Are solar panels worth it?

In a nutshell

Solar panels can be expensive to install, but will then save you money in energy bills. How long these savings will take to cancel out the upfront cost of the system depends on many factors, but most homeowners will see a return on their investment after a decade.

• Solar panels convert sunlight into usable energy, which helps homeowners lower their energy bills while reducing their carbon footprint.
• The average cost for a residential solar system is approximately $25,000. Homeowners can purchase a system with cash, solar loans, solar power purchase agreements (PPAs) or leases.
• According to EnergySage, the average solar payback period (the time it takes homeowners to break even) is eight to nine years.

How solar panels work

Solar panels convert the sun's power into usable electricity, but not always in the same way. Two different technologies are integrated into solar panels — photovoltaics, or PV, and concentrating solar power, or CSP.

Concentrating solar power (CSP) is mostly used in large power plants. Photovoltaics is the technology used in residential solar systems. This is the kind of technology you find in solar panels installed on a home's roof.

Essentially, this technology absorbs photons from sunlight and uses their energy to create an electric field across the panels. This field is then converted into usable electricity which can be used to power lights, run an HVAC system, keep home appliances running and more. This technology not only reduces home energy bills, but it reduces the amount of carbon and other pollutants that make it into the environment, thus helping homeowners reduce their carbon footprint.

Not all homes are suitable for solar installation, either due to the geographic location of a property, tree cover or other factors. The U.S. Department of Energy says the size, shape and slope of a roof are also considerations, and that solar panels "perform best on south-facing roofs with a slope between 15 and 40 degrees."

Ultimately, a qualified solar professional can help you determine if solar installation makes sense for your home, your roof and what you're trying to accomplish.

How much do solar panels cost?

The Solar Energy Industries Association (SEIA) estimates that, at the end of 2023, the average residential solar system installation cost consumers $25,000.

This figure is down from the $40,000 average cost consumers paid for solar installation in 2010, a decrease which can be partially attributed to new tax credits for solar. The U.S. Department of Energy points out that buying a solar energy system qualifies homeowners for the Solar Investment Tax Credit, or ITC. While this tax credit was worth 26% of the cost of solar PV systems installed in 2020 and 2021, Congress passed an extension of the ITC in August 2022 that raised the tax credit to 30% for installations from 2022 to 2032. Solar systems installed in 2033 will qualify for a 26% tax credit, whereas systems installed in 2034 will receive 22%. The tax credit expires in 2035 unless renewed by Congress.

Note that solar installation requires costs for hardware as well as built-in "soft costs" like installation labor, installer marketing costs and costs associated with acquiring permits and inspections. The SEIA notes that, while costs for solar hardware have dropped, soft costs associated with solar installation have continued to rise.

Solar financing options

The cost of installing solar can also vary based on how the systems is financed. For most people, there are three options:

• Self-financing: Homeowners who pay for solar installation upfront and in cash secure the lowest costs overall. Not only does this purchase method help you to avoid interest charges and fees that result from financing, but it can help you qualify for solar tax credits that apply during the year of installation.
• Solar loans: Solar loans require monthly payments that may be smaller than typical energy bills, according to the U.S. Department of Energy. When these loans are paired with energy savings and tax credits derived from solar, they can help homeowners save money over time. Some solar loans are available with below-market interest rates, and there are mortgage loans available through the Federal Housing Administration (FHA) and Fannie Mae that let homeowners build in financing for solar automatically.

• Solar leases and PPAs: Solar leases and solar power purchase agreements (PPAs) let homeowners rent solar systems that are owned by solar companies, then purchase the electricity a system generates. These financing options may let homeowners get a solar system installed with no money down, but they don't let homeowners qualify for federal tax credits. Costs can also be high for these agreements, which require fixed monthly payments, so you’ll need to do your homework.

Pros and cons of adding solar panels to a home

The main advantages of going solar are obvious: You will eventually save money while reducing your environmental impact. But there are some notable downsides to these systems. Consider the following pros and cons before you compare solar installation options in your area.

What to consider before getting solar panels

While potential energy savings and lower utility bills are common reasons for going solar, it's important to remember that financial results can vary widely. The U.S. Department of Energy says the amount you save over time depends on how much electricity your household consumes, how you finance the system, how much power the system generates, local electricity rates and other factors.

According to James Dillon, Chief Marketing Officer of Tigo Energy, a solar energy company, homeowners who install solar typically save $60 to $340 monthly on home energy bills. However, Dillon says this is just a range, and that homeowners can use platforms like EnergySage to get a pressure-free estimate of their potential savings. "Just keep in mind that individual experiences can vary significantly," he says.

Experts we spoke to about going solar also emphasize the importance of considering some of the risks, including the high likelihood of unexpected costs. For example, Dillon says a damaged rafter might need repairs by a roofing contractor before installation can proceed, adding to the overall cost.

Grant Goodrich, Executive Director of the Great Lakes Energy Institute at Case Western Reserve University, adds that homeowners need to make sure their home's wiring and breaker box capacity is sufficient to add solar. If not, these systems may need an upgrade before solar panels can be installed.

