Are solar panels worth it?
Since the cost of going solar falls every year, many homeowners are wondering: should I buy solar now or wait to save money on installation costs? There are many variables that influence the total financial returns you can expect to see from solar over its lifetime, all of which you should take into account when making your solar decision.
Considerations for when to buy a solar panel system
The most obvious variable when evaluating whether to go solar is the upfront cost of the solar panel system itself. In 2015, the average 6-kilowatt residential system cost roughly $16,000 after tax credits and rebates. Assuming that these trends continue, you can save a maximum of $1,450 on the price of your system by putting off your solar purchase for a year. If you wait two years, that number could go up to $2,750.
However, every year you delay your solar decision is another year that you miss out on the financial benefits your solar energy system provides. This is your solar opportunity cost. What you save on your upfront costs by waiting could be outweighed by the financial benefits you would have received in that time. To determine your opportunity cost, take the following into consideration:
Solar protects you from increased electricity prices
If you wait to go solar, you’re stuck paying your utility electricity bill every month, which is an increasingly expensive proposition: electricity prices rose by as much as nine percent in 2015.
The typical U.S. home spends about $1,200 a year on electricity. If you buy a system that meets 100 percent of your electricity needs today, you can eliminate your utility electricity costs and have an extra $1,200 in your pocket a year from now. The following year, when prices go up, you’ll save as much as $1,300 – and the savings will continue to grow for the 25 to 35 years that your system is operational.
Financial incentives will be reduced as popularity of solar grows
While there are significant rebates, tax credits and other incentives in place to encourage homeowners to go solar, incentives programs usually get phased out as solar becomes more popular and costs decrease. The current federal renewable energy tax credit is 30 percent through 2019 – but after that point, it will be phased out for residential systems. Some state and local governments offer similar programs that will be reduced over time. A few examples:
- California used to have rebates up to $15,000. But thanks to the popularity of solar in the Golden State, those rebate programs have been eliminated.
- In New York, the Megawatt Block Incentive Structure gives solar energy system owners a rebate based on the size of their system (in dollars per watt). As more property owners install solar, the value of the rebate is reduced. The highest incentives available through the program are $1/watt, but will eventually be reduced to $0.15/watt as adoption increases.
- Massachusetts had a solar rebate program that initially gave rebates in the $9,000 range. Now, the rebate program has ended and homeowners are only eligible for a tax credit, which is capped at $1,000.
Understand the solar incentives in your state
Incentive programs differ from state to state. Make sure to explore the incentives that are available where you live so you can determine how putting off your solar purchase will impact the tax credits or rebates you could receive. The Database of State Incentives for Renewables & Efficiency (DSIRE®), supported by the Department of Energy, provides a comprehensive summary of policies and incentives available in every state.
SREC programs can earn you money, but also won’t be around forever
Some states and utilities have solar renewable energy credit (SREC) programs and other production-based incentives that pay you for the solar electricity you produce. However, these programs won’t be around forever either. If you live in a state with an SREC program, you could miss out on the opportunity to generate thousands of dollars in extra income from your solar energy system while you wait to go solar.
For example, in Massachusetts, a homeowner could earn up to $2,000 in annual revenue generated through SREC sales. However, the existing SREC program will cease once the state reaches 1,600 MW of installed solar capacity, after which point the legislature will decide if and how the program will continue.
Financing options mean going solar is easier than ever
If you’re interested in going solar but don’t have the cash on hand for an upfront purchase, there are still plenty of financing options available that make it possible to affordably install solar on your home. Many of them even ask for no cash down, so you won’t have to pay anything out of pocket. While there is always some merit in waiting for costs to fall even further, make sure you’re accounting for your opportunity costs too.
At a minimum, you should start exploring your solar options today. Use EnergySage’s Solar Calculator to get an instant estimate of your solar savings, or register your property to get free, no-obligation quotes from multiple pre-screened installers.