Are Solar Panels Worth It?

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Are solar panels worth it?by Simone Garneau

Here’s the breaking news in case you missed

it: solar is taking off. In the past decade, theexpansion of the residential solar energy markethas been nothing short of astonishing. Thoughit’s still early days, all key market metrics pointto continued growth for the coming years.

“Today, solar is still something thatfolks are not used to seeing,”explains Jigar Shah, solar industryexpert and SunEdison founder. “Inten years, everyone will have solaron their roof. In addition to savingmore money, you want to be part ofthe ‘early mass market.’ You will getbetter service and more braggingrights than if you are the last one onthe block to switch.”

For most homeowners though, the decision to gosolar boils down to a single question: is it worthit?

A vision of the future: your solar neighborhood(Photo credit: energy.gov)

Nobody wants to hear “it depends”, but that is the reality. So we decided to write a guide to coverthis topic with the level of detail it deserves. We will cover quite a few topics and go through anumber of examples in this guide. If you don’t get to finish reading it in one sitting, no worries: youcan download a PDF version right here. Here are the top takeaways:

* Don’t fixate on how sunny it is where you live: utility rates and incentive programs can make a huge

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difference.

* Crunching cost per kilowatt-hours is not fun, but only an apples-to-apples comparison can give youthe answer you need.

* When it comes to solar power, think like an investor, not as a utility customer.

* A solar lease may look like a good option for going solar, but in all likelihood, a solar loan is an evenbetter option.

* There are now almost a million solar homes in the U.S. - it’s time to join the party.

* A few online tools are all you need to do the key calculations and start charting your solar strategy.

While solar panels are still a rare site in much of the United States, there are a few states where solarenergy is taking off. Take a drive around Pasadena, California or down the streets of Fair Lawn, NewJersey, and you are bound to come across solar panels. Rapidly falling solar equipment prices andgenerous incentives, like the 30% federal investment tax credit for residential solar, have helpedmake this a reality.

“In 2006 there were only 31,000 U.S. homes with solar,” according to Alexandra Hobson,Press Officer & Communications Manager at Solar Energy Industries Association (SEIA).“Today, there are nearly 1 million and that number is only going to grow.”

Homeowners, frustrated by their ever increasing utility bills, are looking for an alternative that willsave them money in the long run. They are also looking for ways to help the environment byproducing their own clean energy. Jim Jenal, CEO of the solar company Run on Sun in Pasadena,California knows this firsthand:

“For most homeowners it starts with a desire to save money; however, even for the mostcost conscious, the understanding that they are doing something good, sweetens thedeal.”

With dramatic price drops in solar equipment, solar energy is more affordable than ever forhomeowners considering the switch.

“With new financing options, and more capital moving into the industry, it has never been

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cheaper or easier to install solar on your home or business,” according to Hobson at SEIA.“Over the last decade, the price of residential solar has dropped nearly 60 percent.”

Decreasing solar costs is great but that doesn’t mean solar panels will make financial sense foreveryone. Another important factor is the cost of electricity where you live. If you happen to livesomewhere with cheap electricity, you’re unlikely to recoup your investment. Going solar in locationswith cheap electricity is more about lowering your environmental footprint and being more self-sufficient.

“We have clients who don’t even care about what they will save; they just want to be asgreen as possible,” Jenal from Run on Sun explains. “For our non-profit clients it is aboutfulfilling their educational mission and being good stewards of the environment.”

Levelizing the field of cost comparisonChances are, when you think about the suitability of solar energy for your home, the first thing thatcomes to mind is sunny skies and long hot days. While the level of solar radiation in your city is animportant factor, it’s not everything. There is another factor that is equally, if not more, important:your current utility rate. Ultimately, figuring out if solar energy will save you money in the long runboils down to figuring out if the cost of solar electricity is the same or cheaper than electricity fromthe utility. If the answer is yes, then solar energy makes financial sense.

So how do we do this? We will walk you through the steps.

Finding your current electricity rate

OK, I will admit, figuring out the cost of electricity from your utility is not as simple as it should be. Itwould be nice if the cost per kWh was clearly indicated, but in many cases, it is not. A ballpark figurecan be determined by taking your total charge for the month and dividing it by the number ofkilowatt-hours you used.

So in this example bill from a California utility,you would take $300.09 / 1500 kWh =$0.20/kWh.

