We’ve all heard about going solar for the sake of the environment. We’ve heard promises of lower living costs, lower impact on the environment, and easy maintenance. But is the hype on solar power really true or is it just that – hype?
The questions all come to this: are solar panels actually worth the up-front investment and installation time? Will they really do what they promise?
Let’s take a look so you know if they’re a good fit for you and your home in the short-term and the long-term days ahead.
How Does Solar Power Work?
The first thing to understand is how solar power works and what’s involved in a solar panel setup.
Solar panels are made up of a series of photovoltaic cells. These cells work as a single unit, drawing in sunlight – which may be either received via direct sunlight or through daylight – and converting the solar energy into electrical energy.
This electrical energy is then translated into useable electrical energy that can be used to power any number of electronics, appliances, or even a power system running multiple units at once.
The solar panel itself is made up of a frame – usually metal – that has these solar cells placed within the frame. The cells are typically made of glass and silicon.
Different Types of Panels and What They’re Good For
There are three commonly available solar panels that you could install. Each option has different benefits and values, so it’s important to understand which would best be suited to your climate and setup.
Amorphous panels are your low-cost panels, typically. These are the ones that are designed for low-light climates, so they’re recommended for zones that receive less sunshine throughout the year, like Seattle, Portland, Alaska, Russia, or Tórshavn in the Faroe Islands.
Amorphous solar panels are trickle-charging panels, meaning they recharge a battery at the same rate that the battery self-discharges. Amorphous panels are lighter weight and more flexible, as well, but they are far less efficient than crystalline panels.
Monocrystalline panels are the most common option available. They’re made from a single continuous crystal structure – as their name suggests – and look like a single flat color panel.
Monocrystalline panels have the highest efficiency rate, due to their high-grade silicon crystal structure.
These solar panels are also space-efficient and have an incredible lifespan of 25+ years in most cases. And while they’re more efficient in warm weather, they’re still more efficient than amorphous and polycrystalline panels year-round. This makes them the best panels for high-sunshine climates like California or Arizona.
The biggest negative on these panels is that they tend to be the most expensive option in solar panels. But they may be worth it, anyway, since they have a longer lifespan than other options.
Polycrystalline panels are made from multiple sources of crystal. The manufacturing process for these varies quite a bit and involves newer technology than the other options. This means they’re more expensive than amorphous panels but still tend to be less so than monocrystalline panels.
Polycrystalline panels are technically less efficient than monocrystalline panels, but the difference is fairly small. They are less damaging to the environment, however, as the manufacturing process for them leaves a much smaller footprint than that of a monocrystalline panel.
These are the best option for standard to high-sunshine climates on a budget.
How Well Do Solar Panels Work ?
Of course, the big question we’re addressing is here is how well do these things work, and if they’re worth your investment. To help us better understand that, let’s look at a few factors.
Specifically, we’re asking, “Is home solar worth it?” While the principles may apply to other situations – RVs, hunting lodges, etc. – we’re focusing on home use of solar power.
With this in mind, let’s dive in.
How Efficient Solar Power is in Your Area
First off, the climate, terrain, and surrounding factors will greatly determine how efficient you’ll find solar panels to be.
Obviously, the sunnier your climate, the more effective solar panels will be.
Long winters – think the far north of Alaska – produces much lower efficiency rates in solar power, as well. For these locations, off-the-grid power should definitely be a combination of solar and wind power for full coverage.
How Much Energy You Use
If you do live in the right area to produce enough solar energy, you’re looking at the possibility of being able to power your entire house with several solar panels. The square footage of your house, of course, effects the number of panels you need, as does the amount of electricity you usually use.
You can determine how much power you need through a variety of ways, including checking your previous power bills and looking through the list below to determine your normal usage.
- Ceiling fan: 10-50W
- DVD Player: 15W
- CB Radio: 5W
- Modem: 7W
- Laptop: 25-100W
- Drill (1/4 inch) 250W
- Toaster Oven 1200W
- Blu-ray Player: 15W
- Tablet Recharge: 8W
- Satellite Dish: 30W
- Cable Box: 35W
- TV – LCD: 150W
- LED Light bulb (40-watt equivalent): 10W
- LCD Monitor: 100W
- Smart Phone Recharge: 6W
- Coffee Machine 1000W
- Fridge (16 cubic feet) 1200W
Are Solar Panels Worth the Cost for You?
