When evaluating whether residential PV solar panels are worth the cost, there are 10 main factors you should consider as part of your cost-benefit analysis. Let’s dive right into it.
- Rapidly rising electricity costs
- Federal tax credits and local incentives
- Solar resource – global solar irradiance
- Ample solar exposure
- Net Metering rules
- You will need a new roof soon or you have a metal roof
- Home value appreciation
- High-efficiency solar panels vs. polycrystalline
- Energy storage for power access during blackouts
- Solar payback period
When Solar Panels May Not Be Worth the Cost:
- Limited sun exposure
- Middle-aged roof
- You might be moving soon
- Cannot afford a battery pack and no backup power generator in an area with frequent blackouts
- Stagnating or declining local real estate values
1. Rapidly rising electricity costs
Let’s face it, domestic electricity costs are rising rapidly across the nation, especially in Los Angeles, California where residential electricity rates have increased by over 10% from June 2020 to June 2021. Across California, prices have risen by 7% in the same time period.
There is no reason to expect that the rapid increase in electricity and home energy costs will be curtailed any time soon. In fact, with the rapid adoption of sustainability and ESG policies such as moving away from coal and fossil fuels, domestic energy costs are likely to continue to rise over the next decade, especially in states with limited natural resources.
A growing adoption of electric (BEV) and plug-in hybrid electric (PHEV) vehicles also puts an increasing demand on the electric grid and existing infrastructure. Expanding and upgrading the existing infrastructure to support rapidly rising number of BEVs and PHEVs on the road will likely continue driving up electricity rates over the next 5-10 years. – These dynamics are projected to accelerate as states like Washington, Oregon, California, and others incentivize or mandate policies that foster adoption of electric vehicles by 2030 and/or beyond.
If you are concerned about the rising electricity rates in your home state, then investing in a PV solar power system will help offset the effects of rising energy rates while also reducing or even eliminating your current electric utility bills.
2. Federal tax credits and local incentives
Whether you like it or not, Uncle Sam aka the US Congress has decided that going solar is good for you, which is why they have recently extended the 26% federal solar investment tax credit aka tax rebate through December 31st, 2022 (22% in 2023, the last year for solar tax credits).
At an average upfront cost of $15,000 to $25,000 for a domestic PV system, you can shave off some $3,900 to $6,500 of your tax bill come tax time.
But financial incentives don’t end at the federal level, as there are also numerous state and local incentives including net metering rules that can make residential solar investment even more lucrative.
3. Solar resource – global solar irradiance
Where you are in the country can be an important point of consideration when going solar. For example, states like California, Arizona, Nevada, New Mexico, Texas, Utah, Colorado, Oklahoma, and surrounding areas receive plenty of sunshine year-round, making them especially attractive for solar investment.
4. Ample solar exposure
To derive the full benefit of photovoltaic solar system, it’s important to have ample solar exposure that is unobstructed by objects like large trees, surrounding buildings, or mountains casting a shadow over your rooftop in the middle of the day.
Most homes that have a sizeable south-facing roof that is unobstructed can be good targets for installing solar panels.
5. Net Metering rules
Net metering rules make going solar especially attractive for homeowners who want to take advantage of being able to “sell” any excess solar electricity back to the grid for electricity credits.
Going on long vacation and have no need to use your solar electricity? Not a problem, the local grid will credit you for whatever solar electricity you don’t use. How does having your electric meter spin backwards sound? 🙂
To date, net metering rules have been adopted by 41 states. Chances are you live in one of those states. If you do, then going solar has become a whole lot more lucrative thanks to these incentives.
6. You will need a new roof soon or you have a metal roof
If you are planning to get a new roof soon, then it’s perfect time to consider installing solar panels. In fact, it probably makes sense to coordinate the re-roofing work with the installation of solar arrays.
While most homes are covered with fiberglass composition shingles aka asphalt, there are some roofs that are covered with metal and/or a single-ply membrane like EPDM rubber, PVC or TPO membranes that are commonly installed on low-sloped roofs.
7. Home value appreciation
If property appreciation and an eventual sale of your home are motivating factors, then you will be pleased to learn that homes with solar panels sell 20% faster, fetching a 3% to 5% premium relative to the average sale price of other homes in the area.
