Are Solar Panels Worth It?
When is solar truly worth it? Most solar sales pitches extol the virtues of solar power and promise thousands of dollars in savings. While more than 1.3 million homes in the United States have already adopted solar power and are enjoying the benefits, the viability of rooftop solar depends largely on the conditions of your home and your local energy market. In fact, solar power economics can vary from house-to-house even within the same neighborhood. Before investing in solar energy, it’s important to ensure that solar panels are worth it for you.
Your current electricity prices: The higher your current electricity prices, the more likely you will save money by installing solar panels. To figure out how much you’re paying, just check your electric bill. The bill should indicate how much you’re paying per kilowatt-hour.
Electricity rates vary substantially based on where you live, so don’t assume that your electrical rate is the same as the national (or even state) average. In 2016, the average cost of energy produced by solar power was $0.12/kWh. If you’re currently paying more than that for electricity, you likely stand to save significant money by installing solar panels. It’s one of the reasons why Hawaii－where electricity costs $0.37/kWh, the highest rate in the nation－has been one of the leading adopters of solar technology.
How fast your utility is increasing electricity prices: Electricity prices across the U.S. typically increase by 3 to 5 percent per year. In some markets, the price increases are even steeper. In an environment of rising electricity costs, one of the big advantages of installing solar panels is that you can effectively lock in your electricity rate for the next 20 to 25 years.
Even if you’re just leasing your solar panels, you’ll still be paying a flat monthly rate based on what the system is expected to produce. And if you obtain a solar system through a power purchase agreement (PPA), your electric bill will vary based on how much energy you use, but the rate used to calculate your bill remains constant over the course of the agreement, protecting you from surprise rate hikes.
Cost of Solar Panels: The better the deal you’re able to get on your solar system, the more you’ll save by switching to solar power. Solar panels were so expensive when they first started being used in the 1960’s that they were only used in advanced space and military applications.
But by the early 2000’s, prices had fallen to the point that average homeowners could adopt solar, and with recent advances in technology and scale, solar panel prices have continued to plummet. According to the International Renewable Energy Agency (IRENA), solar panel prices dropped 80 percent between 2008 and 2014. IRENA analysts predict that by 2025, the cost of solar modules will be 59 percent cheaper than it was in 2016. Despite future cost reductions, it’s still more cost-effective to switch to solar right away; adopting solar later means you’ll lose out on the opportunity to save money now.
How much sunshine your roof gets: Identical solar panels produce different amounts of electricity depending on upon how much sunshine they receive. Solar panels installed in states like Florida, Texas, and California that get more sun will produce more electricity than solar panels in states like Michigan or Minnesota that generally get less direct sunlight. Most homeowners can meet 75 to 90 percent of their energy needs through solar power.
Even if your home is in a state that gets plenty of sunshine, not all parts of your roof are right for solar. In the U.S., south-facing roofs typically get the most sunshine. East and west-facing roofs are also good for producing electricity and, in instances where the consumer is on a time-of-use tariff, west-facing roofs may offer the best savings potential. North-facing roofs are not ideal for solar in the U.S. and should be avoided in most cases.
In addition, it is important to minimize shading from nearby trees, buildings and other obstructions on the roof, including chimneys, vents, and so on. If your roof is lightly or even moderately shaded, solar panels may still be viable. Systems with advanced technology such as microinverters and DC optimizers can mitigate the effect of shading. But the best way to maximize your system’s output is still to simply be smart about where you place your panels. Avoid heavily shaded roofs unless you are able to address the source of shading (by trimming tree branches, for instance).
Incentives & Rebates: The more incentives and rebates you qualify for, the more economic sense solar power makes. The federal government, along with most state and even many local governments promote clean, sustainable communities by subsidizing solar panels.
The federal government, for instance, offers a generous tax credit equal to 30% of the cost of your solar system. If you pay federal income taxes, this means that your net cost is only 70% of the solar panel system price.
Many states have their own incentive programs. One of the most common state-level programs is the solar renewable energy credit (SREC) program. State energy authorities distribute SRECs to solar power producers according to how much energy solar energy they use. The more solar energy you produce, the more SRECs you’ll receive. You can then sell these SRECs to your local electrical utility for a profit.
Northeastern states like New York, New Jersey, Massachusetts, Vermont, and Rhode Island offer the best incentives. Two west coast states, California and Oregon, are also important leaders in solar energy incentives.
You don’t have to be a math wizard to calculate if solar panels are worth it for you; let our easy-to-use Solar Savings Calculator crunch the numbers for you. Just punch in some basic information and the calculator will let you know if your home is suitable for solar panels and how much you can save from installing them.