Are solar panels worth it in 2022?

Last updated: 04/04/2022

Like any major investment, installing a solar energy system is a big decision! But, as the cost of solar continues to decline and new energy bills make purchasing more attractive, this decision to go with solar over other fossil-fuel-based methods of energy production is becoming easier and easier. For most people, going solar now represents a smart long-term investment with substantial savings. Depending on a variety of factors, you could save $1,200 on your electricity bills in the first year of going solar. However, before installing a solar panel system, you’ll want to make sure that you can take advantage of these benefits by first considering a few major factors. In this article, we’ll help you answer the question: “Is it worth it to buy solar panels?”

Ultimately, the answer to that question is: it depends. There are few circumstances where someone can definitively say that solar panels aren’t for them without exploring their options and getting an evaluation from a licensed, reputable installer. Even renters may have solar options if their property owners or managers are open to it. Keep reading to learn if solar is really worth getting for you and your situation. 

What’s in this article?

• What to consider before going solar
• How much will you save with solar?
• How can you estimate your solar payback period?
• How can you maximize your solar savings?
• When solar panels are worth it, and when they aren’t.
• Frequently asked questions: what makes solar panels worth it?

What to consider before going solar

Buying and installing a solar system is an exciting opportunity for many homeowners and business owners, but each property is as different as the people who occupy or frequent it. There are some key factors that must be considered before investing in a solar system. Ask yourself these questions:

Do you own your home, or are you renting?

There aren’t too many property owners that would be fine with having a tenant install a permanent solar system on their property. As such, renters should consider alternative ways to utilize solar; community solar is an option for renters. For renters with an amicable property owner or manager, renting a solar system might also be an option.

Are you planning on selling your property in the next ten years?

Typically solar panels pay for themselves in ten years or less—usually around seven, as a matter of fact. If you plan to move in the near future, purchasing a solar system may not be worth the investment. Instead, consider options like community solar or renting the system. Leasing your panels may be an option, but keep in mind that leases are typically long-term and can be difficult to cancel. 

Is your roof ideal for solar panels?

Unfortunately, not all roofs are ideal for solar panels. This may be due to the roof’s age, how much weight it can support, the angle and position of the roof, and the surrounding area. While a roof replacement may be the answer and is already a necessary home upgrade, it’s important to consider if your home is structurally able to support a solar system.

How much is your monthly electric bill?

Another factor to consider is how much you are spending now. If a solar system cannot offset 100% of your electricity costs, you’ll have the monthly payment for your solar system (if you are financing, leasing, or renting) in addition to any electricity that you do use. This may be lessened somewhat by buy back programs, but it’s important to know if you’ll ultimately be paying more to have power, rather than less, with a solar system.

Now that you’ve decided whether or not a solar system is right for you, let’s talk about how much you can save with one.

How much will you save with solar?

The first question you’re probably wondering if you’re considering going solar is: how much money will you save? And for good reason! After all, solar is an investment, so you’ll want to understand your payback period before making any decisions. The average home can save between $10,000 and $30,000 over the lifetime of your solar panel system. Most property owners will break even on their solar investment in seven to eight years – but as you start exploring your solar options, there are a few key questions you should ask to approximate your personal return on investment:

How can you estimate your solar payback period?

The initial costs of solar panels are often the biggest consideration when going solar, leading many homeowners to question whether solar power is worth it. While most homeowners can expect their investment to pay off in under ten years, you can get a more specific estimate with a few calculations. If you want to calculate a rough estimate for how long it will take for solar panels to pay for themselves, you can use this formula:

(gross solar system cost – upfront incentives)/(annual savings + additional state and/or utility incentives) = estimated payoff period

Here’s an example: 

Your new solar system costs $15,000 and you received a tax credit for $3,900 in addition to a $1,500 rebate from your state. In this case, your gross solar system cost is $15,000 with the upfront incentives totaling $5,400. This means that your combined cost is $9,600. 

Now, say that your power bill is $100 every month and your solar system produces enough energy to cover your energy needs. Your annual savings is your monthly power bill, multiplied by 12 months, meaning in the first year of having solar, you’ll save $1,200 on your electricity bills. Some states and utilities also provide incentives that pay you extra for the solar energy your panels generate, like SRECs or the SMART program in Massachusetts: it’s not uncommon for those incentives to put an additional $600 a year into your pocket beyond your electricity savings, meaning an annual benefit of $1,800.

By dividing your combined cost of $9,600 and your annual benefit of $1,800, you can get a more realistic estimate of your payback period. In this example, that’s a little less than five and a half years. 

How much do you pay for electricity?

Your current electricity bill is the largest factor in determining how much you’ll save by installing solar. The first step in identifying your savings potential with solar is knowing how much electricity you use, and the rate you are paying for it. You pay your utility company for every kilowatt-hour (kWh) of electricity you use, and your rate varies significantly depending on where you live. In some parts of the country, like the South, you can pay under 12 cents per kWh; in others, like the Northeast, you could pay 20 cents or more. When you go solar, you reduce or eliminate your monthly electricity bill, so the amount you pay for electricity substantially impacts your savings.

If you’re not sure where to start in determining your solar savings, try using our Solar Calculator. Our calculator incorporates local electricity rate data to provide you with a customized estimate of what you can expect to save, and just how quickly your investment will pay off.

How much will your solar installation cost?

