Are solar panels worth it?

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Are solar panels worth it?

by Simone Garneau

Here’s the breaking news in case you missed it: solar is taking off. In the past decade, the expansion of the residential solar energy market has been nothing short of astonishing. Though it’s still early days, all key market metrics point to continued growth for the coming years.
“Today, solar is still something that folks are not used to seeing,” explains Jigar Shah, solar industry expert and SunEdison founder. “In ten years, everyone will have solar on their roof. In addition to saving more money, you want to be part of the ‘early mass market.’ You will get better service and more bragging rights than if you are the last one on the block to switch.”
For most homeowners though, the decision to go solar boils down to a single question: is it worth it?
A vision of the future: your solar neighborhood
A vision of the future: your solar neighborhood (Photo credit: energy.gov)
Nobody wants to hear “it depends”, but that is the reality. So we decided to write a guide to cover this topic with the level of detail it deserves. We will cover quite a few topics and go through a number of examples in this guide. If you don’t get to finish reading it in one sitting, no worries: you can download a PDF version right here. Here are the top takeaways:

Don’t fixate on how sunny it is where you live: utility rates and incentive programs can make a huge difference.

Crunching cost per kilowatt-hours is not fun, but only an apples-to-apples comparison can give you the answer you need.

When it comes to solar power, think like an investor, not as a utility customer.

A solar lease may look like a good option for going solar, but in all likelihood, a solar loan is an even better option.

There are now almost a million solar homes in the U.S. - it’s time to join the party.

A few online tools are all you need to do the key calculations and start charting your solar strategy.


While solar panels are still a rare site in much of the United States, there are a few states where solar energy is taking off. Take a drive around Pasadena, California or down the streets of Fair Lawn, New Jersey, and you are bound to come across solar panels. Rapidly falling solar equipment prices and generous incentives, like the 30% federal investment tax credit for residential solar, have helped make this a reality.
“In 2006 there were only 31,000 U.S. homes with solar,” according to Alexandra Hobson, Press Officer & Communications Manager at Solar Energy Industries Association (SEIA). “Today, there are nearly 1 million and that number is only going to grow.”
Homeowners, frustrated by their ever increasing utility bills, are looking for an alternative that will save them money in the long run. They are also looking for ways to help the environment by producing their own clean energy. Jim Jenal, CEO of the solar company Run on Sun in Pasadena, California knows this firsthand:
“For most homeowners it starts with a desire to save money; however, even for the most cost conscious, the understanding that they are doing something good, sweetens the deal.”
With dramatic price drops in solar equipment, solar energy is more affordable than ever for homeowners considering the switch.
“With new financing options, and more capital moving into the industry, it has never been cheaper or easier to install solar on your home or business,” according to Hobson at SEIA. “Over the last decade, the price of residential solar has dropped nearly 60 percent.”
Decreasing solar costs is great but that doesn’t mean solar panels will make financial sense for everyone. Another important factor is the cost of electricity where you live. If you happen to live somewhere with cheap electricity, you’re unlikely to recoup your investment. Going solar in locations with cheap electricity is more about lowering your environmental footprint and being more self-sufficient.
“We have clients who don’t even care about what they will save; they just want to be as green as possible,” Jenal from Run on Sun explains. “For our non-profit clients it is about fulfilling their educational mission and being good stewards of the environment.”

Levelizing the field of cost comparison

Chances are, when you think about the suitability of solar energy for your home, the first thing that comes to mind is sunny skies and long hot days. While the level of solar radiation in your city is an important factor, it’s not everything. There is another factor that is equally, if not more, important: your current utility rate. Ultimately, figuring out if solar energy will save you money in the long run boils down to figuring out if the cost of solar electricity is the same or cheaper than electricity from the utility. If the answer is yes, then solar energy makes financial sense.

So how do we do this? We will walk you through the steps.

Finding your current electricity rate

OK, I will admit, figuring out the cost of electricity from your utility is not as simple as it should be. It would be nice if the cost per kWh was clearly indicated, but in many cases, it is not. A ballpark figure can be determined by taking your total charge for the month and dividing it by the number of kilowatt-hours you used.
Utility bill sample
Utility bill sample (Source: Southern California Edison)

So in this example bill from a California utility, you would take $300.09 / 1500 kWh = $0.20/kWh.