There are several factors that determine the cost of solar panels overall, and are solar panels worth the investment for you?
Firstly, you have to consider up-front costs for your solar panels. This includes all the components of the solar-powered system. To help you assess that, we’ve put together a general listing of what the system consists of and the average price for each component.
- 100-Watt Solar Panels: Between $100 and $200 per panel
- Solar Inverters: Between $50 and $200
- Battery: $150 to $250
- Generator: Or you can go with a generator at somewhere between $120 and $400
Note that for a house, you’ll need a lot of solar panels and extra wiring. The above pricing is for a very basic, mostly on-the-go or RV setup.
After you have your kit together, you’ll either install everything yourself – only recommended if you’re handy and know electrical systems. Working with electric can be very dangerous.
If you’re more like the rest of us, you’ll need to have someone install the system and rig up everything together, which is where a lot of the costs come from for residential solar.
Of course, installation costs will vary greatly by your region, the exact contractor you choose, et cetera.
But on average, you can expect to spend something like $8-9 per watt installed.
This will generally include the cost of the solar panels, however, though not the entire system.
Throughout the lifetime of your solar power system, you’ll occasionally have some maintenance costs.
These, however, generally come from neglect of your system, severe weather conditions or after the warranty on your equipment runs out. This means you’ll generally replace a few pieces over time during that 25-years that most systems last.
Buying Versus Leasing
In case you’re not aware of it, you can actually lease a solar power system for your home. You’ll want to take a few factors into account before deciding which way to go.
Purchasing your solar panel system with cash or a loan is your best bet when you’re trying to maximize the benefits of installing the system – i.e. financial benefits, not simply because you want to go green – and can use the solar power system to reduce your federal and state tax liability through this installation. If you want to increase the market value of your house, this is also the way to go.
Leasing your panels, however, is more logical and beneficial if you’re trying to reduce your footprint and generate fully renewable energy for your home, want to avoid maintenance and repair costs, or just don’t qualify for the tax breaks.
Would it Be More Cost-Effective to Wait 5 Years to Go Solar?
Similar to the question about the payoffs in 5 or more years, the question of “should I install solar panels now or wait five years” is also important to figure into your overall financial picture.
The cost of installing solar power systems has been steadily falling as the technology for creating the panels and installing them has dropped over the past several decades.
Since the 1970s, when solar power became “a thing” available to the general public, the costs have dropped significantly.
At that time, 1-watt of solar cell power cost about $100 from just a bit before to only $20 per watt. Now, the cost is closer to $1-$2 per watt.
Even since 2010, the cost for a solar energy system has dropped by about 70%. That’s pretty massive for only nine years’ time.
Of course, that ever-dropping cost gives us the dilemma: are solar panels worth it in California or any other state with significant sunshine levels or places like Seattle and Juneau with low levels of sunshine on average?
How to Determine When You Should Go Solar
There is a range of reasons people install solar panels on their home. Here’s how these reasons impact your timeline for determining if and when are solar panels worth it.
Government Programs and Financial Incentives Via Rebate and Tax Credit
One of the heftiest savers for solar panel users is the series of government – whether local or nationwide – incentives for going solar.
You should look into this first in your own city, county, and state to best understand what the incentives are and how much you’d save on your costs. This will also factor into the figures of how much of a payoff you get for your investment in solar panels.
But Realize, Financial Incentives Will Disappear
As you contemplate your exact timeline, be aware that as the popularity and accessibility for solar power increases, the government incentives will decrease. Since more and more people are able to afford solar power, the government is less pressed to encourage people to do it.
With that in mind, the current federal renewable energy tax credit is 30 percent through 2019. After that point, it will be phased out for residential use. That means that if you’re considering going solar, this is the year.
If you’re not sure how accurate this assumption is, look at it this way.
- Formerly, the Golden State offered rebates up to $15,000 for installing solar power systems. However, since California has dived into the use of solar, the rebate programs have been eliminated because it was no longer as critical for the state to support this.
- Massachusetts used to offer a $9,000 range rebate program. However, the program has since ended and homeowners are now only eligible for the tax credit which is capped at just $1000. Someone who installs a $10,000 system doesn’t get much of an incentive for this anymore.
