Are Solar Panels Worth It? Here’s How to Know When You Should Invest

If you’ve felt your stomach drop after receiving an unexpectedly high electric bill, you might be wondering if there’s a way to improve your home’s energy efficiency and save some cash. Solar energy is a growing trend for a reason—but with the high up-front cost, are solar panels worth it? This guide will help you weigh your options.

What Is Solar Power?

Simply put, solar power is energy generated from sunlight. Most residential solar energy systems use photovoltaic (PV) solar panels containing cells made from a semiconductor material like silicon. When sunlight (or, more specifically, the electromagnetic radiation from the sun) hits the cell, the semiconductor creates a direct electrical current. This current passes through a solar inverter, which transforms it into alternating current (AC) electricity that we use in our homes.

Cost of Solar Panels

For most homeowners, solar panel installation costs $18,400 to $36,400 prior to tax credits or rebates. This is a sizable investment, but on average, homeowners with solar panel systems end up saving $1,380 per year on energy costs. Most residential solar energy systems pay for themselves in six to 10 years and last about 25 years with proper maintenance. 

Factors to Determine if Solar Is Right for You

The ROI of a solar panel installation is a delicate balance of up-front costs and long-term savings. Most of the time, the benefits of installing residential solar panels make up for the large price tag, but solar isn't a good fit for every home. You’ll need to consider the following factors. A professional solar panel company in your area can also help you weigh the pros and cons. 

Geographic Location

Solar panels work best in areas of the country with the most sunlight. If you live in a sunny area like Arizona, you could get more out of your solar panels than in an area like Alaska, which has longer periods of darkness during the winter months. 

Local Energy Costs

Areas with higher energy costs will recoup the cost of solar panel installation faster than areas with lower energy costs. However, if energy costs are particularly low, solar panels may not be worth it—even if you live in a very sunny state. 

Energy Consumption

You should also factor in the amount of energy your household uses. If you don’t use much energy and have relatively low overall energy costs, solar panels may not make enough of a positive impact on your household bills. On the other hand, if you have a large house and consume a lot of energy, you’ll need a larger solar energy system, which comes at a higher cost.

Sun Exposure

Solar panels perform best with an unobstructed view of the southern sky. For this reason, most people mount them on the south-facing portion of their roof. If cloudy weather, tall buildings, and trees obstruct the sunlight in your yard, you’ll see lower energy savings. The same is true if you have a north-facing roof.

Roofing Type

Roofing—including the material, slope, surface area, and orientation—can make the biggest impact on the overall value of a solar energy system. Ideally, your roof:

• Faces south

• Is made from a strong roofing material

• Has a slope between 15–40 degrees

• Has plenty of unobstructed surface area for solar panels 

• Is free from obstructions like chimneys and skylights

• Is not shaded by tall buildings or trees

Installing solar panels on a steep roof is challenging and costs more. Smaller roofing may require monocrystalline panels, which are higher efficiency and have a higher price tag. You may struggle to install solar panels on flat roofing or roofing made from weaker materials like thatch.

Financing

Some financing options may make solar panel installation more affordable. There are three routes you can take:

• Self-financing:  If you have the budget, self-financing has the largest ROI because you’ll likely qualify for tax credits and won’t pay interest. 

• Solar loans: You’ll still qualify for tax credits if you take out a solar loan, but you’ll pay interest (around 4%–7%) on top of the cost of the panels.

• Solar leases or power purchasing agreements (PPAs): With these options, you won’t pay for the panels up front. Instead, you’ll lease the panels (via a solar lease) or pay based on the power you use (in a solar PPA). This has a lower ROI because you’re paying perpetual rates through the length of a contract rather than owning solar panels for the entire life of the system.

Net Metering

If your solar energy system is tied to the main power grid, you might be able to participate in a net metering program. These programs allow homeowners to send excess energy back to the grid for public use in exchange for credits on your electric bill. The savings are significant in some areas.

Power Outages

If you live in an area with frequent power outages, you’ll need to consider investing in the extra cost of a backup battery to help ensure that you’ll have power during outages.

Tax Incentives

You can save on the price of solar panel installation by taking advantage of tax credits, incentives, and rebates. One of the main incentives is the federal solar tax credit, or Investment Tax Credit (ITC), which allows you to claim 30% of the cost of a PV solar energy system as a credit on your federal tax return. You could qualify for localized incentives depending on where you live.

When Are Solar Panels Worth It?

You’ll need to weigh the pros and cons of solar energy before deciding if it’s specifically worth it for your home. That said, there are some signs that your home is likely a good fit for solar panel installation (in addition to the roof characteristics listed above): 

• You live in an area with high or average energy costs

• You live in a sunny state without frequent cloudy weather or fog 

• Your utility company offers net metering programs

• You qualify for solar tax credits, incentives, and rebates that help offset the cost

• You live in an area with limited access to the main power grid

When Are Solar Panels Not Worth It?

There are a few instances where solar panels won’t actually have much of a benefit—if you can even install them at all. A pro can inspect your roof for solar panels and help you understand your options, but there are some signs your home may not be the best fit:

• You already have low energy costs and won’t see much savings

• You have a flat roof 

• Your roof is made from a fragile material (such as a thatched roof)

• Your roof has a slope of more than 40 degrees

• Your roof faces north 

• Your roof is obstructed by shade

• You live in a state with lower-than-average sunlight 

• Your roof is aging and will need a replacement in a couple of years

• You plan to move in the next few years

• You’re not prepared to maintain or upkeep your system

The Best States for Solar Panels

Homeowners who live in the sunniest states have the highest potential for solar energy savings, while those who live in darker states that receive less sunlight may see fewer rewards. Savings also depend on local energy costs and incentives. A local solar panel installation pro can help you determine whether or not solar panels will perform well in your area.

Below are the states with the most potential for solar panels and states with the least potential.