But this is not really the most accurate number because it includes your fixed monthly charges, which inflates the cost per kWh. With solar panels, you would still stay connected to the grid and would continue to have fixed charges. Therefore, it would be better if you could find the total cost before the fixed charges. You can compare multiple monthly bills to see which charges are fixed from month to month, or speak to your utility to learn more about the fixed charges for solar customers.

If you don’t want to dig up your past electricity bills, you can also use the 12-month average for your state (for the latest 12-month averages by state click here). In the case of California, the state average for the past 12 months is $0.17/kWh, which is lower than the figure we calculated above.

Now, how do you determine the cost of solar electricity?

And you thought figuring out the plain-vanilla electricity rate was difficult! For most people, determining the cost of solar electricity can be reminiscent of high-school trigonometry problems…not fun. It turns out that the math for solar electricity is actually much easier than a basic trigonometry problem: the issue is the novelty factor. We’re simply not used to thinking about electricity as something that we produce by investing in a “power generation asset”. But buying or leasing solar panels is exactly that, so we need to think like a producer, not a consumer.

To do that, we calculate the levelized cost of solar energy (LCOE), which is essentially the cost of solar electricity, including both the initial installation costs, as well as the ongoing expenses such as fuel and maintenance over the expected lifetime of the investment. The term "levelized" refers to making an apples-to-apples comparison of different sources of energy.

All other things being equal, the more sun a location receives, the lower the levelized cost of solar energy.

The levelized cost of solar energy should not be confused with another solar cost: cost per watt. The cost per watt is nothing but a handy way to "normalize" the total cost of installation. For example, if the cost of installation for a 5 kW (i.e., 5,000 watt) solar PV system is $20,000, then the cost per watt of this system is $20,000 divided by 5,000 watts: $4 per watt. Cost per watt is not dependent on the amount of sun a location receives, but it does vary from place to place because of other factors, such as the cost of permits and customer acquisition, to name a couple.

Location, Location, Location

As mentioned, where you are located greatly impacts the cost of solar electricity, or LCOE. Not only is the amount of sunlight that falls on your panels location dependent, but so are the available financial incentives, such as rebates and tax credits.

Since there are so many different municipal and state incentive programs, for simplicity, we will only consider the federal investment tax credit (ITC) of 30%, because that is available nationwide.

I just bombarded you with tons of information, so let’s take an actual case and illustrate some of these points:


Solar system installation cost: Assuming a cost per watt of $4, an average-sized residential solar panel installation with 5-kW capacity would cost about $14,000 ($20,000 minus the 30% federal investment tax credit). Other available rebates would decrease this cost further.

Operating and maintenance cost: An estimate for the operation and maintenance costs over the expected 25-year lifetime of your panels would be about 10 percent of the purchasing cost before tax credits (0.10 * 20,000) — in this case, about $2,000 for a 5-kW system. This is essentially a provisional budget to account for things like an inverter replacement or minor repairs. With no moving parts, solar panels themselves are virtually maintenance free, but some of the other electrical equipment may need some care.

Fuel cost: In the case of solar, the fuel comes from the sun, so there is no additional cost. In practice this means two things: 1) you will actually save money using a star that’s about 93 million miles from your panels; and 2) once you pay off your solar loan, your annual electricity cost will be minimal.


Coming back to Earth, let’s sum up the installation, as well as operation and maintenance costs, in order to estimate the total lifecycle cost: $14,000 + $2,000 = $16,000.

We’re almost done! But we still need to determine how much electricity you can produce with your system to determine the levelized cost.


Solar panel calculator for Los Angeles
Energy Produced with a 5 kW System in Los Angeles
Solar levelized cost calculator for Los Angeles
Levelized cost of solar electricity in Los Angeles

Electricity Produced: Using our solar power calculator Discover, we can see that a 5-kW system installed in Los Angeles would generate about 8,100 kWh of electricity per year. By comparison, the same system installed in Portland, Oregon would yield about 5,840 kWh per year.

Because, as we mentioned, most solar energy installations have an expected lifetime of 25 years, we multiply the annual average generation by 25 to get 202,500 kWh over 25 years for Los Angeles, or 146,000 kWh over 25 years for Portland.

