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Are solar panels worth it for your home?

Written by Andrew Sendy

Updated March 27, 2020

5 minutes read

Categories: Solar 101, Solar incentives, Solar panels, Solar power, Solar financing


As a general rule (as we have written elsewhere on this site), solar power has a lot of advantages. It's good for the environment, is becoming increasingly affordable and provides a modicum of freedom from utilities.

However, what ultimately matters to most homeowners is solar's return-on-investment (ROI). While some people like to measure this as a percentage return on the cost of the solar panels, others prefer to simply know the payback period.

The payback period is the amount of time that the electric bill savings, due to the system, will take in order to pay for its cost.

How do you calculate the payback period for a home solar system?

To calculate the payback period, you need to be able to work out the cost of a system and also the amount of electricity bill savings that the system will generate.

The cost of the system depends on how much power you use. You will need more solar panels if you use more power. The cost also depends on local solar prices. The electric bill savings depend on your electric utility's rates for power and the solar irradiation available in your location.

The calculator above does all of these things for you. It has a database of electric rates from each utility in America and a database of solar production from each of the 3300 weather stations around the country. By entering your location and the dollar amount of your last monthly utility bill, it works out your electricity use and how many solar panels you need.

It even draws panels on your roof to ensure the size of the system needed will fit. It then calculates the likely cost, based on local solar offers, and then calculates your electric bill savings and payback period.

Are solar panels worth it in my city?

To give you some real-world examples, we examined three different cities with varying levels of average monthly electricity costs using our payback/ROI calculator:

  • Charleston, SC
    • $173 average monthly cost
  • Reno, NV
    • $129 average monthly cost
  • Albuquerque, NM
    • $90 average monthly cost

All data was based on purchasing the system outright - although monthly payments on a solar loan, solar lease, and power purchase agreement are also available if you enter your details into the solar estimator we have posted here below.

Calculate solar savings for your home

The question of whether a solar panel system for your home is worth it comes down to a city-by-city analysis because it depends so much on how high electricity rates are and how much power solar panels produce where you live.

How much solar will save you depends on several factors. Here are some examples showing the upfront cost of solar and average solar payback periods for cities around the country.

Charleston, SC

An average-sized solar electric system in Charleston, SC, where the average monthly electric bill is $173, would cost $13,000 after government incentives pay for between 30% and 65% of the installation. Over the 20 to 25 year lifetime of the system, you would save $45,000.

You would pay off your solar system in approximately 5.7 years, and it would increase the value of your home by 3%. In Charleston, with an average home price of $283,000, that would bring you a nearly $8,500 increase in value.

Ready to talk to highest rated installers in South Carolina? Click here

 Are solar panels worth it?

Reno, NV

In Reno, where the average monthly electric bill is $129, a rooftop solar system will cost approximately $18,000, and you would save $19,000 over the 25-year life of the system.

At the end of 10.5 years, you would completely own your system. If you sold your house the next day, you would increase your home value by nearly $10,000 on an average home price of $320,600.

Ready to talk to highest rated installers in Nevada? Click here

Albuquerque, NM

After federal, state, local, and utility incentives, an average solar system in Albuquerque, NM, costs approximately $11,000. Over the 20 to 25 year life of the system, it would save you $18,000—and after 8.1 years, you would own the system outright, enabling your ROI to truly grow quickly.

For an average home in Albuquerque, the 3% increase would be around $5,600 on a price of $187,900.

Ready to talk to highest rated installers in New Mexico? Click here

As you can see, the payback times and ROIs are as varied in the United States as the cities in them. So use our calculator to see how much solar energy can save you on your home – and then see installation estimates from our highly-rated installers to see if solar is right for you.

But let's be clear: No matter what the payback times and ROIs are, most experts agree that solar installations are a good investment for homeowners. After all, the electricity savings will provide homeowners with a better ROI than a five-year certificate of deposit (CD) at current interest rates. In fact, a Reuters report said that this is true in nearly 90% of all states.

Are solar panels worth it?

Image source: NREL

How does solar compare to other investments in terms of return?

Forbes reports that in many cases, with the federal, state, and local incentives, homeowners can recover almost 97% of their investments, as well as increase the value of their homes. In contrast, a luxury kitchen remodel only brings a 60% payback.

A report by the National Renewable Energy Laboratory found that in most areas, the payback period is often four years or less—meaning that installing solar panels provide 100% ROI.

According to the website Modernize, a home improvement advice site, "You won't find that for cost-comparable home improvement projects, such as installing a garage, adding an addition, or remodeling your kitchen."

Clearly, solar is a better investment than granite countertops.

 

Solar Panel Calculator

What is the payback period where you live?

If you visit Solar-Estimate.org, you can enter your zip code and an average utility bill, and the site will calculate the likely return on investment and payback period you would get from installing solar panels on your home.

How do you find out if solar panels are worth it at your house?

One way is to speak to a solar company near you, however, it is nice to have some independent advice that takes into account the characteristics of your home first. This is why using the solar panel calculator on this site is so beneficial.

All you have to do is enter an address and your monthly power spend, and it will calculate how good solar will be to save money for you.

 




Author: Andrew Sendy Andrew Sendy LinkedIn

As chairman of Solar Investments Inc and chairman of the largest solar panel installation company in South Australia, Andy is passionate about solar power. With his unique working background he writes on the residential solar industry in America from a unique perspective.