Gilbert Michaud, a professor of environmental policy at Loyola University Chicago, said it’s worth looking into available options for solar right now.
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“It makes a lot of sense financially because costs have gone down so much and the incentives are really strong,” Michaud said.
Residential solar is very much a custom-fit product, however. To determine how much you can save, it’s important to be sure you consider all the factors influencing your unique situation.
Long-term solar savings
For most people, installing solar is an investment in the medium- to long-term future.
A payback period is the amount of time it takes to earn back your initial investment through monthly energy savings. How much you save per month depends on the size of your solar system, your home’s energy consumption and other factors.
After solar panels save enough to pay for themselves, the rest is strictly savings.
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How to estimate your solar savings
There’s a simple basic formula to determine how long it’ll take for your solar savings to pay off the cost of installing the system. Start with the upfront cost of installation, then subtract all tax credits, rebates, grants and other incentives you received. This determines your net system cost. Next, estimate how much you’ll save on your annual electricity bills with the system.
With a purchase as big as rooftop solar panels, you should get multiple quotes, make sure your solar installer answers all your questions, and find the offer that best fits your needs.
Subtract tax credits (and other incentives)
While tax credits and incentives vary state to state and utility to utility, the 30% federal solar tax credit applies to everyone. Find out how much you can expect your solar costs to be reduced, and subtract.
Here’s which states exempt solar panels from sales and property taxes. (Data accurate as of June 6, 2023.)
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Beyond such reductions in the upfront cost of installation, using your solar panels over the years can also shrink your energy bill and help pay back your investment through net metering. This is the most popular way utilities compensate homeowners who allow the energy their solar system produces to be fed onto the grid for other consumers to use.
Factors that influence savings
In recent years, net metering policies have begun to shift in some jurisdictions, like the high-profile case in California, and this has sometimes meant a reduction in the overall potential savings from solar. For example, some utilities are moving toward more-complex formulas that govern how much homeowners are paid for releasing energy onto the grid.
It’s important to do your homework to understand your local utility’s net metering policies and any potential changes being considered. You should also get to know any time of use rates that are in place that may influence how much the utility charges for energy consumption and pays for energy production during peak and off-peak hours. In some cases, solar panels paired with a solar battery can save you more with time of use rates than solar panels alone.
Adding an electric vehicle charger is an extra expense, like a battery, but it could increase your savings over time.
The climate and the amount of peak sun hours your location receives can also be a key factor in how much you’ll save over time. A state like New Mexico with up to six peak sun hours per day will obviously allow you to generate more electricity, and possibly save more, than more northern states that receive 25% to 50% less peak sun.
Since solar panels can last 25 years, you need a sturdy roof. If your roof isn’t in top shape, you might have to replace it before installing solar panels. Though you’ll eventually need to replace your roof whether you put solar panels on it or not, having to do so early is an extra expense that might eat into your savings.
Find your state’s solar incentives
Frequently asked questions
The best way to answer this is by doing the math. If you can save more on electricity over time with a solar system than the net cost of installing it, then it’s worthwhile from an economic perspective.
Is it worth paying off solar panels?
The central disadvantage is the upfront cost of a solar installation. Of course, this is partially offset by numerous incentives, like the federal tax credit. Some people may also consider solar panels an eyesore.