Levelized Cost: The final step is to divide the life-cycle cost ($16,000) with the amount of electricity the system will generate over its lifetime. In the case of Los Angeles: $16,000 divided by 202,500 kWh equals about $0.08/kWh, whereas in Portland, we are looking at about $0.11/kWh.

So far, we assumed that you would buy the panels with an all-cash transaction. In reality, many homeowners will need some sort of a financing mechanism (we discuss your financing options in more detail below). Incorporating the cost of financing into the levelized cost estimates complicates the math (compounded interest rate calculations anyone?), so I suggest that you use our Buy or Lease Calculator and quickly go through some alternative financing scenarios to determine the best option.

We were considering the same system with the same life-cycle cost, but because the amount of sunshine differs in the two locations and, therefore, so does the amount of solar electricity that can be produced, we find that the levelized cost is significantly different for the two example locations.

Solar cost in Los Angeles vs Portland

You say grid parity, I say… what?

Solar grid parity map
Once you have the levelized cost of solar electricity where you live, all that is left to do is compare that number to what you are currently paying for electricity from your local utility. If the LCOE for solar electricity where you live is the same or lower than the utility rate, then you’ve reached grid parity and switching to solar will save you money over the lifetime of the panels. (Of course, there are other technical considerations which affect your decision to go solar, such as the shade on your roof – we explore these other factors below).

In the case of Los Angeles, using the state average utility rate of $0.17/kWh and comparing that to the LCOE of $0.08/kWh, we see that solar energy makes financial sense, and you would save a significant amount of money over the lifetime of your panels.

Of course, if you live elsewhere, or learn that the cost is different than the $4/W we assumed, or that you can benefit from additional incentives, you need to run the numbers again. You can sharpen your pencils, sort them in descending order, take out your favorite notepad and prepare to spend a few hours without Netflix, or just use Sunmetrix Discover and catch the next episode of House of Cards right away.

To see how your state compares when it comes to residential solar, you can check out our interactive grid parity map. You can even adjust the cost of solar panels to reflect falling prices. If your state hasn’t reached grid parity yet, you can see at what “cost per watt” it does.

You can easily see how critical the federal investment tax credit of 30% has been in stimulating the growth of the residential solar market. Just try switching it off with our interactive map and see what happens when there is no ITC. It’s helped residential solar take off in many locations. Fortunately, the ITC was recently extended through 2019, after which it will be gradually phased out over the following three years.

Remember, any additional state or municipal incentives will only improve the profitability of solar where you live.

To sum up, I’ll just imagine what Yoda would have said about the topics we covered above:

Yoda on LCOE

“Remain the same over the lifetime of your panels, the levelized cost will.

Almost certain to rise, the cost of electricity from your utility is. Yeesssssss.”

And if you don’t speak Yoda, this is a translation:

“While the LCOE will remain the same over the lifetime of your panels,

the cost of electricity from your utility is almost certain to rise.”


Other considerations when it comes to solar energy

You have determined that, from a financial perspective, solar energy makes sense! But even though the financials are sound, there may be other potential show stoppers. The state of your roof, its configuration, as well as the orientation and shade levels are all important factors.

Using Sunmetrix Discover, you can take into account the estimated level of shade, the orientation of your roof, and its slope. With that, you have a good start, but ultimately, solar installers will need to visit your home and see for themselves. They will make recommendations on the type of equipment and the placement of panels so that you maximize your investment.

James Hahn, CEO of My Solar Home, a solar company in New Jersey, explains the importance of a site visit like this:

Preparing your roof for solar panels
“Our home site audit enables our field technicians to take detailed measurements of your home in order for us to optimize the design of your solar energy system to ensure it best meets your home's specific energy needs. We conduct a thorough examination of your roof which includes measurements, condition/age of roof, along with determining if there are vents, attic fans, chimneys or other obstructions that will impact the system design and production. We obtain comprehensive shade readings to ensure optimal power production. We complete a thorough inspection of your electrical service panel to determine how we will connect your system to the utility grid, as well as assess the structure of your roof by closely inspecting the home's framing. This comprehensive site audit and inspection ensures that we custom design the solar energy system to best meet your home's needs.”
If you already know that your roof is in need of repairs or will need replacing in the next few years, it likely makes more sense to do that work now before you speak with installers. However, in some cases, you may be able to combine the work, as some contractors do both roofing and solar installations, so this option may be worth examining as well.

