Are solar panels worth it?

Key takeaways

• Solar panels are often worth it if you live in a state with good incentives, get a lot of sunlight, or have high electricity bills.

• Solar panels typically pay for themselves in seven to 10 years while generating efficient electricity for 30 or more years.

• Solar panels aren’t worth it if your electricity costs are already low, or if you would have to take on bad debt or a solar lease.

The promise of free energy from the sun may sound enticing, but you have to pay for the panels first. And even if you pay with cash, it takes years to recuperate your initial investment through energy bill savings to break even. Solar panels might not be worth it once you crunch the numbers. Your specific situation determines exactly how much value you'll capture from going solar. Read on to learn about what makes having solar panels worth it.

Are solar panels actually worth it?

Our data shows solar panels are generally worth it for most homeowners in the U.S. The average 5 kW system costs $17,823 and pays for itself in 10 years (not including the federal solar tax credit). After paying for itself, it saves $16,587 in electricity costs within 20 years of installation. That said, where you live, your current energy bill, and your energy needs can all affect your solar panel savings.

If you can save anywhere from $80 to $150 on your monthly electricity bill, solar panels are probably worth it. But if you have cheap electricity already and would only save $25 or $30, panels might not be worth it.

That said, solar panels protect against inflation by stabilizing energy costs for decades after installation. And the environmental benefits, like greenhouse gas reduction and water conservation, provide value that extends beyond pure financial calculations. You might decide panels with a slightly longer payback period are worth it for these reasons.

Are solar panels expensive?

The upfront cost of solar panels is one of the main downsides. Our data shows that the average 5 kW solar panel installation ranges from $13,958 to $21,082. You might need 6 kW or 7 kW to satisfy your home’s energy needs, and that will increase the cost.

Another thing that can increase the cost is financing solar panels. Even if you get a good interest rate, you’ll pay more for the system overall. And if you have a poor credit score, you could add almost 50% to the total cost just in interest. There are cases where the sticker price for a solar panel installation makes sense, but the total financing cost doesn’t.

Incentives and subsidies make solar more accessible

While solar power can be expensive upfront, financial incentives make it more accessible to homeowners across the country. 

The federal Residential Clean Energy Credit offers a 30% reduction off your total system cost through 2032, with no income restrictions and the ability to roll over unused credits to future tax years. The tax credit has been a major driver in the expansion of the U.S. solar industry over the past two decades.

Complementing federal support, state-level programs provide financial relief through upfront rebates, property or sales tax exemptions, and Solar Renewable Energy Certificates (SREC) in certain markets.

Save the most with net metering

Your utility company might offer savings through net metering programs, allowing you to earn credits when your system produces more electricity than you consume. A full net metering program gives you a credit equal to the cost of each kWh you produce. This is the best type of net metering program.

Your payback period can be short if you live in a state with full net metering. However, many states are phasing out full net metering programs for partial net metering, which is also called net billing. This means you get a fraction of the going rate per kWh for producing excess energy. Some states don’t have any net metering program at all. Solar might still be worth it if other conditions are right, though.

Why solar panels aren’t worth it for some homeowners

Although solar energy offers benefits for many homeowners, financial hurdles might make it impractical for your situation.

Consider these downsides:

• Solar panels are most effective in regions with at least four peak sun hours per day on average.

• You'll risk financial loss if you move before reaching the break-even point.

• Property taxes may increase unless your state offers solar exemptions.

• Excessive roof shading from trees or buildings reduces system efficiency, making your investment less valuable.

The upfront investment means homeowners need to stay in their property long enough to recoup costs through energy savings. Those planning to relocate within a decade may never see positive returns on solar investment.

And, while some states offer property tax incentives for renewable energy installations, others may actually increase your tax burden due to home improvement.

Environmental factors like insufficient sun exposure due to property location, roof orientation, or natural obstructions can also reduce energy production capacity, extending the payback period beyond what's financially reasonable for many families. 

Finally, not all roof types and roofing materials provide suitable installation surfaces, potentially requiring expensive structural modifications.

Reputable installers can show you how efficient your solar system could be, considering the local environment.

Variables that determine solar system efficiency

A huge range of variables can influence how solar panels convert light into electricity for your particular home. These include:

• Sunlight intensity (Irradiance): Higher intensity of sunlight enhances the photovoltaic effect and yields more power.

• Temperature: Higher temperatures above 77 degrees Fahrenheit reduce solar panel efficiency because of the temperature coefficient effect.

• Shading: Any obstruction blocking sunlight decreases power output, though modern panels still produce partial power.

• Orientation and tilt: The angle and direction of panels affect sunlight capture.

• Dust, dirt, and debris: Anything that accumulates on panels can reduce sunlight absorption.

• Atmospheric conditions: Humidity, pollution, and altitude affect how much sunlight reaches your roof.

• Solar cell material: Monocrystalline cells are more efficient than polycrystalline cells.

• Panel design: Wiring, coatings, and cell layout can influence energy conversion.

• Age and degradation: Solar panels lose efficiency over time naturally and due to wear and tear.

• Installation quality: The right setup and connections are important for optimal performance.

Resale value: Does your home gain equity?

The data is mixed on solar panels influencing home equity. Overall, new solar installations are likely to increase home value, especially in markets that appreciate solar. But older systems can become a liability in the eyes of a buyer.