There’s a lot that determines the cost of your solar panel system, so you’ll want to do a bit of research first. Some of the biggest factors that will impact your array’s cost – and ultimately how much you save – include: 

• System size: How much electricity you consume correlates with how much energy you will need to produce, and therefore the size your solar array needs to be – and generally, a bigger system with more panels will have a higher average cost than a system with fewer panels. 
• Equipment: while cheaper solar panels may feel like the easiest way to save on your solar system, oftentimes your long-term savings will be greater if you invest in high-quality equipment. 
• Roof characteristics: if you have a south-facing single roof plane that slopes at a 30-degree angle, it’s ideal for solar! This doesn’t mean solar isn’t worth it if you don’t have a perfect solar roof, but your installation may be a bit more complex (and therefore cost more) and your sun exposure might be less direct (meaning potentially less savings). 
• Labor: solar installers can vary substantially in price, even if they’re installing the same equipment. Different installers vary in their labor warranties and skill levels, which is why it’s important to find pre-vetted, high-quality installers, like you can on the EnergySage Marketplace.
• Location: solar prices differ from state-to-state – generally, you’ll see a lower price per Watt ($/W) in warm states and a higher $/W in cold states, but you may need a larger system size in a warm state. Other important factors that impact your solar savings and vary by location are rebates and incentives, which we’ll cover next.

What rebates and incentives are available? 

Rebates and incentives significantly reduce your cost of solar and can actually put money into your pocket each month, translating to substantial long-term savings. The best solar incentive is the investment tax credit (ITC), which allows you to deduct 26 percent of your solar installation cost from your federal income taxes – There’s no cap on its value, but your individual tax liability will determine whether you’re able to take full advantage of this incentive. 

Depending on where you live, you may also qualify for other various incentives that help you save more: in addition to the ITC, local incentives like state tax credits, cash rebates, solar renewable energy certificates (SRECs), and performance-based incentives (PBIs) can increase your solar savings up to 50 percent!

How will you pay for your solar system?

Whether you choose to buy or lease your solar panels will have a major impact on your savings. If you have enough to make a cash purchase, you’ll save more than with any other option – but even with a zero-down solar loan, your savings could still be in the tens of thousands. While solar leases and power purchase agreements (PPAs) require no money down and promise a maintenance-free option, they come with a trade-off: your total savings will typically be just 10 to 30 percent of your utility electricity bill.

How does this play out in the real world? Check out the EnergySage Solar Calculator to see how your long-term savings will differ depending on whether you choose a cash purchase, a solar loan, or a solar lease – or community solar, if that’s something you’re considering!

How can you maximize your solar savings?

So, most likely you’ll save money by going solar – but how can you maximize those savings? We have a few tips to help you get the most out of your solar system:

Get multiple quotes

As with any big-ticket purchase, shopping for solar requires a lot of research and consideration, including a thorough review of companies in your area. By comparing multiple solar quotes, you will get increased competition for your business and transparency, which will ultimately mean a higher quality installation at the right price. 

Data from the EnergySage Marketplace shows that when you receive multiple solar quotes through EnergySage, you’ll save 15 to 25 percent on the cost of solar compared to going solar outside of EnergySage. A 2017 report by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) backs up our findings: when consumers compare as many solar options as possible, they typically avoid paying inflated prices.

Check out smaller installers

These inflated solar prices often come from some of the larger solar installers in the industry – so it’s important to consider all of their solar options, not just the installers large enough to pay for the most advertising. The same 2017 NREL report referenced above found that quotes from large installers were typically 10 percent higher than those from mid- and small-sized installers. If you receive quotes from some of the bigger companies in the industry, just be sure to compare them with quotes from local installers so you don’t overpay for solar. 

Compare equipment options

Getting multiple solar quotes will also allow you to compare the equipment offered by each of those installers. There are many variables to consider when seeking out the best solar panels on the market. While certain panels will have higher efficiency ratings than others, investing in top-of-the-line solar equipment doesn’t always result in higher savings. The only way to find the best system for your property is to evaluate quotes with varying equipment and financing offers.

To compare the equipment options offered by EnergySage installers, make sure to visit our Buyer’s Guide. 

When solar panels are worth it, and when they aren’t

 Solar panels are worth it if… 

• You own your property. Renters or business owners who do not own their property should speak to the property owner prior to making any plans to install a solar system.
• The cost of a solar system is more than your current bill. Investing in solar is pointless if, ultimately, you’ll be paying as much, or more, for your power. 
• You’re planning on moving soon. If you think you’ll be selling your home or moving your business to a new property in the near future, investing in solar might be a waste of money. It largely depends on how much you pay and resale value.

Your property is ideal for solar. Even homes and businesses with a lot of shade can still utilize solar energy. Still, properties that are in the ideal location with the proper roof position and angle are the best candidates for solar.

Are solar panels worth it if you’re not in the sunny Southwest?

Solar loves the sun, but you don’t have to live in the sunny Southwest to achieve solar savings! In fact, solar systems can sometimes cost more in these areas because you need a larger system to cover your electricity needs due to air conditioning. Certain climates, even though they can be less sunny than others, are better suited for solar. Many factors go into whether solar is a good fit or not – sunshine is just one of them! Some of the states with the most installed solar in the country (including New York, New Jersey, and Massachusetts) are in the Northeast – even though they’re more famous for their cold snowy winters than their sunny summer days! These areas often have higher electricity costs and better local incentives than other states, leading to greater savings down the line.

Frequently asked questions: what else makes solar panels worth it?

There’s a whole lot more to know about solar than just “are solar panels worth it”. Here are a few other questions people commonly want answers to about the worthiness of solar panels:

Start your solar journey today with EnergySage

If you’ve decided that solar is worth it for you, check out the EnergySage Marketplace to maximize your savings! You’ll receive up to seven quotes from our network of pre-vetted solar installers, which will allow you to compare installers and equipment. If you’re still not convinced or are unable to install solar on your property, you can also take advantage of solar savings by joining a community solar farm on the EnergySage Community Solar Marketplace.

This article was adapted from a post that originally appeared on Mother Earth News.