Solar panels are a big investment, and for that reason, you want to be as prepared as possible before you speak with solar companies. Understand your options, from central inverters to micro-inverters, know your electricity usage so that you end up with the optimal system size, and read up on solar basics. The installers will be able to walk you through most of it, but you will understand much more and make a more informed decision if you do some simple research first. Sunmetrix is here to help, with articles on all these subjects and much more.

Alexandra Hobson from SEIA offers these additional tips for homeowners considering solar energy:

“Become an informed consumer - any homeowner considering solar should know their situation (electricity usage, roof, finances etc.); do your homework (make sure to get multiple bids for your solar system, research your solar company, understand how tax credits, local incentives and Renewable Energy Certificates may apply); and understand the agreement (know the terms of your contract and fully understand what your warranties protect and for how long).”

OK, I’m ready to go solar. So what are my financing options?

Solar financing options

One of the biggest disadvantages of solar power is the steep price tag that stands between homeowners and their shiny new solar panels. Although the installed price of residential solar PV systems has decreased substantially in the last five years, the initial cost is still significant for most homeowners.

One way to make solar energy more accessible is to decrease the upfront expenses for the consumer. There are three different paths to putting solar panels on your roof. You can lease them, you can be a solar utility customer (also known as a power purchasing agreement, or PPA), or you can purchase them (with or without a loan or PACE financing). Each of these three paths has its own advantages and disadvantages.

For James Hahn, CEO of My Solar Home, the role of a solar company is more than being a hardware installer.

“We not only educate them on their customized personal solar energy savings plan, but provide them background on the market in general and the different finance options they have available for them to go solar ($0 down lease or $0 down purchase). By ensuring they have a complete and thorough understanding of all their available options, we empower our customers to make the best decision for their own home.”
Solar financing options

“In general, I would always advise everyone to finance their solar system,” says solar industry expert Jigar Shah. “A loan is almost always the lowest cost option, but PACE financing and a PPA can also work.”

But first, let’s talk a little about another path many homeowners choose: putting off solar and sticking with their utility.


Status Quo

Many homeowners find the idea of getting solar panels daunting and end up doing nothing. This might be the right decision in some states or for some particular cases, but for those of you who would do better by switching to solar, it’s important not to delay too much.
Utility escalation rates

If you’re unsure about whether you should stick with your utility, maybe you want to consider by how much your electricity rate has increased over the past decade. This is called the escalation rate. The average year over year escalation rate across the U.S. since 2005 was 3.01%.  If you want to compare that to the average year over year rate of inflation rate in the U.S. since 2005, it was about 1.9 percent. In many states, the escalation rate for electricity has exceeded the inflation rate over the past decade.

Although there is variability from year to year, with some states experiencing a decrease in one year or another, the overall trend in the U.S. is increasing electricity rates. By going solar today, you protect yourself from increasing electricity rates, and the more they go up, the more you will be saving in the long run.

If sticking with the status quo doesn’t appeal to you, let’s consider your solar options.


Solar Lease

Signing a solar lease
A solar lease can be very tempting if you live in a state with high electricity rates and/or a high electricity escalation rate over the past decade, especially when there are a number of companies offering zero-down lease options and the peace of mind that comes from someone else taking on the responsibility of maintenance for years to come.

Most of us are quite familiar with the concept of a lease. An automobile lease is the prime example: instead of an all-cash purchase, we can start driving a brand new car as soon as we start making monthly lease payments. The catch, of course, is the ownership. The car doesn't belong to us; it's still the property of the leasing company, and we just have the privilege of using it. At the end of the lease term, the lease has to be renewed or the car has to be returned to the owner.

The case of a solar lease is very similar. A leasing company will pay for the installation of solar panels on your roof, and even take the responsibility for maintaining and servicing them as needed. Naturally, the ownership of the solar panels and other necessary equipment stays with the leasing company.

Your obligation as the homeowner is to make your monthly lease payments and occasionally give access to your roof for maintenance work. In most cases, there are no upfront payments for the lease, and you just start with the first regular monthly payment. This "$0 down" or "free installation" feature of the lease makes it very attractive for many homeowners, but as we'll discuss later, it may not always be the most sensible financing option when it comes to solar power for your home.

