Solar still pays for itself—even without the tax credit

The federal solar tax credit ends after December 31, 2025. That means solar panels will no longer be a viable investment for homeowners, right?

Wrong. It’s still one of the smartest long-term investments you can make in your home.

With falling solar panel costs, rising electricity prices, and the growing importance of personal energy independence, solar continues to deliver major financial benefits in the form of tens of thousands of dollars in savings—with or without the tax incentive. Most homeowners starting their solar journey today can expect to break even within about 10 years, then continue to enjoy at least 15 years or more of free electricity.

Solar still pays for itself—and then some. Here’s how the math works.

Solar prices remained at an average of $2.53 per watt—$29,649 for the average-sized system—in the first half of 2025, the lowest price on record, according to EnergySage data. This represents a dramatic decline from the early 2000s when the average system would’ve cost you nearly $90,000. Even accounting for recent tariffs and supply chain disruptions, the long-term trend remains decisively downward.

Meanwhile, electricity costs are heading in the opposite direction.

"We're entering this era where electricity prices are almost certainly going to rise across the country," Michael Thomas, founder of Cleanview, a platform that tracks clean energy trends, told EnergySage. "They've already risen as much as 30% in a year in a state like Maine recently, and we're looking at electricity price increases of 10, 15, 20% across most states this year."

The U.S. Energy Information Administration (EIA) expects U.S. residential electricity prices to average 16.8 cents per kilowatt-hour (kWh) in 2025, up 2% from last year. Even more concerning for homeowners, residential electricity rates are projected to rise between 15% and 40% by 2030, according to the ICF Climate Center, and could double by 2050.

This divergence creates a widening gap that makes solar increasingly attractive.

"When you install solar panels you lock in a guaranteed price of your electricity, and you get discounted or free electricity for a very long time," Thomas explained. While your neighbor's electric bill keeps going up, yours will remain flat.

Without the 30% federal tax credit, solar payback periods will extend by roughly two years, according to Zoe Gaston, principal analyst at consulting firm Wood Mackenzie. This would push the average payback period they see from seven to nine years.

"So yes, that's two years, but in the grand scheme of things, it's not too significant,” Gaston said.

She’s referring to the fact that solar panels come with 25-year warranties and often last 30 years or more. Even with the extended payback period, homeowners can expect 16 to 20 years of free electricity after breaking even on their solar investment.

”Folks should run the numbers and see what it looks like,” Thomas said. "In some cases, you might be surprised if you see electricity rates are going to rise 10% every year for the next five years, and then calculate how much you might save with solar," he said. "It might look really good."

Not to mention, the federal tax credit isn’t the only solar incentive out there—many states and utilities still offer their own that can further reduce your payback timeline.

The forces driving electricity prices higher show no signs of abating. Data centers powering artificial intelligence are driving unprecedented electricity demand, with consumption expected to increase 130% by 2030. The Energy Department projects data centers will use more electricity than households for the first time ever next year, putting extreme pressure on our aging power grid.

"We have an outdated electric grid that's just not big enough for the types of things that are happening in the economy right now—data centers, electrification, reshoring of manufacturing," Thomas said. "That ultimately requires investment from utilities, and they pass that on to customers in the form of [higher] rates."

Add natural gas costs that jumped more than 40% in the first half of 2025 compared to 2024, and you have a recipe for sustained price increases. "Any way you look at it, gas-fired power is expensive," John Quigley, senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, told NPR. "It's going to be increasingly expensive as natural gas exports increase."

While equipment prices have fallen dramatically, climate activist Bill McKibben said there’s still a lot of work to be done.

“The real problem here is that solar costs us three times as much as it does in Europe or Australia," McKibben said.

One of the culprits? Soft costs—things like permitting, interconnection, and paperwork—which account for about two-thirds of installation costs.

“There are 15,000 building departments and municipalities in this country, and each has a building department who would like to climb on your roof. It’s not necessary—doesn’t happen elsewhere in the world,” said McKibben. “If we could knock that down, the price [of solar] would plummet.”

Fortunately, there is some progress being made in some states—both Texas and Florida passed bills in 2025 that will make the permitting process much smoother.

"That's good from both the consumer experience—you don't have to wait as long, you don't do as much paperwork—but most critically, it's going to drive down these so-called soft costs of solar," Thomas explained.

Battery storage costs have also plummeted, falling about 75% over 15 years, according to the International Energy Agency (IEA).

"Storage prices are really falling because we're seeing the price of battery packs fall across the world, as more people are buying EVs and installing solar and storage," Thomas said. "That's driving the cost down, and consumers benefit from that."

For homeowners concerned about upfront costs without the tax credit, leasing options may provide a solution. A confluence of factors like high interest rates, tax policy changes, and economic uncertainty now make outright ownership more expensive—which makes third-party ownership (TPO) options, including leasing and power purchase agreements (PPAs), more attractive. Gaston said without the solar tax credit, she expects more homeowners to shift toward TPO options.

“The third-party ownership share was about 56% in Q2 of 2025. Looking ahead at our forecast, I expect that to jump to about 70% in 2026,” she said.

With TPO systems, the solar company owns the system, while you benefit from the energy it produces. A key factor: Solar companies can still claim the federal tax credit beyond 2025. It only expires for homeowners this year.

"For the next few years, leases are still going to make a lot of sense because the way the tax bill was written enables [the solar company] to still qualify as a business for the tax credit," Thomas explained. "They will be able to pass that on in the form of cheaper lease rates to consumers."

While solar ownership typically provides better long-term returns, leases eliminate upfront costs and still deliver immediate savings on electric bills—making solar accessible even without the federal tax credit. Solar loans often don't require a down payment either, but if you aren't comfortable taking on a high-debt load, a lease is also worth considering.

Gaston said the elimination of the federal tax credit is also innovating the TPO space, including a new rent-to-own model for solar panel systems that works similarly to leasing a car and purchasing it later.

“There's a lot of hype about prepaid TPO options. The TPO provider owns the system, they claim the tax benefits, but then they pass on the savings to the homeowner as a discount upfront,” Gaston said. “Then the homeowner, after a certain number of years, has the option to purchase the system and own it themselves."

Losing the 30% federal tax credit undeniably makes solar more expensive upfront for those who want to own their systems. But with electricity rates rising faster than general inflation, equipment costs continuing their downward trajectory, and grid instability increasing, the fundamental value proposition of solar remains strong.

"It's a personal financial decision that everyone has to make for themselves," Thomas said. But the math increasingly favors solar—even without federal support.

If you’re thinking of waiting to see if solar prices drop further, McKibben would advise otherwise.

"I think it's like planting fruit trees. The best time to do it was 20 years ago, and the next best time is today,” he said. “This still just makes bottom-line sense in all kinds of ways, including not a small thing that you're helping prevent the destruction of the planet that we happen to live on."

Every month you delay, you're betting that electricity prices won't continue their decades-long climb while missing the opportunity to lock in predictable energy costs. The federal tax credit may be ending, but the economics and ethics of generating your own clean power to escape rising utility rates and better the planet remain as compelling as ever.