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Are Solar Panels Worth the Investment for Owners?

Rafi Rafat's picture
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  • May 6, 2016

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Attention Homeowners: What You Need to Know Before Investing in Solar Panels

Are solar panels a more financially sound investment than stocks? It’s a bold assertion. However, some experts say yes– emphatically.

According to a study commissioned by the U.S. Department of Energy, the NC Clean Energy Technology Center explains that a 5 kilowatt solar panel system not only provides ample opportunity for return, the solar PV system saves homeowners an average $44 to $187 per month in local utility costs. When you consider the national average monthly bill is $107, this can mean deep savings for homeowners.

Still, even with compelling evidence to support this healthy investment, there are factors to consider before committing to solar panels. Be it weighing upfront cost, assessing the effect on your home’s resale value or finding qualified professionals during the installation phase, it’s important to know what you’re in for.

How much do solar panels cost?

Energy Informative, an organization devoted to helping homeowners understand more about solar panels, explains that the true cost of solar panels is a complex calculation. They guestimate that, generally, solar panels sized from 3 to 8kW can cost homeowners somewhere between $15,000 and $40,000. However the panels themselves only account for about 30% of that total. With factors like installation, labor, permits, inspection fees, and other operational costs, the price of residential solar systems go far beyond the actual hardware.

Homeowners who can’t afford the upfront costs out of pocket may consider taking out a home equity loan. Doing so can add compounded interest into the equation.

Fortunately, there are no shortage of tax credits and rebates to help lessen the upfront cost. These incentives exist at the federal level all the way down to your local utility company. For example, through the end of the year the IRS is offering a 30% Residential Renewable Energy Tax Credit that homeowners can claim to offset their taxes at the end of the year. (Check for all available tax credits, rebates and savings in your area on the website.)

How will solar panels affect my property value?

The U.S. Department of Energy has an answer for that, too. They reason that a solar electric system will increase your property value by a factor of 20:1. That is, for every $1 you save in utility costs, solar panels also add $20 to the value of your home. So if you save roughly $800 a year in utility costs, you can estimate increasing your value by approximately $16,000 over the long-term. Still, that’s assuming you’ll be in the house long enough to pay off your investment.

The U.S. Department of Energy states that most solar systems pay for themselves within 5 years. So what happens when you decide to resell your home before the 5-year mark or have to move shortly after an installation? Before you push forward and outfit your home with a solar system, consider whether buyers in your area are likely to see the value.

For instance, assess how many other homes in your neighborhood or city also have solar panels. If potential buyers are seeing them as a common fixture, they may be more inclined to think of them as a worthy investment. You can also check to see what local incentives your city or utility company is offering homeowners. If there are a lot, it could be a good indication that solar panels are a trending upgrade in your area.

What’s the installation process like for solar panels?

The installation process is as complex as understanding the costs of solar panels themselves. Again, there are several potentially limiting factors – or at least challenging factors – that go into the installation phase. All of these can significantly affect a solar panel’s electricity production. A few notable mentions include the number and size of trees on your property, the average temperature and climate type based on your latitude, and most importantly, the size, angle and material of your roof.

As a general rule, plan to build in some extra installation time if your roof is made of metal, Spanish tiles, or regular wood shingles. The mounting systems are more complex, especially if you happen to have a long rainy season.

Because the level of complexity increases the further you diverge from a standard composite shingle roof, it is critical to diligently research providers. Online reviews from trust sites like, or are a great way to source qualified professionals with proven reputations.

In the end, solar panels appear to be a very sound, low-risk investment for homeowners. Gaining some autonomy from the grid, decreasing monthly utility bills and increasing home values are just a few of the perks. Armed with these potential caveats, you’ll be able to make a more informed decision about whether this unique home improvement project is right for you.

Photo Credit: Slim Dandy via Flickr

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Hops Gegangen's picture
Hops Gegangen on May 8, 2016

The current paradigm for residential solar is a heavy-weight installation — heavy panels installed on a roof with a capacity in excess of even peak household requirements and reliance on an unscalable net metering arrangement to make the high installation costs pay off.

What the solar industry needs are lighter panels that can be deployed at smaller scale and more flexibly. Why can’t every suburban house have a few hundred watts peak installed as a circular panel on a post that can be swiveled as the angle of the sun changes with the seasons? Many of them already have basketball hoops of a similar size and installation.

This would do the consumer and the utilities a favor by reducing peak demand on hot sunny days that stress the grid and generate a low level of energy to offset typical constant demand like refrigerators, computers, etc.

And when you have an EV, and if you have space, add more.

Engineer- Poet's picture
Engineer- Poet on May 9, 2016

The problem is that PV peaks at solar noon, but the daily demand peak is either late afternoon or evening (either peak A/C or cooking dinner).

Hops Gegangen's picture
Hops Gegangen on May 9, 2016

Given a thermostat with a timer, you can easily over cool a little during the peak solar period, either with your personal solar or because the grid has a lot of solar and your smart meter is offering you lower electricity prices. Eventually, a wireless connection from thermostat to smart meter or internet will automate some demand shifting to optimize costs.

For commercial users, you can even now install a novel bit of equipment that makes ice during periods of low electricity prices, currently at night, and uses that to cool the AC unit during day. I could imagine hot, solar-rich places like the U.S. southwest extending that to residential use.

Engineer- Poet's picture
Engineer- Poet on May 9, 2016

Over-cool a little?  To coast through the evening demand peak you’d have to overcool a great deal, and you lose a lot of the “stored cool” over time.  Further, you’d need a chiller big enough to absorb the PV production peak.

Ice storage gets around the over-cooling and leakage problems but you still have to pay for the oversized chiller.

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