We often refer to residential solar power systems as an investment. If you own the system, it adds significant value to your home. If you are leasing, however, you are paying for the right to use somebody else's assets, not your own. Thus, the lease is not an investment on its own. However, if it frees up some cash so that you can find a better investment alternative to increase your net wealth, then the lease option can still be very useful.

In the case of a lease, you get to use all of the solar electricity you produce. Any excess can be returned to the grid for a credit and if you need extra, you purchase it from the utility at the normal retail electricity rate. However, as with any third-party ownership agreement, you will not be able to claim the federal investment tax credit (ITC) of 30% for solar installations.

With a solar lease, it is very important to look at the fine print and to consider your situation carefully. Are you planning on moving anytime soon? If so, ask about your options because a number of homeowners have run into difficulties when it was time to sell their home - not every prospective buyer is going to want to take over your solar lease.

There are other questions to consider. Is there an option to own the panels at the end of the lease term? And what is the escalation rate - in other words, by how much will your monthly payments increase every year? With a solar lease, there is generally a fixed escalation rate for the term of the agreement, so the cost of your solar electricity will go up, but because the escalation rate is fixed, you know exactly by how much it will rise, unlike with retail electricity.


Power Purchase Agreement (PPA)

solar ppa

A PPA is another third-party ownership arrangement, where you do not own the panels (and cannot claim the ITC). The solar power purchasing agreement (PPA) and the solar lease are close cousins. The biggest difference is how the monthly expenses are calculated. With a solar lease, your monthly lease payments are fixed. With a solar PPA, your monthly payments depend on how much power you generate.

The kilowatt-hour (kWh) rate is fixed for the year, but the actual monthly payments of your PPA will fluctuate depending on how much electricity you generate. Just like the solar lease option, you still need to keep your customer account with your traditional utility to offset low solar electricity months and to get credit when you have excess production.

Just as with a lease, you want to check the details of any PPA agreement. You should look into the escalation rate so you know by how much your kWh rate will rise over the term of the agreement. You should also understand your options at the end of the agreement, such as whether you will have the option to buy the system or not.

While this option may be very attractive because of the low, or no upfront, cost and the fact that you are unlikely to be responsible for maintenance, it is not for everyone. Like a solar lease, it is very important to consider the fine print and your particular situation.


Ownership with Outright Purchase/Solar Loan/PACE Financing

Just like with electronic devices, there seems to be one thing that's almost certain: the price of your panels will go down right after you buy them. The decrease in solar equipment costs in the last few years has been incredible. But there are many cost elements that are part of a solar PV installation, and the cost of the panels themselves is becoming less and less important when compared to other so-called soft costs, such as design, permitting and customer acquisition.

Outright Purchase

An outright solar purchase generally offers you the best return on your investment (ROI) because as the system owner, you can take advantage of the generous ITC available at the federal level, in addition to any available state or municipal incentives. Moreover, once you pay off your panels, your solar electricity is "free" for the remaining lifetime of your panels (which last on average 25 years) with no risk of cost escalation.

This doesn’t mean that you can say goodbye to your utility (unless you’re completely off the grid). In most cases, you will still be keeping your account with the utility (and paying the fixed charges necessary to keep your account active), so that you can get extra power when you need it or get credit for the excess when you don’t need it.

As the owner of the system, you will be responsible for any required maintenance, which is generally minimal most years, but will eventually include replacement of the inverter(s).

Solar Loan

Most people cannot afford an outright purchase of their solar system, so another option is the solar loan, many of which come with a zero down-payment option.

“Homeowners are looking for an easy, affordable and flexible alternative to solar leasing,” explains Stephanie Bonini, Senior Regional Sales Manager at Sungage Financial.
While you will have to pay interest on the loan, the interest rate is fixed for the duration of the loan and there is no escalation rate. Moreover, a solar loan can enable you to claim the ITC, while minimizing the initial investment required.

It’s important to understand, however, that the ITC is a deferred payment that comes to you after filing your taxes. In order to make the solar loan option even more affordable, some loan providers such as Sungage Financial offer a 0% APR tax credit loan to cover the ITC amount until the payment is received (generally with a loan term of 12 months).

