As technology improves and prices continue to drop, solar panel systems are becoming within reach of more and more people. But even though prices are about 60% less than they were in 2009, installing a solar panel system on the average home costs between $15,000 and $25,000. With that said, are solar panels even worth it?
Solar panels are worth it for people with high energy bills who are not planning to move out of their house any time soon. Lower energy bills and federal and local incentives offset the initial cost of solar panel systems, making them accessible to a larger segment of the population.
This guide will give you an in-depth look into solar panel systems and help you get an idea of their pros and cons. We’ll also walk you through choosing the pieces of your solar panel system and getting the most out of it.
How Do Solar Panels Work?
If you’ve landed on this guide, there’s a good chance you already have at least an idea of what a solar panel is. For those of you whose knowledge is limited to “those shiny things that make energy from the sun,” not to worry. You’re not alone, and honestly, you’re not that far off.
However, just so we’re all on the same page when we start getting a little deeper into the system’s components and which ones to choose, let’s go over the basic concept. Otherwise, it might be hard to picture how all the pieces fit together.
If you want a more in-depth look at solar panels’ inner workings, you can find one here. But for our purposes, we’ll keep it simple:
- 1. Panels Convert Sunlight into Usable DC Energy – Photovoltaic cells (or PV cells) are connected to panels—the whole unit together is what we call a solar panel. Using semiconductor energy, the cells convert sunlight into DC (direct current) electricity when it strikes them.
- 2. Energy Is Converted into AC Energy – Most of our household appliances use AC energy, so the DC energy that the solar panels create is sent to one or multiple inverters, which convert the DC electricity into AC (alternating current) electricity we can use in our homes.
- 3. Energy Use Is Monitored – A utility meter will measure how much energy your solar panels create, how much energy you use, and how much electricity you use from the electric grid. In many cases, if you produce more solar energy than you use, the extra gets sent into your city’s power grid; this gives you a credit that you can draw against, reducing your power bill if you need to draw from the grid in the future.
Solar Panel System Costs: The Equipment
Until you have a solar panel system installed, it can be hard to picture all the components that make one up. The major equipment consists of:
- Solar Panels: these are what actually convert the sun’s light into usable energy and are what most people picture when they think of a solar panel system
- Inverters: convert the DC energy created by the solar panels into AC energy that your home uses
- Mounting Equipment: to mount your equipment, usually to the roof, sometimes on the ground
- Power Meter: measures how much energy you use or direct back into the city’s energy grid, if you’re connected to one
- Backup Battery: (optional) saves power generated for nighttime or cloudy weather
- Backup Generator: (optional) provides power (not from solar) to homes not connected to the power grid in the case of unfavorable weather or at night
Naturally, the physical equipment you choose will have a lot to do with how much the system costs initially, how efficient it is, and how long it lasts. All of this will affect whether you find a solar panel system worth the investment or not.
To make your solar panel system as budget-friendly as possible, keep in mind:
- The initial upfront cost of each piece of equipment
- The efficiency and quality of the equipment
- The estimated amount each piece will save you over time
- The amount spent versus the amount saved in the long run
Some people will choose the most inexpensive equipment, hoping to save on costs now. Others will buy the most efficient, hoping it will pay off in the long run.
Below are the major components of the system that most affect upfront costs and efficiency over time:
There are three main types of solar panels available for residential use. When deciding which type of solar panel to purchase for your system, a few things to keep in mind are:
- What is the initial cost?
- How efficient are they?
- How many will you need to meet your energy needs?
- How much space do you need?
- Do you like the panel’s aesthetic?
The type of solar panels you select will have a significant impact on your solar panel system’s overall cost, both upfront and in the long run.
Monocrystalline Solar Panels
Monocrystalline solar panels are the most efficient of the three types, converting between 15% to 22% of the sunlight that reaches them into usable electricity. The more efficient your solar panels are, of course, the less you’ll need to meet your energy needs. That means that monocrystalline solar panels are ideal for customers who have limited space to set the panels up.
Buying fewer panels can mean spending less money, but on the other hand, these panels are also the most expensive type. Whether you save money on them or not will depend on how much savings per panel you’ll be getting as well as how many fewer you’ll need. It’s also worthwhile to consider how much money they’ll save you over time compared to less efficient models since the return on investment might more than make up for a higher initial cost.
Monocrystalline panels tend to be the favorite of consumers worried about their solar panels’ aesthetic since some consider their flat black color to be less of an eyesore than other options.
Polycrystalline Solar Panels
Polycrystalline solar panels are another popular choice among homeowners, partly due to the fact that they’re less expensive than monocrystalline ones. However, they’re also less efficient, with 15%-17% efficiency.
If budget is a concern, you might want to look into purchasing this less-expensive type of panel, although you might end up having to buy more of them due to their lower efficiency. That might end up costing you just as much in the long run as just going with monocrystalline ones, so take the time to run the figures and see which makes more sense for your situation.
Another thing to consider is the amount of space you’re able to dedicate to your solar panel system since more panels will obviously take up a larger area.
Polycrystalline solar panels are shinier than monocrystalline ones and usually have a bluish hue to them. Many find them unattractive because of this, so they prefer to pay a little more for a more aesthetically-pleasing type.
