There are many benefits of solar panels, but how do you know if solar panels are worth it for your home? In this post, we explain solar energy advantages and disadvantages to help you make an informed decision.
Are solar panels worth it?
May 24, 2018
Summary of the advantages and disadvantages of home solar panels
- Lower cost of electricity
- Higher home resale value
- Lower taxes
- Minimal maintenance costs
- Reduced environmental impact
- Upfront cost
- Payback time
- Not ideal for every home
Advantages of solar energy
Lower cost of electricity:
Going solar will save you money on your monthly utility bill by reducing the amount of electricity you purchase from your utility (e.g. Austin Energy, CPS), coop (e.g. PEC), or retail electric provider (e.g. TXU, Reliant, Green Mountain Energy). With net metering policies, you can be compensated by the utility for the solar power you generate. Solar panels are generally a more attractive investment in areas that have higher electricity rates – the higher your energy costs, the more you can save. The average retail price for electricity in Texas was just under 8.5 cents per kilowatt-hour (kWh) in 2016 (source: EIA), which varies between the regulated utilities and competitive markets (source: TexasElectricityRatings.com). As long as your system is operational and the sun shines, your solar panels will generate guaranteed returns, unlike the volatility of other investments such as the stock market. While the payback of solar varies, ranging from 8-12 years on average in Texas, it is worth noting that there is no payback for the money you pay to the utility every month for your electricity.
Higher home resale value:
Rooftop solar panels can increase your home’s resale value with a return on investment (ROI) that is higher than many other types of home improvements. RealEstate.com found that solar panels boosted the sale price of starter homes by 40 percent, more than any of the other 28 design features analyzed. A 15-year, eight-state study by Lawrence Berkeley National Laboratory study showed a home price premium between 0.78% and 1.05% per kilowatt (kW) of solar.
The Solar Investment Tax Credit (ITC) is a dollar-for-dollar reduction in your federal tax liability equivalent to 30 percent of the cost of your solar energy system. You can take the full deduction when your system goes online or over time. Any unused credits can be rolled over into the next tax year, as long as the solar ITC is still in effect. The ITC was recently extended by the government but with reduced benefits after 2019. The tax reduction decreases to 26 percent on January 1, 2020, to 22 percent at the beginning of 2021, and to 10 percent at the start of 2022.
Minimal maintenance costs:
Once installed, there will be minimal costs to maintain your solar power system. Any damage resulting from storms or other natural events will be covered by your homeowner’s insurance, and any necessary repairs or replacements should be covered by your system warranty. Be sure to check the manufacturer’s warranty to understand what equipment is covered and for how long (find out more about SunPower’s 25-year power, product, and service warranty).
Reduced environmental impact:
Solar power helps you lower your carbon footprint in a meaningful way and does not create local air pollution. Most electricity is still made by burning fossil fuels, with coal and gas accounting for 70 percent of net generation in Texas (source: EIA). By installing solar panels and making your own renewable energy at home, you are contributing to a cleaner, more robust electric grid.
Disadvantages of solar energy
Your system cost is a function of which solar panels you choose, the size of the system, the types of panels you choose, and the incentives that will offset your out-of-pocket cost. You may be eligible for federal, state, and local solar rebates that will lower your cost. If you do not have a federal tax burden (for example, if you are retired), the Solar ITC will not benefit you.
Buying your system with cash only will reduce your total investment but will take time to pay back. Financing can reduce or eliminate your upfront out-of-pocket costs but will lower your lifetime savings.
Solar is a long-term investment, and whether you pay cash or choose to finance the system, it will take some time to see a return on that investment. However, once you pass the breakeven point, you will continue to reap the savings from your solar investment for decades. But what if you aren’t planning to stay in your home for the length of the payback period? The increase in home value will likely still make solar a good investment, as long as you aren’t planning to move in the next 1-2 years.
Not ideal for every home:
Unfortunately, not every home is a good candidate for solar. You need a certain amount of unobstructed sunlight to make the cost of installation worthwhile. The amount of solar power that can reach your home depends on where you live (Texas is lucky to get a lot of sunlight generally), how much shade covers your roof (from trees or roof structures such as chimneys), and the directional exposure of your roof (south and west facing are best).
You do not need to have a brand-new roof to be a good fit for solar panels, but your roof does need to be in good condition. If you need major roof repairs in the near future, you may want to wait until after those repairs are completed before considering solar.
Your roof type can make solar impractical. Composite shingle, the most common roof type, makes for a straightforward installation. A standing seam metal or clay tile roof is more complex, which means your cost will likely be higher and you will need to find an installer who has experience with those roof types. Ground mounted solar may be an option if your roof is incompatible with solar.
“My system has been up and running for 1 year and has produced 5% more power than expected. Our highest electricity bill has been $9.21 and we haven't had any issues, from the installation through our first year of energy independence."
–Jay M., Texas homeowner