“The tax credit loan is essentially a free loan for the homeowner to offset the deferred receipt of the federal tax credit,” according to Bonini.
Unlike with a lease or PPA, you will be responsible for the maintenance of your system and the occasional equipment replacement. As solar loan providers are working with installers that they know, an added benefit of choosing a solar loan over an outright purchase is that you may have more recourse should an issue arise with the performance of your panels.
As Jigar Shah points out, “the reason not to pay cash is because solar systems will have maintenance issues and it is important to work with a financing provider who is incentivized to make sure that your solar installer maintains your system properly - the loan is how you have leverage over making sure your system is always working.”
Some solar loan providers, such as Sungage Financial, require installers to include a minimum 10 Year Workmanship Warranty on the equipment they are installing on the homeowner's roof.

With a loan, just as with a lease or PPA, it still important to look at the fine-print. In particular, you should understand if there are any dealer/loan fees that must be paid at the outset. Generally, the lower the interest rate, the higher the initial fees. Stephanie Bonini from Sungage Financial offers these words of advice:

“As with any loans, homeowners should always educate themselves on the interest rates and fees of their solar financing options. For example, very low interest rates that seem ‘too good to be true’ are often a result of rate ‘buy-downs,’ which are basically tactics by the lender to keep interest rates artificially low. Those low rates are ultimately still paid for by the homeowner via inflated system costs and/or other hidden fees.”

Homeowners should also be looking at their contract to understand if there are any pre-payment penalties.

Approved for a solar loan
“Homeowners are looking for solar loans they can pay off whenever they want—without having to worry about pre-payment penalties,” explains Bonini.
At first glance, many solar leases may seem less expensive, but more and more solar loan options remove the initial upfront costs, making the solar loan more attractive.
“In New Jersey, for example, a 15-year Sungage Solar Loan costs about the same per month as a 20 -25-year solar lease,” according to Bonini.

And at the end of the loan term, you own the panels, unlike with a solar lease.

PACE Financing

Another mechanism for financing solar panels is PACE Financing. PACE stands for Property-Assessed Clean Energy. The PACE programs allow homeowners to implement a number of energy efficiency and renewable energy improvements on their private property.

Energy.gov explains PACE financing like this:

“Property owners who voluntarily choose to participate in a PACE program repay their improvement costs over a set time period—typically 10 to 20 years—through property assessments, which are secured by the property itself and paid as an addition to the owners' property tax bills. Nonpayment generally results in the same set of repercussions as the failure to pay any other portion of a property tax bill.”
Rommel Dingle, Sales Manager at Golden Gate Power in San Francisco believes that PACE financing offers a number of advantages.
“It isn’t limited to solar projects, and can include insulation, water efficiency (including synthetic turf), roofing projects, windows and doors, air conditioners (including new installations), and furnaces,” says Dingle. Moreover, homeowners can take advantage of the Federal ITC and “there are no monthly payments (unless property tax is impounded with the mortgage); payments are paid in the frequency matching property tax payments.”
With PACE financing, because the debt is tied to the property as opposed to the homeowner, the re-payment obligation transfers with the property.
“This is an important consideration for a homeowner when it comes to the sale of their property,” according to Dingle.

Many homeowners are reluctant to make property improvements if they think they may sell soon and not be able to recoup their initial investment.

However, homeowners thinking of using PACE financing should be aware of a potential limitation, that certain criteria must be met, with regard to the home improvements.

“Products other than solar that are funded by PACE will need to meet certain energy efficiency benchmarks,” Dingle explains. “For example, some solar projects require the installation of a new roof. If PACE is to fund the entire project, the new roof must meet cool roof benchmarks and can increase the cost of a project significantly.”

A Few More Words on Ownership

There are other types of loans available that you might be considering, but it’s good to keep in mind a few words of advice from Stephanie Bonini at Sungage Financial:

“When compared to other traditional loan options, the advantage of solar loans is financing features that are specifically designed for the purchase of solar arrays, such as a built-in, ‘same as cash’ tax credit options. Ideally, the solar loan provider would also have an in-depth understanding of the solar industry and strong working relationships with installers. Just as a home mortgage is very different from a car loan, a solar loan is very different from a traditional home improvement loan.”

A big advantage of ownership: there is no "20-year lease term". In all likelihood, your solar panels will continue to keep on ticking after 20 years (25 years on average). Each additional year of service will be a bonus and increase the financial appeal of ownership. Yes, there is some maintenance work to do, and the occasional equipment replacement. But compared to your car, for example, these costs are going to be less frequent. Another major advantage of owning your solar system is that they increase the market value of your home.


