Converting to solar power comes with many benefits, including energy savings, reduced carbon emissions, and increased property value. However, there are some cases when solar panels aren’t worth the investment. 

Even with a high-quality system from a top solar provider, your location, home design, and local solar market could all diminish the long-term benefits of solar panels. We’ll explore these factors and more to help you decide if a solar panel system is worth the investment.

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When Are Solar Panels Worth It?

Transitioning to renewable energy helps to lower your electricity bills, reduce your carbon footprint, and boost your property value. However, your location, current energy rates, and local solar incentives can all impact whether such a big investment will be worthwhile for your home. We’ll take a closer look at these factors below.

Energy Consumption and Rates

Solar panels provide an economical alternative to fossil fuels. This equals energy savings for homeowners in areas with high electricity rates. According to the U.S. Energy Information Administration (EIA), the average American household spends $122 per month on electricity bills. However, these rates vary throughout the country, with energy bills as high as $180 for some households. Below are the states with the highest electricity rates per kilowatt hour.

State	Average Electricity Rate (cents per kilowatt hour)
Hawaii	$45.69
New Hampshire	$32.32
Connecticut	$28.84
Massachusetts	$27.77
California	$26.66
Rhode Island	$24.43
New York	$23.97
Maine	$23.26
Alaska	$23.08
Vermont	$20.75

*Data provided by the U.S. Energy Information Administration (EIA).

Residents in areas with higher-than-average rates, such as California, will benefit more from a solar panel system than those in areas with a low cost of electricity.

Energy consumption also affects how much a solar system will benefit your home. Homes with low energy consumption won’t receive long-term savings from going solar. Most reputable solar companies will review your average energy usage and estimate your potential savings from going solar. If your energy consumption or electricity rates are too low, a solar panel system won’t be recommended.

Local, State, and Federal Tax Incentives

Homeowners can use solar incentives, credits, and rebates to save money on their solar panel system. For example, the federal solar tax credit provides a tax reduction equal to 30% of your solar installation costs. Additional state tax credits and incentives may be available in your area. Your local utility company may also offer one-time rebates.

Additionally, your state may have net-metering programs. These programs allow customers to sell extra energy back to the grid for credits on future electricity bills or payouts at the end of a calendar year. Alternatively, you can install a solar battery to store excess energy for use during a blackout, low sunlight days, or periods of high electricity rates.

We recommend checking the Database of State Incentives for Renewables and Efficiency (DSIRE) to find solar incentives and rebates in your area. 

Location

Solar photovoltaic (PV) systems work best in areas with ample sunlight. Solar panels will work in inclement weather but won’t generate their maximum power levels. If you live in an area with year-round cloudy or rainy weather, your solar system may not reach its peak energy output, and your long-term savings will be reduced.

Your home should also be free of any obstructions that could cast shadows on your panels, such as surrounding trees and nearby buildings. Blockage for even a few hours a day could reduce your panels’ energy output and lower your potential savings. Homes in the northern hemisphere that face south, southwest, or west receive the most direct sun exposure, resulting in optimal solar energy production.

Property Value

Any home improvement project can boost your home’s property value, including solar panel installation. The U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) found that your home value increases by $20 for every $1 you save on your utility bills. If your solar panel system saves you $800 per year, that translates to an added $16,000 to your home value. 

Your increased property value may not necessarily result in additional property taxes. Several states have laws protecting homeowners from paying additional taxes for clean energy upgrades. These laws vary by state, so we recommend researching exemption laws in your area. 

Roof Design

Your home’s roof design and angle are crucial to your solar panel installation. You’ll need enough roof space to install an adequate number of solar panels. How many panels you need depends on your energy usage and which type of solar panels you select.

High-quality solar panels are more efficient, so you’ll need less of them to power your home. These panels help to conserve space when additional roof obstructions, such as chimneys or skylights, reduce your available area. Choosing inexpensive solar panels with lower power output will require more panels and ample roof space. 

Panels should be installed at an angle between 15 and 40 degrees for peak sun absorption. If your home has a steep pitch, your solar installer will need to use special mounting equipment to adjust to the correct pitch. This is a more complicated installation and will increase your labor costs.

 

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The Overall Cost of Solar Panels

Your total solar system cost will include more than the panels themselves. You’ll also have to pay for labor and additional equipment, plus ongoing maintenance and servicing fees or add-ons such as a solar battery or electric vehicle (EV) charger. 

The good news is that solar panel prices have dropped by 60% over the last 10 years, according to the Solar Energy Industries Association (SEIA). An average solar energy system now costs around $20,000, though pricing varies based on your system size, local rates, and your chosen solar installer. 

Your final price also depends on your selected financing option. Homeowners who pay for a solar system up-front will see a higher return on investment because you’ll avoid interest rates and get access to solar incentives. You’ll also qualify for solar incentives if you choose a solar loan. However, the interest rates will add to your total cost over time. 

Additional options, such as a solar lease or power purchase agreement (PPA), allow homeowners to lease their system rather than committing to ownership. These options cost less up-front but disqualify you from incentives and won’t increase your property value.

 

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Our Recommendation

Solar panels aren’t beneficial for everyone. Several factors, including local weather conditions, available incentives, and electricity rates, impact whether a solar system will be worth it for your home. In ideal conditions, a solar system offers long-term energy savings and increased home value. Homeowners installing solar panels should select the right financing options and take advantage of state and federal tax credits to maximize their return on investment.

 

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