But this is not really the most accurate numberbecause it includes your fixed monthly charges,which inflates the cost per kWh. With solar

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Utility bill sample (Source: Southern California Edison)

panels, you would still stay connected to the gridand would continue to have fixed charges.Therefore, it would be better if you could find thetotal cost before the fixed charges. You cancompare multiple monthly bills to see whichcharges are fixed from month to month, orspeak to your utility to learn more about thefixed charges for solar customers.

If you don’t want to dig up your past electricitybills, you can also use the 12-month average foryour state (for the latest 12-month averages bystate click here). In the case of California, thestate average for the past 12 months is$0.17/kWh, which is lower than the figure wecalculated above.

Now, how do you determine the cost of solar electricity?

And you thought figuring out the plain-vanilla electricity rate was difficult! For most people,determining the cost of solar electricity can be reminiscent of high-school trigonometry problems…notfun. It turns out that the math for solar electricity is actually much easier than a basic trigonometryproblem: the issue is the novelty factor. We’re simply not used to thinking about electricity assomething that we produce by investing in a “power generation asset”. But buying or leasing solarpanels is exactly that, so we need to think like a producer, not a consumer.

To do that, we calculate the levelized cost of solar energy (LCOE), which is essentially the cost of solarelectricity, including both the initial installation costs, as well as the ongoing expenses such as fueland maintenance over the expected lifetime of the investment. The term "levelized" refers to makingan apples-to-apples comparison of different sources of energy.

All other things being equal, the more sun a location receives, the lower the levelized cost of solarenergy.

The levelized cost of solar energy should not be confused with another solar cost: cost per watt. Thecost per watt is nothing but a handy way to "normalize" the total cost of installation. For example, ifthe cost of installation for a 5 kW (i.e., 5,000 watt) solar PV system is $20,000, then the cost per wattof this system is $20,000 divided by 5,000 watts: $4 per watt. Cost per watt is not dependent on the

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amount of sun a location receives, but it does vary from place to place because of other factors, suchas the cost of permits and customer acquisition, to name a couple.

Location, Location, Location

As mentioned, where you are located greatly impacts the cost of solar electricity, or LCOE. Not only isthe amount of sunlight that falls on your panels location dependent, but so are the available financialincentives, such as rebates and tax credits.

Since there are so many different municipal and state incentive programs, for simplicity, we will onlyconsider the federal investment tax credit (ITC) of 30%, because that is available nationwide.

I just bombarded you with tons of information, so let’s take an actual case and illustrate some ofthese points:

Solar system installation cost: Assuming a cost per watt of $4, an average-sizedresidential solar panel installation with 5-kW capacity would cost about $14,000 ($20,000minus the 30% federal investment tax credit). Other available rebates would decreasethis cost further.

Operating and maintenance cost: An estimate for the operation and maintenance costsover the expected 25-year lifetime of your panels would be about 10 percent of thepurchasing cost before tax credits (0.10 * 20,000) — in this case, about $2,000 for a 5-kW system. This is essentially a provisional budget to account for things like an inverterreplacement or minor repairs. With no moving parts, solar panels themselves arevirtually maintenance free, but some of the other electrical equipment may need somecare.

Fuel cost: In the case of solar, the fuel comes from the sun, so there is no additional cost.In practice this means two things: 1) you will actually save money using a star that’sabout 93 million miles from your panels; and 2) once you pay off your solar loan, yourannual electricity cost will be minimal.

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Coming back to Earth, let’s sum up the installation, as well as operation and maintenance costs, inorder to estimate the total lifecycle cost: $14,000 + $2,000 = $16,000.

We’re almost done! But we still need to determine how much electricity you can produce with yoursystem to determine the levelized cost.

Energy Produced with a 5 kW System in Los Angeles

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LevelizedcostofsolarelectricityinLosAngeles

Electricity Produced: Using our solar power calculator Discover, we can see that a 5-kW system installed inLos Angeles would generate about 8,100 kWh of electricity per year. By comparison, the same systeminstalled in Portland, Oregon would yield about 5,840 kWh per year.

Because, as we mentioned, most solar energy installations have an expected lifetime of 25 years, wemultiply the annual average generation by 25 to get 202,500 kWh over 25 years for Los Angeles, or146,000 kWh over 25 years for Portland.

Levelized Cost: The final step is to divide the life-cycle cost ($16,000) with the amount of electricity thesystem will generate over its lifetime. In the case of Los Angeles: $16,000 divided by 202,500 kWh equalsabout $0.08/kWh, whereas in Portland, we are looking at about $0.11/kWh.

