure you’re getting the best deal on your solar panels is to get multiple quotes and ask as many questions of your potential installers as you need. CNET has reviewed many of the national solar companies, but it’s a good idea to check into local installers, too, who sometimes can offer lower prices.
How do I maintain solar panels?
Solar panel maintenance is generally minimal and fairly easy. Even so, we’ve got the info you need to keep your panels in the best possible shape.
Does solar work where I live?
Solar panels, in general, will work in a variety of climates, even those with frigid winters. The more important questions to ask are: Does my roof get adequate sunlight? Are any trees shading my roof? And most importantly, does my utility offer net metering?
Net metering is perhaps the most important aspect of going solar, in that it stipulates that your energy utility will pay you for the energy created by your solar panels that you don’t consume. Net metering ensures that the return on investment in going solar is financially sound.
Does solar increase the value of my home?
Going solar has another benefit for homeowners: it can boost the price of their properties if and when they decide to sell. According to studies by the Lawrence Berkeley National Lab and Zillow, homes with solar panels often sell for about 10,000 more compared to those that don’t.
Are solar panels a scam?
No. Solar panels are a proven technology that can help you shift some of your energy use to cheaper, greener electricity. But that doesn’t mean that scammy companies (while apparently rare) don’t exist. The company discussed in the story linked below recently went out of business, but a bit of caution is a good thing.
What is net metering?
Net metering.- the process by which you’re paid for electricity generated by your solar panels but sent back to the grid.- is a critical factor in whether homeowners should go solar.
Let’s say during a beautiful sunny day, you’re at work, the lights, TV and dishwasher are off, so you’re probably generating more electricity from your system than you’re consuming, Delman said. When that happens, that electricity goes to the electric grid through your electric meter to be used by your neighbors. Net metering is what ensures you receive credit for that electricity so that your investment is still being paid back even if you’re not using the electricity yourself.
You can see what your state’s policy toward net metering is here.
Should I go solar?
Solar won’t be an option for everyone. If your home does not receive adequate sunlight due to shading on your roof, you live in a state without net metering or there’s no community solar, going solar may not be viable for you.
But with rising energy costs and the falling price of solar panels, for many people there’s never been a better time to go solar. There’s options to go solar that should fit most people’s needs, whether that’s through financing, a solar lease, PPA or community solar, that will allow them to start seeing savings on their energy bills almost immediately. By most estimates, a solar system starts paying for itself after between seven and 12 years.
Powering your home with solar not only allows you to get your electricity from a clean source, but provides an unmatched return on investment that will save you money on your energy bills and boost the value of your home.
The Cost of Solar Panels: Is It Worth It?
Do the benefits of solar panels outweigh their costs?
Nathaniel Riley brings 28 years of experience in financial services, including merger-arbitrage trading, hedge funds, and alternative investments.
Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas.
Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies.
What Is Solar Power for the Home?
Homeowners who install solar power systems can receive numerous benefits: lower electric bills, lower carbon footprints, and potentially higher home values. But these benefits typically come with significant installation and maintenance costs and the magnitude of the gains can vary widely from one house to another.
This article will help homeowners make the financial calculations required to determine the viability of solar power in their homes.
- Those seeking to go green may want to consider equipping their home with solar panels.
- Not only is solar power good for the environment, but you can earn money selling back excess power to the grid.
- While costs have come down over the past years, installation and maintenance of solar panels can be quite expensive.
- Solar panels are best suited for homes that receive ample sun exposure throughout the year.
- Before committing to solar power, be sure to understand both the social and economic factors.
Understanding Solar Power
In principle, working out whether it makes financial sense to install solar power for your home is simple. You will need to calculate:
- The cost of a solar power system
- How much energy it will produce
- What you would otherwise pay for the same amount of energy
- How many years it will take for your upfront investment to pay for itself in saved energy costs
- Whether the system will pay for itself in five years
If it does and you have the upfront capital, it’s probably a great idea. If you’ll have to wait longer for savings or take out a loan to afford the system, you’ll need to think the decision through carefully.
In practice, however, things are not this simple. There is a large variation in each of these factors, and that can make the costs and benefits of installing solar power for two homes—even if they are neighbors—radically different.
There are some tools that can help, though. Solar Reviews offer a calculator that will quickly provide you with representative costs and savings for a solar power system in every part of the U.S. Calculators like this are a good place to start if you are new to solar energy and want to understand the basic cost model.