Thin-Film Solar Panels
As their name suggests, thin-film solar panels are much thinner than polycrystalline and monocrystalline panels, making them much lighter and more portable. Thin-film solar panels are also the least expensive to purchase.
Thin-film panels come in blue or black, depending on what they’re made of. The solar cells themselves are ultra-low-profile, but panel frames can be pretty thick, depending on which ones you get. That would, of course, cancel out the appeal of a low-profile design.
Unfortunately, thin-film solar panels are also the least efficient, with only about 11% efficiency. Because they’re so inefficient, you’d need much more thin-film solar panels to produce the same amount of energy from either of the other two types.
You’d need so many, in fact, that it’s actually very rare for thin-film panels to be used in residential applications since they need such a large area to produce enough energy to be useful.
As we mentioned earlier, inverters convert the energy created by the solar panels from DC to AC electricity that our household will use. The same rule that applies to solar panels goes for inverters: spending more upfront on an efficient model will likely save you more money over time. Most modern inverters are about 97% efficient at converting the energy they receive, although older or lower quality models will be under this.
Inverter costs for an average residential system will usually be somewhere around 6% of the solar panel system budget or $1,000-$1,500.
Let’s take a quick look at the different types of inverters most commonly used for residential or smaller-scale installations.
The least expensive inverters are string inverters, which have commonly been used the most in residential setups.
With string inverters, each solar panel is “strung” together by wires, which then run down to one centralized inverter, usually attached to the house’s side, or perhaps in a garage or basement. This cost-effective option makes maintenance simple since the inverter is accessible from the ground rather than on the roof.
String inverters are suitable if you have:
- A wide enough roof for all the panels to lay side-by-side, facing the same direction
- Limited shade in the area where the solar panels are
Because all the panels in a string inverter setup are connected, if just one is covered by shade, it will affect the system’s overall performance. For this reason, they’re not ideal for homes with a complex roof layout that will require the panels to face different ways or one which is partially covered by shade.
Micro-inverters have the highest initial cost, although prices drop every year as technology improves.
These inverters allow for a flexible system since one small inverter is installed directly under each solar panel. That allows each panel to work independently from each other, so the whole system doesn’t suffer if one loses efficiency.
Micro-inverters are suitable for people looking for a scalable system since you’ll be able to just add more inverters for each new solar panel you install. Because each inverter will be installed on the roof (assuming that’s where your panels are located), maintenance can be more of a hassle than with string inverters.
String Inverters with Optimizers
Located in the happy middle ground between string and micro-inverters are string inverters with optimizers.
In these systems, solar panels are strung together to an inverter located on a wall of the home, as usual. But there is also an optimizer installed under each individual panel, which allows them to work independently.
These inverters are more cost-effective than micro-inverters but do essentially the same thing, optimizing the system in case one panel isn’t working to full speed. The main difference lies in where the power is optimized. With regular string inverters, the energy produced from each panel travels down to the inverter, where it’s all optimized at once. The inverter then converts it into AC power.
String inverters with optimizers optimize each panel’s energy output right there on the roof before sending it down to the inverter to be converted.
Installing a backup battery as part of your solar panel system will add to your initial costs, but it can also save you money:
- Batteries save energy for you to use when the solar panels aren’t producing energy (at night and during cloudy weather).
- You can use energy from the battery during more expensive times of day if your energy bill is on a “time-of-day” plan.
It’s generally a good idea to install the battery along with your system, or at least build the system while keeping in mind that you’d like to add a battery later. But batteries can be added to any system, even if the system isn’t set up to accommodate one—it just might cost a little bit to make the necessary modifications.
Below are the types of batteries there are to choose from:
AC-Coupled batteries are usually what people go for if they’re adding a battery to an existing solar panel system. Adding an AC battery also requires adding an additional inverter, though, making them less efficient.
Here’s how your solar energy system will work with an AC-coupled battery:
- Solar panels produce DC energy.
- The inverter converts DC energy into usable AC energy.
- The energy is routed through the home’s circuit breaker into a second inverter.
- The second inverter converts the energy back into storable DC energy.
- The energy finally goes into the battery from the second inverter.
Each time the energy is converted between AC and DC, a little bit is lost. That means that although they’re less expensive upfront when adding them to an existing system, they’re less efficient.
It still might make the most sense to add one, though, depending on how old your current system’s components are. Plus, AC-coupled batteries can charge from either your solar panels or the electrical grid, whichever is less expensive at any given time.
If your home uses micro-inverters, you’ll definitely want either an AC-coupled battery or a hybrid one since DC-coupled batteries don’t work with them.
If you’re in the process of shopping for or installing a solar panel system, it usually makes more sense to go with a DC-coupled battery.
Instead of using multiple inverters to convert the energy from DC to AC, then back into DC, solar panel systems with DC-coupled batteries work like this:
- Solar panels convert sunlight to DC energy.
- DC energy is sent to the battery for storage.
- As it’s needed, energy travels from the battery to an inverter, which converts it to AC energy for household use.