So far, we assumed that you would buy the panels with an all-cash transaction. In reality, manyhomeowners will need some sort of a financing mechanism (we discuss your financing options in more

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detail below). Incorporating the cost of financing into the levelized cost estimates complicates the math(compounded interest rate calculations anyone?), so I suggest that you use our Buy or Lease Calculatorand quickly go through some alternative financing scenarios to determine the best option.

We were considering the same system with the same life-cycle cost, but because the amount of sunshinediffers in the two locations and, therefore, so does the amount of solar electricity that can be produced, wefind that the levelized cost is significantly different for the two example locations.

You say grid parity, I say… what?

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Once you have the levelized cost of solar electricity where you live, all that is left to do is compare thatnumber to what you are currently paying for electricity from your local utility. If the LCOE for solarelectricity where you live is the same or lower than the utility rate, then you’ve reached grid parity andswitching to solar will save you money over the lifetime of the panels. (Of course, there are other technicalconsiderations which affect your decision to go solar, such as the shade on your roof – we explore theseother factors below).

In the case of Los Angeles, using the state average utility rate of $0.17/kWh and comparing that to theLCOE of $0.08/kWh, we see that solar energy makes financial sense, and you would save a significantamount of money over the lifetime of your panels.

Of course, if you live elsewhere, or learn that the cost is different than the $4/W we assumed, or that youcan benefit from additional incentives, you need to run the numbers again. You can sharpen your pencils,sort them in descending order, take out your favorite notepad and prepare to spend a few hours withoutNetflix, or just use Sunmetrix Discover and catch the next episode of House of Cards right away.

To see how your state compares when it comes to residential solar, you can check out our interactive gridparity map. You can even adjust the cost of solar panels to reflect falling prices. If your state hasn’treached grid parity yet, you can see at what “cost per watt” it does.

You can easily see how critical the federal investment tax credit of 30% has been in stimulating the growthof the residential solar market. Just try switching it off with our interactive map and see what happenswhen there is no ITC. It’s helped residential solar take off in many locations. Fortunately, the ITC wasrecently extended through 2019, after which it will be gradually phased out over the following three years.

Remember, any additional state or municipal incentives will only improve the profitability of solar whereyou live.

To sum up, I’ll just imagine what Yoda would have said about the topics we covered above:

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“Remain the same over the lifetime of your panels, the levelized cost will.

Almost certain to rise, the cost of electricity from your utility is. Yeesssssss.”

And if you don’t speak Yoda, this is a translation:

“While the LCOE will remain the same over the lifetime of your panels,

the cost of electricity from your utility is almost certain to rise.”

Other considerations when it comes to solarenergyYou have determined that, from a financial perspective, solar energy makes sense! But even though thefinancials are sound, there may be other potential show stoppers. The state of your roof, its configuration,as well as the orientation and shade levels are all important factors.

Using Sunmetrix Discover, you can take into account the estimated level of shade, the orientation of yourroof, and its slope. With that, you have a good start, but ultimately, solar installers will need to visit yourhome and see for themselves. They will make recommendations on the type of equipment and theplacement of panels so that you maximize your investment.

James Hahn, CEO of My Solar Home, a solar company in New Jersey, explains the importance of a site visitlike this:

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“Our home site audit enables our field technicians to take detailed measurements of yourhome in order for us to optimize the design of your solar energy system to ensure it bestmeets your home's specific energy needs. We conduct a thorough examination of your roofwhich includes measurements, condition/age of roof, along with determining if there arevents, attic fans, chimneys or other obstructions that will impact the system design andproduction. We obtain comprehensive shade readings to ensure optimal power production. Wecomplete a thorough inspection of your electrical service panel to determine how we willconnect your system to the utility grid, as well as assess the structure of your roof by closelyinspecting the home's framing. This comprehensive site audit and inspection ensures that wecustom design the solar energy system to best meet your home's needs.”

If you already know that your roof is in need of repairs or will need replacing in the next few years, it likelymakes more sense to do that work now before you speak with installers. However, in some cases, you maybe able to combine the work, as some contractors do both roofing and solar installations, so this optionmay be worth examining as well.