A slightly dated study by Zillow showed that homes with solar panels sold for an average 4.1% more than comparable homes in the area.
An ROI of 20% plus is another benefit to consider.
8. High-efficiency monocrystalline solar panels vs. polycrystalline
If long-term efficiency for generating solar electricity is a key consideration for your needs, then investing in high-efficiency solar panels from the likes of LG, Panasonic, and SunPower will deliver superior solar cell efficiency with minimum annual degradation (loss of solar-generating capacity). A 90% of the initial efficiency is what you can expect at a 25 year mark from high-efficiency panels.
If saving money upfront is more important than long-term solar cell efficiency, then mid-range monocrystalline or even polycrystalline (less efficient) solar panels can be a viable option for your needs, with an average of 80% plus of the initial efficiency still remaining at a 25-year mark.
9. Energy storage for power access during blackouts
At $700-$1,000 per kWh installed, solar energy storage is not cheap, but a solar battery can help increase the overall value of your home solar system (home value appreciation), delivering uninterrupted power even during blackouts or at night.
If uninterrupted power during blackouts is a key consideration — think power outage blackouts in California and Texas, then a PV solar and a battery combo may be worth the higher upfront cost of investment.
Pro Tip: Another option is to allocate a smaller investment to an emergency backup solar power generator, which can be purchased for $250-$2,000, depending on the model.
10. Solar payback period
An average solar payback (break-even) period of 8-10 years is what you can expect from a PV power system based on the data from EnergySage.
When Solar Panels May Not Be Worth the Cost:
1. Limited sun exposure
Needless to say, if your roof has limited sun exposure due to tall trees or a roof not facing south, then a rooftop solar power system will likely be a waste of money for your home’s rooftop. Unfortunately, not all homes make great candidates for going solar.
2. Middle-aged roof
Installing solar panels requires thoughtful planning and considering the state of your home’s rooftop is one important area to pay attention to.
If you currently have a composition shingle roof that is between 5 and 10 years old, then installing PV panels may not make a whole lot of sense because you will likely need to replace your roof in about 10-15 years, whereas most modern high-efficiency PV solar panels like LG and Panasonic are designed to generate solar electricity for 25 years at a remarkable 90% efficiency level at the 25 year mark.
Should you find yourself in a situation where you must replace the old roof within the first fifteen years of installing solar panels, then you will need to pay for the professional removal and re-installation of the solar panels, which can cost a few thousand dollars extra in the added expense — total cost of ownership.
It’s best to install solar panels at the time of getting a new roof, unless you happen to have a metal roof designed to last some 30-50 years.
3. You might be moving soon
Needless to say, if you are planning on moving in the next three to five years, then installing solar panels today will not give you the full benefit of owning solar panels. That said, you may still be able to sell your home at a profit because potential buyers will likely find your property more attractive thanks to the solar panels.
4. Cannot afford a battery pack and no backup power generator in an area with frequent blackouts
If you live in an area that experiences frequent blackouts and you cannot afford a power generator or a battery, then don’t expect solar panels to generate any power during blackouts. If you must have electrical power even during blackouts, then you will need to provision some extra cash for a battery storage or home power generator which may or may not currently be within your budget.
Another option is to allocate a smaller investment to an emergency backup solar power generator, which can be purchased for $250-$2,000, depending on the model.
Not providing electricity during blackouts is one of the known cons of solar panels that are not coupled with an energy storage battery.
Tip: Learn more about pros and cons of solar panels here.
5. Stagnating or declining local real estate values
While most homes have gone up in value by double digits during pandemic, there are likely to be some stagnating or declining real estate pockets developing within some of the local real estate markets — such areas may not make a whole lot of financial sense to invest in (at least from a financial ROI perspective) because they’ve either overshot the rest of the given local market or happen to have too many problems like high crime rates that may eventually force current residents to move out, leading to declining real estate values.
However, as the real estate markets are continually going up, those declining areas are currently few and very far between. But the market winds are subject to change, so always do your due diligence and consider the state of the local real estate market including the specific neighborhoods aka pockets within that market, especially if going solar is part of your property appreciation play. 😉
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