- New York offers rebates for homeowners who install solar power. The rebate gives $1 per watt installed. But as the popularity of the program and number of installs goes up, the rebate will drop 85% to only $0.15 per watt.
Be sure to explore your statewide incentives right now to understand what you could save if you install this year before the federal programs drop.
This database gives a fairly decent overview of the various options, as available by state.
Rate at Which Solar Panels and Installation Costs are Dropping
It’s also important to understand the rate at which installation costs and initial purchasing costs are dropping.
This will factor in with the rebates and tax credits to help you determine should I get solar panels now or later.
There’s a chart below that shows the average drops that have occurred already, which should give a fairly good idea on how quickly the drop will continue.
The Current Financial Benefits of Installing Now Versus Down the Road
The final thing that influences your timing for installation is the cost of energy versus the amount of savings you’d see if you installed now. The section below goes into details with calculation formulas for this purpose.
However, the anticipated increase in non-renewable energy costs is also going up, so that should be included in the estimations.
You can see a Year-on-Year comparison on average energy costs per state here: https://www.electricchoice.com/electricity-prices-by-state/.
How Do Solar Panels Hold Up Against Your Energy Bill?
Once you’ve decided if you will lease or buy, you really need to look at the ways that solar power energy compares to your overall costs of using power on the grid.
Obviously, if your primary goal is to get off the grid, this matters more for understanding how much solar power you need rather than the costs, but it’s still important to know.
One of the most practical ways to compare is thinking about your bill versus the energy of solar power like this:
A 100-watt solar panel will produce 100 watts per hour, for as long as the battery or generator allows for the power to be stored.
Look at your power bill. You’ll notice kWh listed, which is 1000 watts per hour. This is your kilowatt hour, a basic energy unit. Your bill should show the average kWh use per month.
The average kilowatt use for residences is 903 kilowatts per month. Most of us have multiple electronics and appliances running year-round – think refrigerator/freezer, air conditioning in summer or heat in winter, and lamps.
It would take 20 50-watt bulbs one hour to use a kWh. (20*50 watts = 1000 watts)
To determine how much you actually use, divide your average monthly use by 30 days to produce your general daily use. This will reveal how much power you’d need in your solar power system.
At the average of 903 kWh per month, that gives us about 30 kWh per day.
Next, figure out how much sunlight you get on average. There are maps for checking this, but most American locations get between 4 and 6 hours of direct sunlight each day in winter – which is what you need to plan for.
If you get five hours per day, for example, and you average 30 kWh per day, you need to divide that 30 kWh by 5 hours of sunlight to determine how many watts per hour you need to generate during the sunlight hours to cover your energy needs 100% via solar power.
In this case, you’d need to generate 6 kWh (or 6000 watts per hour) from your solar panels, and store that for use over the entire day.
As an example, this 6 kWh solar system includes 20 305 watt panels and costs about $8000, without including installation costs.
This is a good time to ask if solar makes sense for you in regards to set up costs as well as long-term.
That’s where the 5-year, 10-year, 20-year pay off charts come in handy. We’ll take a look at a fictional user to see a concise and direct answer on this.
Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its future cash flows. DCF analysis finds the present value of expected future cash flows using a discount rate. A present value estimate is then used to evaluate a potential investment. If the value calculated through DCF is higher than the current cost of the investment, the opportunity should be considered.
More practically, you’ll calculate the payoffs via a levelized cost of electricity – or LCOE – which is then compared to the cost of the electricity charged by your local utility company.
According to Investopedia:
LCOE ($/kWh) = Net Present Value (NPV) of the Lifetime Cost of Ownership ($) / Lifetime Energy Output (kWh)
Let’s say you set up a $20,000 solar system (including maintenance), and it lasts for about 25 years, and produces 6 kWh for 5 hours per day like the example system we linked to above.
LCOE would then equal $20,000/273,750 kWh, or $0.073/kWh.
This is not necessarily a real life example, but it gives you an idea of how to make the calculation for yourself.
If, however, you did get this number, you could assume that solar would be a decent long term bet, assuming the national average energy price of $0.1319/kWh (in March 2019).
All right. After that financial gobbledygook, let’s take a look at an actual example that could explain the process of calculating your payoffs.