Solar panels are a big investment, and for that reason, you want to be as prepared as possible before youspeak with solar companies. Understand your options, from central inverters to micro-inverters, know yourelectricity usage so that you end up with the optimal system size, and read up on solar basics. Theinstallers will be able to walk you through most of it, but you will understand much more and make a moreinformed decision if you do some simple research first. Sunmetrix is here to help, with articles on all thesesubjects and much more.

Alexandra Hobson from SEIA offers these additional tips for homeowners considering solar energy:

“Become an informed consumer - any homeowner considering solar should know theirsituation (electricity usage, roof, finances etc.); do your homework (make sure to get multiplebids for your solar system, research your solar company, understand how tax credits, localincentives and Renewable Energy Certificates may apply); and understand the agreement(know the terms of your contract and fully understand what your warranties protect and forhow long).”

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OK, I’m ready to go solar. So what are myfinancing options?

One of the biggest disadvantages of solar power is the steep price tag that stands between homeownersand their shiny new solar panels. Although the installed price of residential solar PV systems hasdecreased substantially in the last five years, the initial cost is still significant for most homeowners.

One way to make solar energy more accessible is to decrease the upfront expenses for the consumer.There are three different paths to putting solar panels on your roof. You can lease them, you can be a solarutility customer (also known as a power purchasing agreement, or PPA), or you can purchase them (with orwithout a loan or PACE financing). Each of these three paths has its own advantages and disadvantages.

For James Hahn, CEO of My Solar Home, the role of a solar company is more than being a hardwareinstaller.

“We not only educate them on their customized personal solar energy savings plan, butprovide them background on the market in general and the different finance options theyhave available for them to go solar ($0 down lease or $0 down purchase). By ensuring theyhave a complete and thorough understanding of all their available options, we empower ourcustomers to make the best decision for their own home.”

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“In general, I would always advise everyone to finance their solar system,” says solar industryexpert Jigar Shah. “A loan is almost always the lowest cost option, but PACE financing and aPPA can also work.”

But first, let’s talk a little about another path many homeowners choose: putting off solar and sticking withtheir utility.

Status Quo

Many homeowners find the idea of getting solar panels daunting and end up doing nothing. This might bethe right decision in some states or for some particular cases, but for those of you who would do better byswitching to solar, it’s important not to delay too much.

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If you’re unsure about whether you should stick with your utility, maybe you want to consider by howmuch your electricity rate has increased over the past decade. This is called the escalation rate. Theaverage year over year escalation rate across the U.S. since 2005 was 3.01%. If you want to compare thatto the average year over year rate of inflation rate in the U.S. since 2005, it was about 1.9 percent. Inmany states, the escalation rate for electricity has exceeded the inflation rate over the past decade.

Although there is variability from year to year, with some states experiencing a decrease in one year oranother, the overall trend in the U.S. is increasing electricity rates. By going solar today, you protectyourself from increasing electricity rates, and the more they go up, the more you will be saving in the longrun.

If sticking with the status quo doesn’t appeal to you, let’s consider your solar options.

Solar Lease

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A solar lease can be very tempting if you live in a state with high electricity rates and/or a high electricityescalation rate over the past decade, especially when there are a number of companies offering zero-downlease options and the peace of mind that comes from someone else taking on the responsibility ofmaintenance for years to come.

Most of us are quite familiar with the concept of a lease. An automobile lease is the prime example:instead of an all-cash purchase, we can start driving a brand new car as soon as we start making monthlylease payments. The catch, of course, is the ownership. The car doesn't belong to us; it's still the propertyof the leasing company, and we just have the privilege of using it. At the end of the lease term, the leasehas to be renewed or the car has to be returned to the owner.

The case of a solar lease is very similar. A leasing company will pay for the installation of solar panels onyour roof, and even take the responsibility for maintaining and servicing them as needed. Naturally, theownership of the solar panels and other necessary equipment stays with the leasing company.

Your obligation as the homeowner is to make your monthly lease payments and occasionally give accessto your roof for maintenance work. In most cases, there are no upfront payments for the lease, and youjust start with the first regular monthly payment. This "$0 down" or "free installation" feature of the leasemakes it very attractive for many homeowners, but as we'll discuss later, it may not always be the mostsensible financing option when it comes to solar power for your home.

We often refer to residential solar power systems as an investment. If you own the system, it adds

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significant value to your home. If you are leasing, however, you are paying for the right to use somebodyelse's assets, not your own. Thus, the lease is not an investment on its own. However, if it frees up somecash so that you can find a better investment alternative to increase your net wealth, then the lease optioncan still be very useful.

