Are Solar Panels Worth It?

Assess 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 continues to decline, homeowners are increasingly looking to power their homes with solar, which over time can save quite a bit in electricity costs. They 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. For one thing, solar has startup costs that may pose a barrier for some would-be customers. According to the Center for Sustainable Energy, the average 5-kilowatt (kW) residential system in 2019 cost $15,000-$25,000 before tax credits or incentives. A variety of financing options could help make costs more manageable.

To maximize your investment, it’s important to assess your home’s potential energy generation, calculate costs, look for savings, and research financing options.

Consider Your Current Electric Bill

Over the lifetime of a residential photovoltaic system, a homeowner can save significantly in electricity costs. Exactly how much depends on location, what incentives are available, your electricity consumption, and other factors. 

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.

Estimate Upfront Costs

Solar panels alone only represent a fraction of the total upfront costs of switching to solar energy, and the total cost can vary significantly depending on different factors. A recent NREL report analyzes the cost of a 22-panel PV system, stating that the 2020 price per watt is $2.71. Assuming each panel is 250 watts, the total cost is $14,905 before tax credits. That price takes into account the cost of panels, installation, equipment, and operational costs.

In addition, there are costs associated with other essential components—wires, switches, inverters, battery, and charger—that allow the panels to convert the sun’s energy into electricity. Add to that the expenses associated with design, permitting, and connecting to the grid—and of course, the cost of installation.

Is it necessary to 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 and associated paperwork (permitting, state and local ordinances, rebates). Paying a certified installer provides peace of mind that your panels are correctly installed, and that you’ve jumped through all the legal hoops. 

Cost of installation can vary greatly, so it pays to thoroughly analyze your options and get multiple quotes. Treehugger identified some of the best solar installation companies to help you narrow down your search. 

Once up and running, a residential solar system requires little maintenance. Many installers offer their own maintenance service plans, so look into this before committing.

Look for Incentives

Now let’s take a closer look at potential savings. The most significant is the Solar Investment Tax Credit (ITC), 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. And as of this article's publication date, those savings may be extended for another decade under President Joe Biden’s $2-trillion infrastructure package.

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. Net metering is one potential state incentive for going solar at home; forty-one states have mandatory net metering rules.

If you live in an area that offers solar renewable energy certificates (SRECs), you may be able to earn additional money for selling them 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.

This website provides an easy-to-navigate, state-by-state breakdown of state incentives for renewables and energy efficiency. Solar consumer organizations in your state are other good sources of information about potential solar savings available locally.

Assess Your Sunlight Exposure

The amount of solar generated by a residential solar system depends on how much of the sun’s energy reaches it during the day. This is influenced by factors like the roof slope and direction, and how much direct sunlight it receives overall. Solar radiation varies by location and latitude (think Seattle versus Las Vegas), seasonal differences in daily hours of sunlight, atmospheric conditions like clouds and water vapor, and pollutants like dust and smoke. These maps from the National Renewable Energy Labs (NREL) can help you assess the amount of sun energy in your region. 

You don’t have to have optimal solar conditions to benefit from a solar system, however. That’s because PV panels make use of both direct sunlight and scattered solar radiation—sunlight that gets diffused by clouds and water vapor, for example. Installers will know how to optimize your system’s sun exposure.

Bottom Line

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. Even if you decide against residential solar based on cost or feasibility, there are still ways to support and benefit from renewable energy. Consider community solar, a solar project or purchasing program in which customers benefit from energy generated offsite. About a third of states now have policies for community solar; a local utility often manages projects in other states.

Key Takeaways

  • Purchasing a residential solar system can have significant financial and environmental benefits, but deciding to go solar requires an investment of time to fully assess your potential energy generation, financing options, and upfront and long-term cost-saving opportunities. 
  • There are significant startup costs associated with purchasing a solar system, but in the long run, it should more than pay for itself.
  • If upfront costs are prohibitive, solar financing may be an option. 
  • If a residential solar system isn’t an option for you, community solar offers an alternative way to support renewables and save on your electricity bill. 
View Article Sources
  1. "How Much Does a Typical Residential Solar Electric System Cost?" Center for Sustainable Energy.

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

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

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