The Homeowner’s Guide to Solar Panels

Solar power is shining bright in its potential to provide homes across the U.S. with efficient energy. And with solar panels becoming increasingly more attractive for homeowners, many are starting to wonder if now is the time to make the investment.

The market for solar energy is growing fast, with the U.S. Office of Energy Efficiency and Renewable Energy reporting that solar panels today are more affordable, more accessible, and more prevalent in the country than ever before. Installations of solar panels have grown 35-fold in the past decade or so, with the current capacity enough to power the equivalent of 12 million homes—and installations are expected to double by 2023. Meanwhile, the average cost of solar panels has dropped by almost 50% since 2014, greatly reducing upfront costs for homeowners and further increasing energy savings.

So should you make the switch to solar? Here’s what you need to know to make a smart decision for your home—and your wallet.

What Are Solar Panels?

In their simplest definition, solar photovoltaic panels, usually shortened simply to solar panels or PV panels, are structures that harness light from the sun and convert it into energy. This renewable, sustainable energy is usually installed on the roof and can be used to power your home, replacing less efficient (and more costly) energy sources like electricity and natural gas.

If you look closely at a solar panel you’ll see a grid, with each square a photovoltaic cell that produces a magnetic field that strips the electrons from the particles of light coming from the sun. The same panels then turn those electrons into a power source, transferring them to wires where they can go to work just like any other power source in the home.

As the solar industry has become more advanced, so too have the panels. Today’s solar panels are smaller and more efficient than they used to be, making them a lot more accessible for the average U.S. homeowner.

How Much Do Solar Panels Cost?

The average cost for solar panels and installation in the United States is $13,142 after tax credits, according to EnergySage. Prices are determined by watts, with more watts meaning more energy, and an average price per watt of $2.96. The more watts that you need the more you’ll end up paying, since you’ll have higher equipment and installation costs.

Solar panel costs vary by state. Currently, Washington has the lowest price per watt, while Iowa and Rhode Island round out the top. Prices also vary based on the manufacturer.

If you don’t want to buy your solar panels, leasing is also an option. Leasing solar panels is cheaper upfront than purchasing them and some companies even offer $0-down leasing, however you will have to pay a monthly fee for use. Solar leases are generally offered with 20- to 25-year terms, with fixed monthly payments that increase at a set percentage every year.

Solar Tax Credits

Offsetting the cost of purchasing solar panels for your home are federal and state solar tax credits. These credits incentivize the use of sustainable solar energy, and have been been largely responsible for the surge in use over the past decade (the federal Solar Investment Tax Credit (ITC) alone has coincided with a 10,000% growth in the industry).

There are two types of solar tax credits to be aware of: federal and state.

The federal Solar Investment Tax Credit (ITC) provides a tax credit of 26% of the purchase price of panels and installation for residential and commercial properties. You can learn more about the requirements of the ITC here.

State solar tax credits on the other hand vary depending on where you live. These credits operate similarly to the federal ITC in that they credit your taxes a certain percentage of the amount you pay for your solar panels, however they differ widely be state, with some states offering substantial solar tax credits and some offering none at all.

Visit the Database of State Incentives for Renewables and Efficiency to see the tax credits offered in your state, as well as other incentives (in Illinois, for example, utility companies will buy back any excess energy that your home’s solar grid system produces).

Cost Savings From Solar Panels

It takes most homeowners about 15 to 25 years to break even on their solar panels. The exact amount of time depends on current utility costs and savings, state incentives, and how you pay for the system—for example, an interest-bearing loan versus paying outright.

As for how much solar panels can save you on your utility bills every month, where you live is again going to be a major deciding factor. Here’s what you can expect to save in some major cities across the country with a 6kW solar power system, which is the typical size for residential use:

New York: $73.41 a month
Los Angeles: $128.44 a month
San Francisco: $126.40 a month
Chicago: $64.74 a month
Seattle: $47.20 a month
Boston: $95.88 a month
Houston: $64.75 a month
Philadelphia: $77.35 a month
Miami: $73.70 a month

As you can see, these savings—which are calculated based on the avoidance of energy-based utility bills—are pretty major. The more that you spend in monthly electricity and natural gas bills, the more that you can expect to save if you make the switch to solar energy.

Are Solar Panels Worth It?

There are obvious advantages to making the switch to sustainable energy in your home, since unlike electricity and natural gas, solar power is a renewable resource that can be harnessed for free once you’ve got the panels in place. Still, it’s up to individual homeowners to make the call about whether solar panels are worth it for their needs. The answer to that question will depend on various factors, including:

    • State tax credits and incentives
    • Your solar rating (i.e. the amount of sun your home receives; visit SunNumber to look up the solar rating for your address)
    • Your current energy rates

    If you’ve got a high solar rating, high energy rates, and a strong system of state support for solar incentives, then yes, solar panels are likely to be worth it. Even without state incentives though, you’ll still get the federal tax credit, which is equal to thousands of dollars off of your tax bill.

    Another benefit to keep in mind: solar panels raise the value of your house, with an average 4.1% gain across the U.S. Depending on the initial price you paid to purchase your home, the gain in value could account for the cost of the solar panel system, though of course you won’t see that return until you go to sell your house later on.

    There are a lot of advantages to solar panels, and a lot of good reasons to make the switch. If you’re interested in investing in solar energy for your home, look to see what programs your state has in place to support your purchase. You should also talk to your neighbors about a solarizing campaign, which provides installation discounts for communities where multiple homes are purchasing solar systems.

    Not quite sure yet if solar is for you? Based on current trends, you can expect to see solar panels become more accessible and less costly in the coming decade, so it may pay to wait it out just a little bit longer and then take the leap.