In the case of a lease, you get to use all of the solar electricity you produce. Any excess can be returned tothe grid for a credit and if you need extra, you purchase it from the utility at the normal retail electricityrate. However, as with any third-party ownership agreement, you will not be able to claim the federalinvestment tax credit (ITC) of 30% for solar installations.

With a solar lease, it is very important to look at the fine print and to consider your situation carefully. Areyou planning on moving anytime soon? If so, ask about your options because a number of homeownershave run into difficulties when it was time to sell their home - not every prospective buyer is going to wantto take over your solar lease.

There are other questions to consider. Is there an option to own the panels at the end of the lease term?And what is the escalation rate - in other words, by how much will your monthly payments increase everyyear? With a solar lease, there is generally a fixed escalation rate for the term of the agreement, so thecost of your solar electricity will go up, but because the escalation rate is fixed, you know exactly by howmuch it will rise, unlike with retail electricity.

Power Purchase Agreement (PPA)

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A PPA is another third-party ownership arrangement, where you do not own the panels (and cannot claimthe ITC). The solar power purchasing agreement (PPA) and the solar lease are close cousins. The biggestdifference is how the monthly expenses are calculated. With a solar lease, your monthly lease paymentsare fixed. With a solar PPA, your monthly payments depend on how much power you generate.

The kilowatt-hour (kWh) rate is fixed for the year, but the actual monthly payments of your PPA willfluctuate depending on how much electricity you generate. Just like the solar lease option, you still need tokeep your customer account with your traditional utility to offset low solar electricity months and to getcredit when you have excess production.

Just as with a lease, you want to check the details of any PPA agreement. You should look into theescalation rate so you know by how much your kWh rate will rise over the term of the agreement. Youshould also understand your options at the end of the agreement, such as whether you will have the optionto buy the system or not.

While this option may be very attractive because of the low, or no upfront, cost and the fact that you areunlikely to be responsible for maintenance, it is not for everyone. Like a solar lease, it is very important toconsider the fine print and your particular situation.

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Ownership with Outright Purchase/Solar Loan/PACE Financing

Just like with electronic devices, there seems to be one thing that's almost certain: the price of your panelswill go down right after you buy them. The decrease in solar equipment costs in the last few years hasbeen incredible. But there are many cost elements that are part of a solar PV installation, and the cost ofthe panels themselves is becoming less and less important when compared to other so-called soft costs,such as design, permitting and customer acquisition.

Outright Purchase

An outright solar purchase generally offers you the best return on your investment (ROI) because as thesystem owner, you can take advantage of the generous ITC available at the federal level, in addition to anyavailable state or municipal incentives. Moreover, once you pay off your panels, your solar electricity is"free" for the remaining lifetime of your panels (which last on average 25 years) with no risk of costescalation.

This doesn’t mean that you can say goodbye to your utility (unless you’re completely off the grid). In mostcases, you will still be keeping your account with the utility (and paying the fixed charges necessary tokeep your account active), so that you can get extra power when you need it or get credit for the excesswhen you don’t need it.

As the owner of the system, you will be responsible for any required maintenance, which is generallyminimal most years, but will eventually include replacement of the inverter(s).

Solar Loan

Most people cannot afford an outright purchase of their solar system, so another option is the solar loan,many of which come with a zero down-payment option.

“Homeowners are looking for an easy, affordable and flexible alternative to solar leasing,”explains Stephanie Bonini, Senior Regional Sales Manager at Sungage Financial.

While you will have to pay interest on the loan, the interest rate is fixed for the duration of the loan andthere is no escalation rate. Moreover, a solar loan can enable you to claim the ITC, while minimizing theinitial investment required.

It’s important to understand, however, that the ITC is a deferred payment that comes to you after filingyour taxes. In order to make the solar loan option even more affordable, some loan providers such asSungage Financial offer a 0% APR tax credit loan to cover the ITC amount until the payment is received(generally with a loan term of 12 months).

“The tax credit loan is essentially a free loan for the homeowner to offset the deferred receipt

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of the federal tax credit,” according to Bonini.

Unlike with a lease or PPA, you will be responsible for the maintenance of your system and the occasionalequipment replacement. As solar loan providers are working with installers that they know, an addedbenefit of choosing a solar loan over an outright purchase is that you may have more recourse should anissue arise with the performance of your panels.

