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Are Solar Panels Worth It?

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Author Icon By Tamara Jude + 1 other Reviewer Icon Reviewed By Sarah Wilder Updated 12/20/2023

Solar energy has many benefits, including lower electricity bills and reduced carbon emissions. However, installing a solar panel system is expensive, causing many homeowners to wonder if the investment is worth it.

Our team has spent more than 300 hours researching the solar industry, interviewing experts, and surveying homeowners about their solar experiences to help you determine if going solar is right for you. This guide covers the basics of how solar panels work, their benefits, and which homes solar power is most suitable for.

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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 system’s inverter and becomes alternate current (AC) power. Finally, the converted energy flows through your home’s wall outlets and charges any connected batteries. Excess energy can be sent back to the grid. If your solar system doesn’t fully cover your electricity needs, you’ll get the remaining power from the grid.

The type of solar panels used for a system is selected based on your home’s design 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. You may want to choose solar panels that match your rooftop or fit your aesthetic preferences.

Most solar panel systems are placed on your home’s roof. The number of panels used will be determined by your energy needs and home size. Ground-mounted solar panels are an alternative if your roof doesn’t have enough space or isn’t in the best position for solar collection. These panels can be set up at the ideal angle and direction of the sun to maximize efficiency.

What Are the Benefits of a Solar Panel System?

Using solar energy provides several advantages to homeowners, including financial savings and environmental benefits. We’ll go over these in detail below.

Inexhaustible Sustainable Energy

Solar power provides a renewable energy source, preventing homeowners from having to rely on fossil fuels. As a result, solar users will reduce their carbon footprint and cut back on harmful emissions that contribute to climate change.

Lower Utility Bills

According to the U.S. Energy Information Administration (EIA), homeowners spent an average of $137 per month on their electric bill in 2022. The average electricity cost varies significantly from state to state, with higher averages in New England and the South.

Using solar panels allows you to tap into a less expensive resource than the traditional power grid, helping you to generate your own energy and save on electric bills. Homes that use electric-powered appliances, such as electric stoves or water heaters, are able to use more of their solar-generated electricity and save on gas bills.

Solar panels often generate more energy than is needed to power your home. Some states offer net metering, allowing customers to sell their excess energy to the grid 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 outages.

Increased Home Value

Homeowners often look for ways to raise their home value through upgrades and renovations. Installing a solar system can increase your home value, too.

According to the Department of Energy (DOE), homes with solar panel systems sold quicker throughout the country. Buyers are willing to pay upward of $15,000 more for homes with preinstalled solar systems, resulting 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 rebates for customers who move to solar energy. Likewise, state and local governments make the switch desirable by offering rebates to solar customers. Local utility and state government credits vary by state.

The federal government offers the Investment Tax Credit (ITC) for homeowners who install new solar panel systems. This federal solar tax credit provides a federal tax reduction equal to 30% of your solar installation costs for systems installed until 2032. The credit rate will reduce to 26% in 2033 and drop to 22% in 2034. It’s set to expire in 2035 unless renewed.

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Which Homes Benefit the Most from Solar Panels?

If you’re still unsure whether solar panels are a good fit for your home, consider the following factors:

  • Homes that get plenty of sun exposure: Every state gets enough sunlight to power an average-sized home. However, specific factors such as shading and roof positioning could reduce your ability to take full advantage of solar panels. The ideal rooftop is free of obstructions, such as trees or tall buildings. The roof should also be south-facing and have a slope that can hold a solar panel at a 15- to 40-degree angle and have a good sun number score. Alternatively, panels can be placed on racks to optimize their positioning. Solar panels will still work in less-than-ideal conditions, though you may receive less savings.
  • Homeowners with high utility bills: If your utility bill costs are constantly high, a solar system might help. Keep in mind that you may need to install more solar panels than average to offset these costs, leading to a more expensive system. If your monthly electric bill typically stays low, a solar system may not be an ideal investment. A solar panel installer will review your current electricity bill to help you determine if solar is right for you.
  • 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 installation 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.

If you’re not able to install solar panels on your roof, we recommend looking into community solar projects. These projects allow you to pay for a portion of a shared system of solar panels, often located within your community.

How Much Do Solar Panels Cost?

Solar panel installation costs vary by provider and location. We surveyed 1,000 homeowners and found that the average solar panel system costs between $15,000 and $20,000, but systems can be as much as $25,00 according to data from the Solar Energy Industries Association (SEIA).

Several factors can affect this price, including your home’s size and the number of panels needed to run it efficiently. Note these prices are before applying any solar incentives, rebates, and tax credits, which can significantly reduce your installation cost as well as your monthly bills.

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

  • Full payment: Customers can pay for their new system immediately and receive full ownership. This is the most cost-effective payment option, as it qualifies you for solar incentives and prevents you from paying additional fees for interest rates.
  • Solar loan: Homeowners can choose to take out a loan and pay for their system in monthly installments over time. Typical loans range from five to 10 years and may be through a top solar company or a third party. You’ll pay more for your system in total due to interest rates, but you’ll qualify for incentives and own your system.
  • Solar lease: Homeowners can rent their panels from a solar company for a fixed monthly rate. Solar leases may last from 10 to 25 years, depending on the company’s terms. At the end of the lease term, you can pay for the panels or return them to your installer. We generally don’t recommend a solar lease because you don’t qualify for incentives and don’t own your system, but this option may be a fit in specific circumstances, such as if you don’t qualify for a loan and can’t afford a large initial lump sum payment.
  • 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 your system generates. The solar company retains full ownership of the equipment, and you’re disqualified from incentives. We also don’t recommend this option except in specific circumstances.

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How Does Solar Installation Work?

Here’s a video we created to help explain the solar installation process:

How to Choose a Solar Panel Installer

Choosing the right solar panel installer can make or break the process. “If you work with a turn-key installer who communicates at each step of the process, the home solar installation should be easy and worry-free,” says Matt Johnson, co-owner of Namaste Solar. “A seasoned installer should handle all the logistics from design to permitting to finding all the incentives and rebates available.” Johnson recommends looking for a company that has a long track record in the industry, provides a workmanship warranty, and offers ongoing service after installation.

Look for the following qualities when browsing for a top-rated solar provider in your area:

  • 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

FAQ About Solar Panels

Can I install my own solar panels?

You can install your own solar panels using a DIY kit, but they may not meet your energy needs. These systems are typically 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.

Installing solar panels is labor-intensive and requires you to cover the project’s total cost. You’ll also be responsible for any paperwork, such as 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.

Are solar panels covered under homeowners insurance?

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

Do solar panels increase property taxes?

Solar panels can increase property taxes in some states. Installing a solar power system increases your home value, which typically raises your property taxes. However, many states have laws that prevent homeowners from paying additional property taxes for solar equipment.

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