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Solar energy has many benefits, including lower electricity bills and reduced carbon emissions. However, installing a solar panel system is expensive, causing many homeowners to wonder if the investment is worth it.
Our team has spent more than 770 hours researching the solar industry, interviewing experts, and surveying homeowners about their solar experiences to help you determine if going solar is right for you. This guide covers the basics of how solar panels work, their benefits, and which homes are the best candidates for solar power.
How Do Solar Panels Work?
Solar panels, also known as photovoltaic (PV) panels, absorb energy from sunlight and convert it into electricity to power your home. The power generated by solar panels starts as direct current (DC) electricity, passes through a solar inverter, and becomes alternate current (AC) power. Finally, the converted energy flows through your home’s wall outlets and charges any connected batteries.
If you have an off-grid solar system, your home will rely entirely on the electricity generated by your solar panels. A solar battery will store extra energy to use later, when your panels are not actively producing power. However, most systems are connected to the grid. If your grid-tied solar system doesn’t fully cover your electricity needs, you can get the remaining power from the grid. Excess energy can be sent back to the grid or stored for later use.
What Are the Benefits of a Solar Panel System?
Using solar energy provides several advantages to homeowners, including financial savings and environmental benefits. We’ll go over these in detail below.
Inexhaustible Sustainable Energy
Solar power provides a renewable energy source, preventing homeowners from having to rely on fossil fuels. As a result, solar users will reduce their carbon footprint and cut back on harmful emissions that contribute to climate change.
Lower Utility Bills
According to the U.S. Energy Information Administration (EIA), homeowners spent an average of $137 per month on their electric bill in 2022. Electricity prices vary significantly from state to state, but you’ll generally see higher averages in New England and the South.
Using solar panels allows you to tap into a less expensive resource than the traditional power grid, helping you to generate your own energy and save on electric bills. Homes that use electric-powered appliances, such as electric stoves or water heaters, are able to use more of their solar-generated electricity and save on gas bills.
Solar panels often generate more energy than is needed to power your home. Some states offer net metering, allowing customers to sell their excess energy to the grid and accumulate credits over time. Alternatively, solar customers can add a solar battery to store extra energy for use later. Homeowners can use stored energy during low-sunlight days or power outages. The best reviewed solar batteries are able to power your home longer than most alternatives.
Increased Home Value
Homeowners often look for ways to raise their home value through upgrades and renovations. Installing a solar system can increase your home value, too. In 2019, Zillow found that homes with solar panels sold for about 4% more, on average, than comparable homes with solar power. Some states even offer tax exemptions to ensure that you benefit from the home value boost without having to pay higher property taxes.
Solar Tax Breaks and Incentives
Homeowners may receive additional monetary benefits from their local utility company, state government, and federal government. Many utility companies provide rebates for customers who move to solar energy. Likewise, state and local governments make the switch desirable by offering rebates to solar customers. Tax credits and other incentives vary by state.
The federal government offers the Investment Tax Credit (ITC) for homeowners who install new solar panel systems. This federal solar tax credit provides a federal tax reduction equal to 30% of your solar installation costs for systems installed until 2032. The credit rate will reduce to 26% in 2033 and drop to 22% in 2034. It’s set to expire in 2035 unless renewed.
Which Homes Benefit the Most from Solar Panels?
Not all homeowners will benefit equally from solar panels. However, if any of the following statements are true, your home may be an ideal candidate for solar panels.
- Your home gets plenty of sun exposure: Every state gets enough sunlight to power an average-sized home. However, specific factors such as shading and roof positioning could reduce your ability to take full advantage of solar panels. The ideal rooftop is free of obstructions, such as trees or tall buildings. The roof should also be south-facing and have a slope that can hold a solar panel at a 15- to 40-degree angle and have a good sun number score.
- You have high utility bills: If your utility bill costs are constantly high, the highest-performing home solar systems might help. Keep in mind that you may need to install more solar panels than average to offset these costs, leading to a more expensive system. If your monthly electric bill typically stays low, a solar system may not be an ideal investment. A solar panel installer will review your current electricity bill to help you determine if solar is right for you.
- Your state offers solar tax incentives: Many states offer solar incentives to encourage their residents to switch to solar panels. These incentives help reduce the system’s overall cost, making installation much more affordable. Local utility companies may offer additional incentives and credits, too. Roughly 75% of our 1,000 surveyed solar users said they took advantage of solar incentives to increase their return on investment.
- Your electric company offers a net metering program: Excess energy from your solar panel installation can be stored in a solar battery or returned to the power grid. Several states offer net metering, which compensates solar customers for the excess power that their system produces. Approximately 32% of our survey respondents said they participated in a net metering program.
If you’re not able to install solar panels on your roof, we recommend looking into community solar projects. These projects allow you to pay for a portion of a shared system of solar panels, often located within your community. It’s also worth noting that solar panels will still work in less-than-ideal conditions, though you may receive less savings. You can also look into ground-mounted solar as an alternative to rooftop solar.