As Jigar Shah points out, “the reason not to pay cash is because solar systems will havemaintenance issues and it is important to work with a financing provider who is incentivized tomake sure that your solar installer maintains your system properly - the loan is how you haveleverage over making sure your system is always working.”

Some solar loan providers, such as Sungage Financial, require installers to include a minimum 10 YearWorkmanship Warranty on the equipment they are installing on the homeowner's roof.

With a loan, just as with a lease or PPA, it still important to look at the fine-print. In particular, you shouldunderstand if there are any dealer/loan fees that must be paid at the outset. Generally, the lower theinterest rate, the higher the initial fees. Stephanie Bonini from Sungage Financial offers these words ofadvice:

“As with any loans, homeowners should always educate themselves on the interest rates andfees of their solar financing options. For example, very low interest rates that seem ‘too goodto be true’ are often a result of rate ‘buy-downs,’ which are basically tactics by the lender tokeep interest rates artificially low. Those low rates are ultimately still paid for by thehomeowner via inflated system costs and/or other hidden fees.”

Homeowners should also be looking at their contract to understand if there are any pre-payment penalties.

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“Homeowners are looking for solar loans they can pay off whenever they want—withouthaving to worry about pre-payment penalties,” explains Bonini.

At first glance, many solar leases may seem less expensive, but more and more solar loan options removethe initial upfront costs, making the solar loan more attractive.

“In New Jersey, for example, a 15-year Sungage Solar Loan costs about the same per monthas a 20 -25-year solar lease,” according to Bonini.

And at the end of the loan term, you own the panels, unlike with a solar lease.

PACE Financing

Another mechanism for financing solar panels is PACE Financing. PACE stands for Property-Assessed CleanEnergy. The PACE programs allow homeowners to implement a number of energy efficiency and renewableenergy improvements on their private property.

Energy.gov explains PACE financing like this:

“Property owners who voluntarily choose to participate in a PACE program repay theirimprovement costs over a set time period—typically 10 to 20 years—through propertyassessments, which are secured by the property itself and paid as an addition to the owners'property tax bills. Nonpayment generally results in the same set of repercussions as thefailure to pay any other portion of a property tax bill.”

Rommel Dingle, Sales Manager at Golden Gate Power in San Francisco believes that PACE financing offersa number of advantages.

“It isn’t limited to solar projects, and can include insulation, water efficiency (includingsynthetic turf), roofing projects, windows and doors, air conditioners (including newinstallations), and furnaces,” says Dingle. Moreover, homeowners can take advantage of theFederal ITC and “there are no monthly payments (unless property tax is impounded with themortgage); payments are paid in the frequency matching property tax payments.”

With PACE financing, because the debt is tied to the property as opposed to the homeowner, the re-payment obligation transfers with the property.

“This is an important consideration for a homeowner when it comes to the sale of theirproperty,” according to Dingle.

Many homeowners are reluctant to make property improvements if they think they may sell soon and notbe able to recoup their initial investment.

However, homeowners thinking of using PACE financing should be aware of a potential limitation, thatcertain criteria must be met, with regard to the home improvements.

“Products other than solar that are funded by PACE will need to meet certain energy efficiencybenchmarks,” Dingle explains. “For example, some solar projects require the installation of a

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new roof. If PACE is to fund the entire project, the new roof must meet cool roof benchmarksand can increase the cost of a project significantly.”

A Few More Words on Ownership

There are other types of loans available that you might be considering, but it’s good to keep in mind a fewwords of advice from Stephanie Bonini at Sungage Financial:

“When compared to other traditional loan options, the advantage of solar loans is financingfeatures that are specifically designed for the purchase of solar arrays, such as a built-in,‘same as cash’ tax credit options. Ideally, the solar loan provider would also have an in-depthunderstanding of the solar industry and strong working relationships with installers. Just as ahome mortgage is very different from a car loan, a solar loan is very different from atraditional home improvement loan.”

A big advantage of ownership: there is no "20-year lease term". In all likelihood, your solar panels willcontinue to keep on ticking after 20 years (25 years on average). Each additional year of service will be abonus and increase the financial appeal of ownership. Yes, there is some maintenance work to do, and theoccasional equipment replacement. But compared to your car, for example, these costs are going to beless frequent. Another major advantage of owning your solar system is that they increase the market valueof your home.