Our assumptions are that Joe Schmoe uses the average 903 kWh/month, or 10,836 kWh/year, that he lives in an area with average solar panel production ratios (about 1.45), and that he wants 100% solar power.
That means he’ll need roughly 30 250 watt solar panels to power his home, which is average for a fairly sunny, but not desert, location.
If the average cost of solar panel installation per watt is $3.05, it would cost $21,350 before any tax credits for Joe Schmoe to install his system.
As you can see in the chart above, the LCOE, which again, basically tells you whether a solar system will be worth it long term, is roughly comparable with the national average after about 20 years of use, and below the national average by about 4 cents after 30 years of use.
So, if Joe Schmoe knows that he’ll be living in his home for the next 30 years, and the cost of electricity in his state is more than $0.092/kWh, then he will be saving money by installing a solar panel system.
If, however, he thinks he’ll only be at his current home for the next 10 years, then paying an average of $0.212/kWh is likely going to be much more expensive than paying his current electric utility bill.
Do Solar Panels Increase the Value of Your Home?
Another aspect of the payoff of your investment in solar panels is the increase of value on your home. If you’re planning to sell anytime in the next decade – or possibly two – solar panels can make a difference in your resale value.
Studies, such as the “Selling Into the Sun: Price Premium Analysis of a Multi-state Dataset of Solar Homes” shows that installing solar panels on a home definitely increases the value of a house in many cases.
How Much Value Do Solar Panels Add?
The value will vary somewhat between houses – primarily based on location and overall value of homes within an area – but a generic view looks like this.
This study shows that buyers pay about an additional $4 per watt of installed solar power.
Therefore, if you have a 5 kWh solar panel system installed, you’re looking at upwards of $20,000 in increased value of your home.
This shows that you can basically recoup the costs of a solar panel install when you sell your home, which means that any savings you get on your electricity bill impact your wallet immediately, without having to wait multiple years to reap the rewards.
What Would Make Solar Panels a Bad Investment?
There are a few reasons that solar panels are not for everyone. Everything from initial cost to weather and climate to maintenance issues, you must look at your own needs and circumstances to determine your answer for yourself.
Prohibitive Up-front Costs
The first and most obvious reason a solar power system may be a bad investment for some folks is the initial set up cost. This cost can range anywhere from a few hundred dollars for small installations – like a pool heater, RV rig, or hunting lodge setup – to several thousands of dollars to fully outfit a home.
Weather, Climate, and Terrain
Secondly, you may determine that solar power is a poor choice for your situation due to a few physical aspects involved in your location. Low-light areas will benefit from a combination of both solar and wind power, but your exact location may prohibit even this combination from being useful for the full powering of a site.
The climate and terrain can also affect the benefits of solar power, since heavy shading – whether trees or tall buildings – can prevent your system from fully charging up enough to power the household.
Solar power systems are usually fairly easy to maintain but living in certain areas may make this a problem.
For example, someone who lives in Tornado Alley or hurricane country may discover they frequently must repair or replace parts of their power system. This can become costly in a few years’ time.
Space Needed for Setup
If you’re going for a roof option, you’re less likely to face the issue of space.
But in some situations – such as an urban area where solar panels may be prohibited, or the precise setup of your living situation may make that problematic – roofs aren’t always suitable options.
Unfortunately, this means that ground area or poles need to be used to mount your solar panels. This works in some spaces – large backyards, for example – but in many cases, this may prevent someone from using solar power at home.
The Bottom Line: Is Installing a Solar Panel Financially Viable for You?
Whether you’re asking, “are solar panels worth it in Michigan” a less sunny state or “are solar panels worth it in Texas” a higher sunshine state, you’ll have to evaluate your own needs, costs, state incentives and more to determine what your overall value is for solar power systems in your home.
Solar panels are a great investment for many, but others have too many trees, not enough space, too low-light conditions, or other factors that make them too cost-prohibitive to be worth investing in.
Remember that determining your LCOE is the best way to figure out if solar panels are worth it to you. Compare the LCOE you get to what you’re currently paying for electricity, and if it’s lower, it usually means you’ll save money in the long term.
The information provided above should allow you to make a full assessment of your own needs and circumstances to determine your best outcome with solar panels.