DC-coupled batteries are incredibly efficient compared to AC-coupled ones, although it’s worth pointing out that they don’t work with systems that use micro-inverters.
Also called AC batteries, inverter-battery hybrids, like Tesla’s Powerwall 2, combine an inverter and battery into one unit. That helps minimize the amount of energy lost over time and saves you from buying multiple pieces of equipment.
You can also install a hybrid unit without the battery, giving you an economical option to add the battery later without spending a ton on all new equipment.
How Solar Panel Systems Save or Earn You Money
Now that you know a bit more about the ins and outs of how solar panel systems work and where you can save money on them (initially by buying inexpensive equipment, or in the long run by paying more for more efficient models), let’s take a look at how these systems can save you money.
Of course, the exact amount you spend or save will depend on your specific situation and where you live, but this guide will give you the tools to know what to factor in when deciding if solar panels are going to be worth it to you or not.
Lower or Eliminate Electric Bills
The main thing that people think about when trying to decide whether solar panels are worth it is their effect on your electric bills. This is the most obvious benefit, since the more solar power you use, the less electricity you need to draw from the grid.
Not only will a solar panel system lower your energy use overall, but it can also save you extra money if your electric bill uses “Time of Use” billing. Time of Use billing charges you more during peak hours, which are usually in the evenings when most people are using electricity. If you don’t produce enough of your own solar energy to stop drawing from the grid altogether, you can draw from the grid during low-cost times and use your solar during peak hours.
Lowered or eliminated electric bills are already appealing, but they’re becoming even more so all the time since the cost of solar panel systems is dropping as electric costs continue to climb.
Additionally, many electric companies will give you credits if you produce more solar power than you use since that excess power goes into the grid to be used by your neighborhood.
Incentives and Rebates
In addition to saving money on your bills, you can qualify for several rebates and other incentives that will offset your system’s cost.
- Federal Tax Credit: lowers the amount you pay in taxes based on how much you spent on your solar panels
- State Incentives: each state is different, but many offer tax credits and other incentives
- Renewable Energy Certificates: utility companies in some states will buy the credits you earn from producing solar energy to meet their quote
- Performance-Based Incentives: paid by some states or utility companies based on the amount of energy you produce
- State or Utility Rebates: some states and utility companies offer cash rebates, for sometimes as much as 10%-20% of the system’s cost
The more money you collect from the government and other organizations from rebates and credits, the sooner your system will start paying for itself.
Increase Home Value
On average, installing solar panels to your home increases its value by about 4.1%, or an average of $9,274. It goes without saying that this figure will change based on several factors, including:
- The home’s market value
- The current market
- The location
- How old the solar panels are
Even if you’re not planning on selling your home any time soon, it’s always a good idea to make modifications, such as adding solar panels, that will make selling it more profitable.
Will Installing Solar Panels Be Worth It for You?
Whether installing a solar panel system will be worth it or not is a decision that only you can make, but it’s an easy choice when you consider these factors:
- First, do your research on how much a system will cost you (make sure to check out a few different options).
- Then, take a look at what incentives and rebates are available to you based on where you live to get an idea of how much of the installation cost will be offset.
- Finally, calculate your projected energy bill savings.
Putting these three factors together will give you a pretty good idea of whether a solar energy system will make sense for your specific situation.
Obviously, every situation is different, but most homeowners can expect their solar panels to pay for themselves after about 7-20 years.
We’ve already detailed the major system costs and savings, but there are a few other things to consider that will affect the system’s installation cost and overall savings.
Where you live will have an impact on how effective a solar panel system is. Locations with lots of sun and few clouds will be much more efficient than areas where it’s cloudy or rainy all the time.
Obviously, panels exposed to more sun will generate more solar power, making them more worthwhile than panels that aren’t exposed to enough sunlight to work half the time.
Another important consideration is your current energy consumption. If you use a lot of energy, using a solar energy system to lower your electric bills might make the system worth it sooner rather than later.
But if you don’t use much energy, either through conservation or because you’re away from home a lot, the savings are going to pile up more slowly, making solar panels less worthwhile.
People who live in larger cities where energy costs are through the roof will benefit more from solar panels than people who live in places with more reasonable electric prices. Either way, a lower energy bill is a lower energy bill, though.
Your home layout can also impact whether or not solar panels are worth it. The following can make solar panels less efficient and more of a hassle upon installation:
- A small or multi-sided roof, where not many panels can fit or where they’ll be facing in different directions
- A house surrounded by large trees or other structures that may shade the panels
- An older house with a roof that needs replacing before it can bear the weight of solar panels
None of these are deal-breakers, but they may add to higher installation costs or lower efficiency, so they’re worth considering.
If you plan on living in your home indefinitely, you might find solar panels more worth it than if you’re planning on moving soon. On the other hand, they do increase your home’s value, so you’ll get some of the money back, even if you don’t get to enjoy the lower energy bills for as long.
As you can see, there are a ton of factors that play into whether installing a solar panel system for your home will be worth it or not. But you can refer to this guide as you’re pricing structures and deciding which equipment to get, as well as to get an idea of the money you’ll be making back. In most cases, installing a solar panel system is well worth the expense and effort, but it depends on your particular situation.