Do solar panels increase the value of my home?

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With more and more homeowners choosing to install solar panels (nearly 1 million homes in the U.S.today, according to SEIA), both homeowners and appraisers/realtors need to better understand how solarpanels affect the value of a home.

Whether the PV system is owned or leased is an important distinction. The studies we refer to belowlooked at owned systems. In the case of leasing, it is more relevant to consider the terms of youragreement if you think you might sell your home - can the lease be passed on to the next owner, what arethe penalties for breaking the lease agreement, is there a buy-out option, can you take your panels to yournew home, etc.

As with many solar panel related questions, the premium on solar homes is location dependent.Homeowners in jurisdictions that are favorably located for solar energy production, that have high retailelectricity prices, and that encourage development through incentives and subsidies are more likely to findtheir investment will pay off. This is even more true in areas where green or renewable energy is veryhighly valued, such as neighborhoods with a higher concentration of hybrid or electric vehicles.

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According to a recent study by the Lawrence Berkeley National Laboratory, supported by the U.S.Department of Energy SunShot Initiative, the average premium for a home in the U.S. with owned solarpanels was $3.78/W, or $14,000 on an average sized PV system of 3.8 kW on a home sold in 2011. PVpremiums varied across the U.S. (in the study, 43 home-sales pairs were studied in six states, wherehome-sales pairs are pairs of comparable PV and non-PV homes) and the premiums ranged from $2.68/Wto $4.31/W. It was found that PV premiums were more similar to net PV costs, as opposed to gross PVcosts, which is understandable as incentives/subsidies decrease the cost to the homeowner significantly.As the cost of solar PV installations decrease, it is expected that PV premiums will also decrease.

Investing in solar panels for your home is no longer just an environmental decision taken by green-livinghomeowners. It is an economic decision taken by homeowners looking to make a smart, financially sounddecision with respect to the value of their home.

Conclusion – are solar panels worth it?Congratulations! You made it to the end of this guide. By reading this, you already took an important stepin taking charge of your own energy future. We are in the middle of an energy revolution, and it’s time tojoin the party.

A decade ago, rooftop solar panels were a rare sight. Today, more and more homeowners are taking aserious look at what solar energy can do for them.

“Growth in solar markets across the country is at a level unimaginable at the start of thisdecade,” according to Alexandra Hobson from SEIA. “Thanks to the recent extension of thesolar investment tax credit, by 2020, the industry will be employing more than 420,000American workers and deploying more than 20 GW of solar electric capacity annually. To putthis in perspective, at the end of 2014, 20 GW was the total amount of solar that America hadinstalled in its history.”

With rising electricity rates in most parts of the country, solar energy is increasingly an investment thatmakes sense for homeowners. Fortunately, the cost of solar has decreased significantly, making it a moreaffordable option.

“Whether you save 10% from day one or just 1%, utility prices are going up and the availablesolar incentives are going away,” says Jigar Shah. “The time is now to get your roof checkedout and see if you have a nice unobstructed view of the sun.”

In addition to installing solar panels, there are many other things homeowners can do today to managetheir electricity bills, starting with reducing electricity consumption, especially during peak periods, andimplementing home energy-efficiency measures.

All of these steps have the added benefit of helping the environment and reducing the negative effects of

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climate change.

As Hobson sums it up, “if we are to have a realistic hope of continuing greenhouse gasreduction, then greater deployment of 21st century solar technologies – both in the UnitedStates and around the world – is absolutely critical.”

Whether you do it for the environment, for your finances or just to impress your neighbors, the time to gosolar is now. All that's left to do is to crunch the numbers and find highly-rated installers in your area.Sunmetrix Discover is here to help!

Spread the solar goodness: please share this guide with your friends and family.

Written by Simone

Simone Garneau is the co-founder of Sunmetrix, an online consumer education website for residential solarenergy. The goal of Sunmetrix is to help homeowners go solar and save money with our Solar CashbackProgram. In addition to the 200+ articles about solar energy, Sunmetrix offers homeowners two maintools: Discover, to preview solar energy for your home, and GO, the only solar energy test driveexperience. Read all of Simone's articles here.

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Contact InformationGot any questions about solar power? Interested in our solar cashback program?Just give us a call.

Phone: 514-482-2220

Address: 4999 St Catherine West Suite 540, Westmount, QC, H3Y2N2, Canada

E-mail: support@sunmetrix.com

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