In the rest of this article, we’ll take you through each of the key factors you should consider when calculating the costs and potential savings of solar power for your home.
Before getting solar panels, get quotes from several reputable installers to compare.
The Cost of Solar Power for Homeowners
First, let’s look at the cost of installing a solar power system for your home. The average, upfront cost of a residential solar power system is between 3,500 and 16,000.
Why the huge range of costs? Well, a lot of the variation depends on the size of the system you’d like to install and the type of panels you want to use. Whatever system you use, keep in mind that solar power is capital intensive and the main cost of owning a system comes upfront when buying the equipment. The solar module will almost certainly represent the largest single component of the overall expense.
There are some additional costs, as well. Other equipment necessary for installation includes an inverter (to turn the direct current produced by the panel into the alternating current used by household appliances), metering equipment (if it is necessary to see how much power is produced), and various housing components along with cables and wiring gear. Some homeowners also consider battery storage. Historically, batteries have been prohibitively expensive and unnecessary if the utility pays for excess electricity that is fed into the grid (see below). The installation labor cost must also be factored in.
In addition to installation costs, there are some further costs associated with operating and maintaining a PV solar array. Aside from cleaning the panels regularly, inverters and batteries (if installed) generally need replacement after several years of use.
While the above costs are relatively straightforward—often a solar installation company can quote a price for these for a homeowner—determining subsidies available from the government and/or your local utility can prove more of a challenge. Government incentives change often, but historically, the U.S. government has allowed a tax credit of up to 30% of the system’s cost.
details on incentive programs in the U.S., including programs within each state, can be found on the Database of State Incentives for Renewables Efficiency (DSIRE) website. In other countries, such information is often available on government or solar advocacy websites. Homeowners should also check with their local utility company to see whether it offers financial incentives for solar installation and to determine what its policy is for grid interconnection and for selling excess power into the grid.
The U.S. installed 19.2 gigawatts of solar PV capacity in 2020 to reach 97.7 GWdc of total installed capacity, enough to power 17.7 million American homes.
Calculating Your Energy Production
The second factor you’ll need to consider in your calculations is the amount of energy your system will produce and when it will do that. This can be a very complicated calculation to make, even for experienced solar engineers. However, let’s run through the basics.
One of the most important considerations is the solar irradiation levels available in the home’s geographical location; in other words, how sunny it is where you live. When it comes to using solar panels, being closer to the equator is generally better, but other factors must be considered. The National Renewable Energy Laboratory (NREL) produces maps for the U.S. showing solar irradiation levels and the tools on its website provide detailed solar information for specific locations within the U.S.
Equally important is your home’s orientation: For rooftop arrays, a south-facing roof without trees or other objects obstructing sunlight maximizes the available solar energy. If this is not available, panels can be mounted on external supports and installed away from the house, incurring additional costs for the extra hardware and cables.
And then you must factor in the size of your system. Solar panel size is quoted in terms of the theoretical electrical output potential in watts. However, the typical output realized for installed PV systems—known as the capacity factor—is between 15% and 30% of the theoretical output. A 3 kilowatt-hour (kWh) household system running at a 15% capacity factor would produce 3 kWh x 15% x 24 hr/day x 365 days/year = 3,942 kWh/year or roughly one-third of the typical electricity consumption of a U.S. household.
How Much Will You Save?
Once you know how much a solar power system will cost upfront, and how much energy it will produce, you can (theoretically) predict how much you can save in energy costs per year.
This is another tricky calculation, however, because a lot depends on how you pay for electricity at the moment. Utilities often charge residential consumers a flat rate for electricity, regardless of the time of consumption. This means that instead of offsetting the expensive cost of peak electricity production, homeowners’ solar power systems merely offset the price they are charged for electricity, which is much closer to the average cost of power production.
However, many utility companies in the U.S. have introduced pricing schemes that allow homeowners to be charged at different rates throughout the day in an attempt to mirror the actual cost of electricity production at different times: This means higher rates in the afternoon and lower rates at night. A PV solar array may be very beneficial in areas where this sort of time-varying rate is used since the solar power produced would offset the most costly electricity.
Exactly how beneficial this is for a given homeowner depends on the exact timing and magnitude of the rate changes under such a plan. Similarly, utilities in some locations have pricing schemes that vary over different times of the year due to regular seasonal demand fluctuations. Those with higher rates during the summer make solar power more valuable.