Still not sure if solar panels are a good idea? The video below covers five important things to consider before installing solar, including the conditions that make a roof perfect for solar panels.
How Much Do Solar Panels Cost?
Solar panel installation costs vary by provider and location. We surveyed 1,000 homeowners in 2022 and found that the average solar panel system costs between $15,000 and $20,000. However, systems can be as much as $25,000 according to data from the Solar Energy Industries Association (SEIA).
Several factors affect the price you pay, including your home’s size and the number of panels needed to run it efficiently. Additionally, solar incentives, rebates, and tax credits can significantly reduce your installation costs.
Homeowners have several options for paying for a solar panel system. Most providers offer the following methods of paying for solar:
Customers can pay for their new system immediately and receive full ownership. This is the most cost-effective payment option, as it qualifies you for solar incentives and prevents you from paying additional fees for interest rates.
According to our 2024 survey of solar customers, 49% chose to pay in full upfront.
Homeowners can choose to take out a loan and pay for their system in monthly installments over time. Typical loans range from five to 10 years and may be through a top solar company or a third party. You’ll pay more for your system in total due to interest rates, but you’ll still qualify for incentives and own your system.
Of our 1,000 surveyed solar users, 23% financed their system through a loan.
Homeowners can rent their panels from a solar company for a fixed monthly rate. Solar leases may last from 10 to 25 years, depending on the company’s terms. At the end of the lease term, you can pay for the panels or return them to your installer. We generally don’t recommend a solar lease because you won’t qualify for incentives or own your system.
Roughly 11% of our survey takers leased their solar panels monthly.
A Power Purchase Agreement (PPA) works similarly to a monthly utility bill in that a customer pays for each kilowatt-hour (kWh) of solar power used. Unlike fixed solar loans or lease payments, these bills fluctuate each month depending on the amount of electricity your system generates. The solar company retains full ownership of the equipment, and you’re disqualified from incentives. We also don’t recommend this option except in specific circumstances.
Despite the downsides, 17% of our survey respondents chose a PPA.
How Does Solar Installation Work?
Installing solar panels typically involves several key steps. First, a professional will evaluate your roof’s suitability, sun exposure, and potential for shading. They’ll also discuss your energy usage and budget. Based on the assessment, the solar company will design your system, including the number of panels, placement, and inverter size.
Once any necessary permits and approvals are obtained from the local authorities, installation can begin. Qualified technicians mount the racking system on your roof, secure the solar panels, and connect them to the electrical system in your home. Final inspections are conducted by local authorities and the utility company before your system is activated.
Here’s a video we created to help explain the solar installation process:
How To Choose a Solar Panel Installer
Choosing the right solar panel installer can make or break the process. “If you work with a turn-key installer who communicates at each step of the process, the home solar installation should be easy and worry-free,” says Matt Johnson, co-owner of Namaste Solar. “A seasoned installer should handle all the logistics from design to permitting to finding all the incentives and rebates available.”
Johnson recommends looking for a company that has a long track record in the industry, provides a workmanship warranty, and offers ongoing service after installation. Look for the following qualities when browsing for a premier solar company in your area:
- Years of experience
- Types of solar panels used for installations
- Available add-ons, such as solar batteries
- Warranty coverage for the solar panel equipment and its performance
- Reviews from current and former customers
- Better Business Bureau (BBB) ratings
- Financing options and terms
- Customer service availability
- Online pricing or available quotes
- Estimated payback period for your system
- A detailed review of your average energy usage and potential solar savings
Our Conclusion
While the upfront cost can be a hurdle, solar panels offer a compelling combination of environmental benefits, potential cost savings, and increased home value. Ultimately, whether solar panels are worth it depends on your unique circumstances and goals. A qualified solar installer can help you assess the feasibility and potential return on investment for your specific situation.
FAQ About Solar Panels
Can I install my own solar panels?
Technically, yes, you can install your own solar panels using a DIY kit. However, DIY solar panels are typically designed for smaller projects, such as powering an RV or a shed, and will not provide enough power for an entire home. Consulting a professional installer ensures a safe, efficient, and code-compliant system. DIY solar options may be worthwhile to skilled professionals.
Are solar panels covered under homeowners insurance?
Most residential homeowners insurance policies cover solar panels. We recommend checking your current plan for coverage limits and stipulations for solar panels before purchasing a system.
Do solar panels increase property taxes?
Solar panels can increase property taxes in some states. Installing a solar power system increases your home value, which typically raises your property taxes. However, many states have laws that prevent homeowners from paying additional property taxes for solar equipment.
Do you really save money with solar panels?
Whether you truly save money with solar panels depends on several factors, including your electricity costs, sun exposure, and system size. Solar panels can significantly reduce your electricity bills over time, but it may take several years for your solar panels to pay for themselves. Our surveyed solar users reported that they typically save $100 per month on their energy costs.
To share feedback or ask a question about this article, send a note to our Reviews Team at reviews@thisoldhousereviews.com.
