Are Solar Panels Worth It? Assessing Solar Potential

Determine the costs, savings, and your home's sunlight exposure to get your answer.

Technicians fitting solar photo voltaic panels to a house roof in Ambleside, Cumbria, UK.
Ashley Cooper / Getty Images

As the cost of solar panels declines, they can help homeowners save quite a bit in electricity costs over time. Consumers can feel doubly good knowing that they’re reducing air pollution and planet-warming carbon emissions

But before investing in solar, it’s important to do your homework. Solar has a host of startup costs, but a variety of financing options could help make it more manageable.

To maximize your investment, assess your home’s potential energy generation in relation to costs.

How Much Are You Spending on Electricity?

A good starting point for figuring potential solar savings is to review your recent electricity bills and calculate average consumption. Check out the electricity rates set by your utility company.

You can get an idea simply by visiting the Utility Rate Database and entering your zip code. Then, find out how much the utility company will reimburse you for sending the excess energy generated by your solar panels back to the grid.

Assessing Solar Potential

The amount of solar electricity generated by a residential solar system depends on how much sunlight it receives daily. Factors like the roof slope and direction impact this, as well as broader meteorological factors.

Solar radiation varies by location and latitude, seasonal differences in daily hours of sunlight, atmospheric conditions like clouds and water vapor, and pollutants like dust and smoke.

You don’t need optimal solar conditions to benefit from a solar system. Solar panels make use of both direct sunlight and scattered solar radiation.

Upfront Solar Costs

Solar panels alone only represent a fraction of the total upfront costs of switching to solar energy. The total price must take into account the cost of panels, installation, equipment, and operations. Installation costs include:

  • Essential components like wires, switches, inverters, batteries, and chargers allow the panels to convert the sun's energy into electricity.
  • Logistics expenses include design, permitting, and grid connection costs.
  • Installation costs can vary widely depending on location and roof complexity.

Should You Hire an Installer?

Though it’s possible to install the panels yourself, DIY can be daunting unless you have the time and specialized knowledge of solar installation. Paying a certified installer provides peace of mind that your panels are correctly installed and that you've completed legal necessities.

Cost of installation can vary greatly, so it pays to thoroughly analyze your options and get multiple quotes.

Once up and running, a residential solar system requires little maintenance. Many installers even offer their own maintenance service plans.

Federal and Local Solar Incentives

The most significant is the Solar Investment Tax Credit (ITC). The ITC is a federal renewable energy credit that homeowners can put toward a portion of their solar installation costs.

In 2021 and 2022, homeowners can save 26% of their total costs with the ITC. In 2023, the credit will cover 22% of costs.

Some states offer additional solar tax credits similar to the ITC. You may also be eligible for rebates from your state, city, or utility company.

If you live in an area that offers solar renewable energy certificates (SRECs), you may be able to earn additional money for selling electricity to your utility. Prices fluctuate, but an SREC, which is earned for every 1,000 kilowatt hours of energy produced by a solar system, can be worth over $300 in some states. Many homeowners generate enough solar energy to acquire several SRECs per year.

Alternatives to Residential Solar

For many homeowners, the short-term costs of going solar will be worth it in the long run, both in terms of electricity savings and reducing your environmental impact.

But if the upfront costs are too high, there are still ways to support and benefit from renewable energy. Community solar is a solar purchasing program in which customers benefit from energy generated offsite.

Frequently Asked Questions
  • How much does a home solar system cost?

    A 22-panel PV system, with each panel being 250 watts, cost $14,905 before tax credits in 2020.

  • How much can you save using solar power?

    Various reports put annual savings from home solar power at $600 to $800 per household.

  • How can you tell if your house is suitable for solar panels?

    If your roof has a good amount of sun exposure—ideally four to five hours per day and between the hours of 10 a.m. and 3 p.m.—then your house is suitable for solar panels. You can even install solar panels on a flat roof or on the ground.

View Article Sources
  1. U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. "Guide to the Federal Investment Tax Credit for Commercial Solar Photovoltaics."

  2. "Net Metering." National Renewable Energy Laboratory.

  3. Feldman, David, et al. "U.S. Solar Photovoltaic System and Energy Storage Cost Benchmark: Q1 2020." National Renewable Energy Laboratory, 2021, pp. iv-v.