Some utilities have tiered pricing plans in which the marginal price of electricity changes as consumption rises. Under this type of plan, the benefit from a solar system can depend on the electricity use of the home; in certain areas subject to rates that increase dramatically as consumption increases, large homes (with large energy needs) may benefit most from solar arrays that offset high-cost marginal consumption.
For some homes, it might even be possible to make money by selling solar power back to the grid. In the U.S., this is done through net metering plans, in which residential consumers use the power that they put into the grid (when the rate of electricity generation from the solar array is greater than the rate of household electricity consumption) to offset the power consumed at other times; the monthly electric bill reflects net energy consumption. The specific net metering regulations and policies vary across regions. Homeowners can refer to the DSIRE database and should also contact their local utilities to find more specific information.
Calculating Solar Power Costs
At this point, you will be in a position to make a final calculation, and an assessment of whether solar power makes sense for you.
The overall cost and benefit of a solar system can theoretically be evaluated using the discounted cash flow (DCF) method. Outflows at the beginning of the project would consist of installation costs (net of subsidies) and inflows would arrive later in the form of offset electricity costs (both directly and through net metering).
However, rather than using DCF, the viability of solar power is usually evaluated by calculating the levelized cost of electricity (LCOE), then comparing it to the cost of electricity charged by the local utility. The LCOE for household solar will typically be calculated as cost/kilowatt-hour (/kWh or ¢/kWh)—the same format commonly used on electricity bills. To approximate the LCOE, one can use the following equation:
LCOE (/kWh) = Net Present Value (NPV) of the Lifetime Cost of Ownership / Lifetime Energy Output (kWh)
The useful life of a PV solar module is generally assumed to be 25 to 40 years. The cost of ownership includes the maintenance costs, which must be discounted to find the NPV. The LCOE can then be compared to the cost of electricity from a utility; remember, the relevant price is that which occurs during times at or near peak PV solar production.
Is Solar Power Worth It?
Once you’ve worked through all of these calculations, you’ll likely end up with a single number—the number of years it will take for a solar system to pay for itself in savings from your energy bills. If you live in a sunny part of the country and have high utility bills at the moment, you could be looking at a system that will reach this point in five years. Other homeowners may have to wait 10 or 20 years to reach this point.
In other words, most homeowners will eventually see a benefit from a solar power system; it might just take decades for this to be realized. Whether it is worth installing such a system therefore often comes down to a number of much less technical factors than those we’ve listed above: how long you are going to stay in your home, the subsidies available in your area, and simply whether you want to do your bit for the environment.
Pros and Cons of Solar Panels for Your Home
Like most things, solar power has its benefits and drawbacks. At the same time, some economic costs may be defrayed by the social benefits to the environment and lowering your carbon footprint, which may be more important to you than a purely monetary evaluation.
- Green energy that lowers your carbon footprint
- Net metering allows you to sell back excess energy produced
- You may be eligible for certain tax breaks
- Installation and maintenance costs are still high
- Solar only works when the sun is out
- Parts of the system need to be replaced every few years
- Some tax breaks may have expired or will be expiring
Can a House Run on Solar Power Alone?
Practically, it is not often possible. This is because solar only works when the sun is shining—when it is cloudy or nighttime, they do not generate electricity. There are some battery solutions to provide power during these times, but they still tend to be quite expensive. Most homes with solar panels still rely on the grid from time to time.
Do You Really Save Money With Solar Panels?
Depending on where you live, it is possible that the system can pay itself back and more over time. This is because you won’t be spending as much money buying electricity from your utility. If net metering is in place, you could reduce your bills even further.
How Much Does a Solar Panel Cost?
have been coming down steadily over the years. The total cost will depend on how many kilowatts of power your array will generate. According to consumer reports, after solar tax credits are accounted for, the cost for a solar panel system on an average-sized house in the U.S. in 2021 ranges from 11,000 to 15,000.
How Long Will It Take To Recoup the Initial Cost?
Depending on where you live and the size of your system it can take, on average, anywhere from 10 to 20 years to break even on a solar installation.
The Bottom Line
Determining whether to install a PV solar system may seem like a daunting task, but it is important to remember that such a system is a long-term investment. In many locations, solar power is a good choice from a financial perspective.
Even if the cost of solar power is found to be marginally more expensive than electricity purchased from a utility, homeowners may wish to install solar power to avoid future potential fluctuations in energy costs, or may simply wish to look beyond their personal financial motivations and use solar for green living.