Are Solar Panels Worth It?

Learn about the benefits of solar panels and decide if they are worth it for your home.
By This Old House Reviews Team

An increasing number of homeowners are upgrading their traditional home energy systems to solar power. Federal and state governments have introduced more incentives to encourage homeowners to switch to clean energy. And according to the U.S. Department of Energy (DOE), more than 3 million homes have converted to solar energy, with a million installations taking place in the last two years.

However, many homeowners are still unsure if a move to solar panels is worth it for their homes. The hesitation to move to solar energy could be due to many factors, including unfamiliarity with solar technology, the high costs of a solar system, or how to choose the best solar companies for the job.

Although the world of solar panels may seem too complicated to understand, we are here to help make the process much clearer. We will cover the basics of solar panel systems, the benefits of converting, and how to determine if a solar investment is ideal for your home.

What Are Solar Panels?

Solar panels, also known as photovoltaic (PV) panels, absorb energy from sunlight to run your home. The solar cells collect this energy and convert it into direct current (DC) power. DC power passes through the inverter within the solar power system and becomes alternate current (AC) power. Finally, the converted energy flows through the wall outlets of your home.

The types of solar panels used for a system are selected based on the design of the home and the available sunlight. Some companies offer a wide selection of panels, while others may stick to one particular brand or type.

Solar panels are usually all-black or may have a bluish tint. Some homeowners are picky about their solar panels choice because they don’t want the design to take away from the aesthetics of their home.

Most solar panel systems are placed on the roof of your house. The number of panels used on your home will be determined by your energy needs and the size of your home. Ground-mounted solar panels are an alternative if your roof is not the ideal place for your system. This style of solar system can be set up at the ideal angle and direction of the sun to maximize its efficiency.

What Are the Benefits of a Solar Panel System?

The investment in solar panels provides several advantages to homeowners, from environment-friendly solutions to monetary credits.

Unlimited Sustainable Energy

Solar energy provides a renewable energy solution that helps protect the environment. Harnessing the power of solar energy provides homeowners with unlimited access to clean energy. Without relying on expensive fossil fuels, homeowners can take full advantage of a natural energy source that results in lower energy costs. As a result, customers will reduce their carbon footprint, helping to reduce harmful emissions that contribute to climate change.

Lower Utility Bills

According to the U.S. Energy Information Administration (EIA), homeowners spent almost $118 per month on their electric bill in 2020. However, the average cost varies significantly from state to state, with higher averages in New England and Southern states.

Using solar power in your home would reduce the need for costly fossil fuels and tap into a less expensive resource. Homes that use more electric-powered appliances would benefit from a solar conversion.

Not only do solar panels generate enough energy for your home, but they often collect an excess of energy. The excess energy can be sent back into the local grid, helping to lower your meter and save on your energy bills. Some states offer net metering, allowing customers to sell back their excess energy 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 loss.

Added Value to Your Home

Homeowners often look for ways to raise the value of their homes through upgrades and renovations. However, adding a solar installation could add to the value of your home, too.

The DOE states that homes with solar panel systems sold quicker throughout the country. Buyers are willing to pay upward of $15,000 more for homes with pre-installed solar arrays. Selling a solar-powered home could result in a profitable return on investment.

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 added rebates for their customers moving to solar energy. Likewise, state and local governments make the change desirable by offering rebates to their solar customers. Local utility and state government credits vary per state.

The federal government offers the Investment Tax Credit (ITC) for homeowners who install new solar panel systems. This federal solar tax credit provides 26% of the total cost back for any systems installed by the end of 2022. After this deadline, the credit rate reduces to 22% for installations occurring in 2023. The ITC expires in 2024, although the federal government may extend it in the future.

Which Homes Benefit the Most from Solar Panels?

If you are still undecided whether solar panels would be a worthwhile investment, consider the following factors needed for the successful integration of a solar system:

  • Homes that get plenty of sun exposure: Your home should receive ample sunlight to take full advantage of solar panels. The ideal house will be free of obstructions, such as trees or tall buildings. In addition, the roof should be south-facing and have a steep slope that can hold a solar panel at a 15 to 40-degree angle. Solar panels will still work in less-than-ideal conditions. However, homes that receive little light or have limited roof space will not benefit from a system.
  • Homeowners with high utility bills: If the cost of your utility bills is constantly high throughout the year, a solar system could help meet your energy needs. Remember that you may need more solar panels installed to offset the costs, leading to a more expensive system. On the other hand, if your monthly electric bill typically stays low, a solar system would not be an ideal investment for you. A solar panel installer will review your current electricity bill and make the best call based on your needs.
  • Residents that can get state 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 the transition to solar much more affordable. Local utility companies may offer additional incentives and credits, too.
  • Homes in states that use net metering: 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 credits solar customers for the excess power that their system produces. If you accumulate enough credits, you could receive a monetary return at the end of the year.

How Much Do Solar Panels Cost?

The cost of solar panels will vary, depending on the providers in your area and your location. The national average of solar panels in the United States ranges between $15,000 and $25,000. Several factors can affect this price, including the size of your home and the number of panels needed to run it efficiently. However, these estimates do not include additional rebates or tax credits that potential solar customers could receive. Rebates and credits help reduce your monthly utility cost and the installation costs of the overall system.

Homeowners have several options for paying for a solar panel system. Most providers usually offer the following financing options:

  • Total payout: Customers have the option to pay off their new system immediately and retain full ownership.
  • Loans: This process involves taking out a loan through a solar company or a third-party company. Solar loans can range from five to 10 years and end with the homeowner owning the solar system.
  • Lease: Homeowners can rent their panels from the company for a fixed monthly payment. Solar leases may last from 10 to 25 years, depending on the company’s terms. At the end of the lease term, you have the option to pay for the panels or return them to the solar panel installer.
  • Solar Power Purchase Agreement (PPA): A 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 generated by your system. The solar company would retain full ownership of the equipment.

Any available state incentives and the ITC program will reduce the system cost. However, only solar customers that own their systems qualify for these solar incentives. Participants in a solar lease program or PPA would not meet the requirements for these extra savings.

How to Choose a Solar Panel Installer

When browsing for the best solar companies in your area, look for the following qualities during your search:

  • Years of experience
  • Types of solar panels used for installations
  • Optional additions, 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 offered, including up-front costs, interest rates, and payback period
  • Customer service availability
  • Online pricing or available quotes
  • A detailed review of your average energy usage and potential solar savings

Frequently Asked Questions About Solar Panels

Can I install my own solar panels?

There are self-installed solar systems for use, but they may not meet your needs. Typically, these systems are designed for smaller projects, such as powering an RV or a shed. They don’t generate enough power to replace a traditional home energy source large enough to power a home.

These projects are often labor-intensive and require the homeowner to cover the total cost of installation. You will also be responsible for any paperwork required for your solar project, including permits and associated fees. Moreover, some states require that a certified solar panel installer handle the installation before approving the payout for their solar incentives.

We recommend working with a professional solar contractor to ensure the installation is done correctly and you can benefit from additional solar incentive savings.

Are solar panels covered under homeowners insurance?

Most residential homeowners insurance covers solar panels. We recommend checking your current plan for coverage limits and policies specifically for solar panels before purchasing a solar system.

Do solar panels increase property taxes?

Although solar energy systems increase the overall value of your home, they do not increase your property taxes. Many states have tax laws that prevent homeowners from paying additional property taxes due to a new system.

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