Do solar panels increase the value of my home?

Selling your solar home

With more and more homeowners choosing to install solar panels (nearly 1 million homes in the U.S. today, according to SEIA), both homeowners and appraisers/realtors need to better understand how solar panels affect the value of a home.

Whether the PV system is owned or leased is an important distinction. The studies we refer to below looked at owned systems. In the case of leasing, it is more relevant to consider the terms of your agreement if you think you might sell your home - can the lease be passed on to the next owner, what are the penalties for breaking the lease agreement, is there a buy-out option, can you take your panels to your new home, etc.

As with many solar panel related questions, the premium on solar homes is location dependent. Homeowners in jurisdictions that are favorably located for solar energy production, that have high retail electricity prices, and that encourage development through incentives and subsidies are more likely to find their investment will pay off. This is even more true in areas where green or renewable energy is very highly valued, such as neighborhoods with a higher concentration of hybrid or electric vehicles.

According to a recent study by the Lawrence Berkeley National Laboratory, supported by the U.S. Department of Energy SunShot Initiative, the average premium for a home in the U.S. with owned solar panels was $3.78/W, or $14,000 on an average sized PV system of 3.8 kW on a home sold in 2011. PV premiums varied across the U.S. (in the study, 43 home-sales pairs were studied in six states, where home-sales pairs are pairs of comparable PV and non-PV homes) and the premiums ranged from $2.68/W to $4.31/W. It was found that PV premiums were more similar to net PV costs, as opposed to gross PV costs, which is understandable as incentives/subsidies decrease the cost to the homeowner significantly. As the cost of solar PV installations decrease, it is expected that PV premiums will also decrease.

Investing in solar panels for your home is no longer just an environmental decision taken by green-living homeowners. It is an economic decision taken by homeowners looking to make a smart, financially sound decision with respect to the value of their home.


Conclusion – are solar panels worth it?

Congratulations! You made it to the end of this guide. By reading this, you already took an important step in taking charge of your own energy future. We are in the middle of an energy revolution, and it’s time to join the party.

A decade ago, rooftop solar panels were a rare sight. Today, more and more homeowners are taking a serious look at what solar energy can do for them.

“Growth in solar markets across the country is at a level unimaginable at the start of this decade,” according to Alexandra Hobson from SEIA. “Thanks to the recent extension of the solar investment tax credit, by 2020, the industry will be employing more than 420,000 American workers and deploying more than 20 GW of solar electric capacity annually. To put this in perspective, at the end of 2014, 20 GW was the total amount of solar that America had installed in its history.”

With rising electricity rates in most parts of the country, solar energy is increasingly an investment that makes sense for homeowners. Fortunately, the cost of solar has decreased significantly, making it a more affordable option.

“Whether you save 10% from day one or just 1%, utility prices are going up and the available solar incentives are going away,” says Jigar Shah. “The time is now to get your roof checked out and see if you have a nice unobstructed view of the sun.”

In addition to installing solar panels, there are many other things homeowners can do today to manage their electricity bills, starting with reducing electricity consumption, especially during peak periods, and implementing home energy-efficiency measures.

All of these steps have the added benefit of helping the environment and reducing the negative effects of climate change.

As Hobson sums it up, “if we are to have a realistic hope of continuing greenhouse gas reduction, then greater deployment of 21st century solar technologies – both in the United States and around the world – is absolutely critical.”
Whether you do it for the environment, for your finances or just to impress your neighbors, the time to go solar is now. All that's left to do is to crunch the numbers and find highly-rated installers in your area. Sunmetrix Discover is here to help!

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Written by Simone

Simone Garneau is the co-founder of Sunmetrix, an online consumer education website for residential solar energy. The goal of Sunmetrix is to help homeowners go solar and save money with our Solar Cashback Program. In addition to the 200+ articles about solar energy, Sunmetrix offers homeowners two main tools: Discover, to preview solar energy for your home, and GO, the only solar energy test drive experience. Read all of Simone's articles here.

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I highly appreciate your efforts in issuing this guide. It's a very useful and educational tool for those willing to learn and understand the solar energy industry.

Basil T.

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