A Fannie Mae/Berkeley study shows solar panels increased home value by 1.6%, and a Zillow study shows home value can increase by 4.1%. For a $600,000 home, this equates to increases of $9,600 and $24,600.

An increased property valuation effectively recaptures some of your initial solar investment when selling. In the best-case scenario, solar panels are as much a real estate enhancement as they're an energy solution.

Leasing vs buying panels and how it affects long-term value

Ownership is king with solar panels. This includes paying by cash, getting a solar loan, using a home equity line of credit, or Property Assessed Clean Energy (PACE) financing. The end result of all of these is that you own the solar panels.

Ownership is best

With ownership, you'll secure full property rights once purchased or after your loan is paid off. This gives you complete control over your system and all its future value. You can make modifications as needed, claim available tax incentives directly, and benefit from increased home value without complications. The system becomes a true asset that continues generating free electricity after the payback period.

Avoid leases and power purchase agreements

Leasing, however, only grants you usage rights. The leasing company maintains ownership. This means you need their approval for any modifications. This arrangement can complicate selling your home if there's no buyout option. Prospective buyers might not want to assume your lease agreement.

While leasing offers lower upfront costs, the leasing company gets all the long-term benefits, not you. Lease escalator clauses may also increase your payments over time, which negates the purpose of installing solar panels.

A power purchase agreement (PPA) is similar to a lease. You pay a set rate for the energy the panels produce, and you don’t own them.

Overall, we recommend avoiding solar leases and PPAs in favor of solar loans or paying in cash when possible.

Environmental benefits that make solar worth it

Reasons to choose solar energy go beyond financial savings. We know many homeowners value solar power because it represents their commitment to the environment. A long payback period is easier to endure since you get to use the sun for clean energy.

When you transition to solar power, you're actively participating in carbon reduction efforts that make a tangible difference. 

Here are some positive effects of a 7 kW solar installation in Texas:

• Reduces CO2 emissions by 4.8 tons per year

• CO2 emissions are equivalent to planting 220 trees per year

• Emission reduction is also equivalent to 11,869 miles less a year

Keep battery storage in mind for grid independence

Many people aren’t aware that solar panels by themselves don’t provide security for power outages. If you want to reduce your dependence on the grid, battery storage is crucial.

Modern battery systems provide backup power for 24 hours or more during grid outages. This means your appliances and home systems remain functional when power fails. Panels automatically shut off to protect utility workers during an outage, which is why having a battery is important.

The upfront investment for lithium-ion batteries ranges from $500 to $1,500 per kWh of storage, which isn’t cheap. Fortunately, the 30% federal tax credit applies to battery installations when paired with solar. Other state rebates can also help.

When you have a battery, you can draw from it when energy prices are highest during peak hours and send excess to the grid. This can help you earn more valuable credits through time-of-use net metering. You can also save money since you aren’t drawing from the grid during peak hours.

Is your house a good candidate for solar?

You might be enthusiastic about solar, but that doesn’t mean your house is the best candidate for efficient energy generation. Start by examining your roof. Does it need replacing? You don’t want to put panels on a roof that’s nearing the end of its life. You’ll have to remove and reinstall them to update your roof. Panels typically last 35+ years, so structural integrity is crucial.

The best performance comes from south-facing roof sections with slopes between 15° and 40°, though east and west-facing surfaces can still generate significant power with the right design. Here are a few more things to keep in mind.

• Sunlight exposure is fundamental—homes in sunny regions like Colorado have greater potential, but shading from trees or buildings reduces efficiency.

• Local climate affects performance, with panels losing some efficiency in extreme heat.

• A higher monthly electricity bill (above $100) makes solar power more worthwhile.

• Local regulations like HOA rules and building codes may restrict installation options.

Bottom line: Are solar panels worth the investment?

You've got to weigh many factors when deciding if solar panels are right for you. Your location, roof orientation, local electricity rates, and available incentives all impact your potential savings. While the upfront cost isn’t cheap, many homeowners see payback periods of 7 to 10 years or even less. Solar panels aren’t for everyone, but if you're planning to stay in your home long-term, they can be a worthwhile investment both financially and environmentally.

FAQs on solar panel viability

Below are a few frequently asked questions about whether solar panels are worth it.

Do you really save money with solar panels?

You could save money with solar if the conditions are right. Solar owners with good sunlight and in states that have favorable benefits can expect to save $100 to $150 per month or more. We found the average 5 kW solar installation saves $16,587 over 20 years after paying for itself.

What are the negatives of solar panels?

Downsides of solar panels include high upfront costs, long payback periods, intermittent energy, installation complexity, and potential location-based financial penalties. Do your research to see if solar is right for you.

Are solar panels on a house really worth it?

Putting solar panels on a house can be worth it if you live in the right area and have good sunlight. The average 5 kW system costs $17,823 but saves $16,587 over 20 years after paying for itself (not including the federal tax credit). You might wait seven to 16 years for the break-even point, though, depending on your state and other conditions.

How long does it take for solar panels to pay for themselves?

The solar payback period is about 10 years on average (not including the federal solar tax credit). However, we see average payback periods as low as seven years in Arizona. It all depends on electricity rates, incentives, sunlight, and system specifics. Higher utility costs shorten payback.