Also consider the state of your roof, he said. Solar panels are typically designed to last 20 to 25 years, similar to a roof’s life span. "If you are planning to replace your shingles in the next 10 years or anticipate needing to make some roof repairs in the near future, you’ll want to complete those before having solar installed," said Goodrich. Considering the average cost of a new roof with asphalt shingles stands at approximately $30,680 nationally, that's another unexpected and significant cost homeowners should be aware of.

Other costs homeowners may not consider upfront are associated with solar storage. For example, Goodrich says it's common for solar system owners to pair their systems with an energy storage system like a solar battery (e.g. Tesla Powerwall) to reduce solar costs even further. Of course, solar batteries and other storage systems come with their own separate costs that should be priced out ahead of time.

Environmental benefits of solar panels

Solar energy can benefit the environment in myriad ways, since it's a renewable energy source. Solar can be used to reduce greenhouse gas emissions, a major contributor to climate change. Solar energy also has the potential to improve air quality and reduce the amount of water used to produce other forms of energy.

The U.S. Department of Energy's level solar deployment targets, called SunShot, aim to have solar meet 14% of U.S. electricity demand by 2030 and 27% by 2050. These goals could also:

• Reduce water scarcity in 36 states, enough to hydrate 1.3 million households.
• Curb air pollution enough to prevent $167 million in environmental damages.
• Save $259 billion in global climate change damages.
• Save more than 25,000 lives and preventing unnecessary health care costs.

Risks associated with solar panel installation

Some risks associated with solar installation depend on the financing, whereas others have to do with the home on which solar is being installed. Consider the following risks before you buy or lease a solar system for your home.

Issues when selling a home

According to Dillon, some major issues can arise when homeowners try to sell homes with solar panels that are leased through a solar lease or a power purchase agreement (PPA). That's because potential buyers for the home need to qualify for a home loan and the PPA agreement, which can complicate the sale process.

There are also buyers in the market for a home who will not even consider a property with leased or completely paid off solar panels installed. After all, solar panels can make it impossible for a home inspector to appropriately inspect the home's roof, which comes with its own major replacement cost. Dillon compares homes with solar to homes with other common upgrades.

"While some may see it as a valuable investment, others may not fully appreciate its benefits," he said. "Similar to a pool, solar panels may enhance the property's appeal for some buyers but could be neutral or detract from others' interest."

Issues with your HOA or homeowners insurance

Goodrich points to a few additional issues that are common with solar installation, including the fact some insurance companies will actually increase homeowners insurance premiums for consumers who install solar. This scenario typically arises when homeowners’ insurance companies increase the replacement value of a home to account for the new solar system. Some types of solar systems may even require their own separate add-on policies or a separate insurance policy altogether, so make sure to check ahead.

The expert adds that homeowners also need to check with their HOA to make sure they can install solar, or if any specific rules apply to installation.

Solar won't work for everyone

We also want to reiterate that solar isn't going to be a great option for every home. This doesn't mean a solar company won't install a system anyway. For the most part, it's up to the homeowner to determine if their property is a good fit for solar, and if their home energy savings will recuperate the costs of installing a system.

According to Asim Hafeez, President of solar energy company Empower Energy Solutions, homes that aren't a good fit for solar may not get enough sunlight on their roof, leading to panels that don't produce as much energy. "If a house has a decent amount of tree cover, it is just not a good fit for solar energy," he said.

Care and maintenance of solar panels

Goodrich says homeowners should have their solar panels inspected by a certified technician annually, just as they should with their furnace or HVAC system. This suggestion is partly due to the fact panels covered in sand, dust, pollen and leaves will generate less electricity. A certified technician will come out and inspect a system for problems each year, but they will also clean the system to keep it in optimal working condition.

He adds that, in the case of heavy snowfall, homeowners will want to have a plan to clear the panels of snow if they are counting on that electricity to heat the home. After a hailstorm, homeowners will want to have their system inspected for damage.

Some solar installers (including Tigo and others) offer active monitoring systems that help homeowners determine if their system is having issues. With remote monitoring, homeowners can receive automated alerts if a part of a solar system is not performing as expected.

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According to EnergySage, the average solar payback period ranges from eight to nine years. Investing in solar makes sense only if you plan to stay in the home for at least that long. Other considerations should also be taken into account, including whether a home is a good fit for solar and the financing used to have solar installed on a roof.

Solar panels can be worth it when the financial savings outweigh the upfront costs of installation and ongoing costs for maintenance and repairs. You'll have to run the numbers to know where you stand.

Frequently asked questions (FAQs)

Do you really save money with solar panels?

Installing solar on a home can lead to considerable financial savings, although savings can vary based on the size of the solar system, how you finance the system, how much power the system generates, local electricity rates and other factors.

What is the downside of getting solar panels?

Potential downsides of solar panel installation include unexpected costs, including expenses required for a new roof or roof repairs, upgrades to a home's electrical system and more. Solar panels can also make it more difficult to sell a home in some markets.

Is it harder to sell a house with solar panels?

Installing solar can make it more difficult to market a home for sale, or it could reduce the pool of potential buyers. This possibility is especially likely if a solar system is leased, since the new owner would have to agree to the terms of the lease to purchase the home.