Are Solar Panels Worth the Investment?

Are Solar Panels Worth the Investment?

Solar energy is a growing industry, with costs shrinking and efficiency increasing. As a clean and renewable energy source, solar is beneficial for the environment — but is it beneficial for your wallet? Many home and landowners have discovered the financial advantages of solar energy. Different factors will determine if solar power will save you money — and how much. Learn about solar energy to decide if the investment is right for you.

Important Factors to Consider

When considering whether or not to install solar panels, you'll want to think about all of the factors affecting the cost and return on investment (ROI). Several factors will determine how much solar will cost for you and how much it will help you save. Here are some things to think about before you decide to go solar:

1. Your Current Energy Expenses

One of the most significant determining factors is your current energy expenses. How much you pay per kilowatt-hour and how much energy you use will impact your savings with solar. As a rule of thumb, the more energy you use, the more money you'll save. If your energy needs are minimal, it may take a long time before you see a return on investment. On the other hand, if you need to power a large home, farm or ranch, your solar investment should pay for itself before you know it.

2. Your Access to Sunlight

While solar energy is available everywhere, it's more powerful and reliable in some locations than in others. A solar system will offer greater returns depending on where you live. Regions at lower latitudes, closer to the equator, receive more solar radiation. Other factors affect solar availability, as well, such as clouds, air pollution, dust and shade from trees or mountains.

If you live in the United States, the best places for a solar investment are in the Southwest. In this region, sunlight is the most reliable and consistent. The annual average daily solar resource is over 6.5 kilowatt-hours per meter squared. Solar is most beneficial in the following states:

  • Texas
  • Oklahoma
  • New Mexico
  • Arizona
  • California
  • Utah
  • Colorado
  • Nevada

Because of their latitudes, climates and landscapes, places like rural Texas and Oklahoma yield the strongest ROI for solar panels in the shortest amount of time.

3. Current Technology

Every decade, solar technology advancements have improved its affordability. Photovoltaic (PV) solar panel systems have much greater efficiency than they did a decade ago. Installation and maintenance costs have also fallen. As a result, solar is a smarter investment today than it was in previous years. Both residential and commercial panel systems have fallen in cost by more than half since 2010. Investing now, while costs are at an all-time low, will help you see a faster ROI.

4. Roof or Ground Availability

Every property is different. You'll need a property evaluation to determine where solar panels would work best for you. You can mount solar panels on the ground or on a roof — each option has its pros and cons. With a ground-mounted system, you might be able to install more panels and have easier access for maintenance. But ground-mounted panels are less space-efficient and can be costlier to install.

Roof-mounted panels are easier to install and will not take up your land. However, your roof will constrain the system's size and location, and the panels will be a bit tougher to access for maintenance. In addition, any necessary roof repairs or replacements might hinder the project. Whether a ground or roof-mounted system is the better choice for you will depend on your unique property and its characteristics.

5. Installation Costs

Several factors will affect your solar system's installation costs. A more complicated or challenging installation will increase your initial investment.

Some factors that contribute to the installation costs include:

  • Number of panels: Of course, a greater number of panels will incur a greater cost. More panels will allow you to produce more energy, however, resulting in a higher ROI.
  • Type of panels: The type of panels will also impact the installation cost. Better panels come with higher price tags. For instance, some panels are thin film, and others are crystalline. Thin-film panels cost less but are also less durable and efficient. You'll have to consider whether or not you're willing to sacrifice some level of quality for reduced initial costs.
  • Battery or generator: Another factor is whether you decide to include a battery or a backup generator in your installation. A battery will store your solar energy for later use and allow you to run off-grid. A backup generator will give you access to propane or natural gas when needed. Both options will allow you to use energy during grid blackouts.
  • Unique challenges: Other factors might impact installation costs, such as unique challenges with your property or roof. For instance, an irregular-shaped roof will complicate the solar installation.

6. Maintenance Costs

You'll also need to consider the lifetime maintenance costs involved with a solar system. Regular maintenance and repairs will ensure your system runs smoothly. It's important to keep your solar panels clean of any debris and monitor their performance. Routine check-ups will help you catch issues before they become serious. As you consider investing in solar, ask yourself if you're willing and able to keep up with regular maintenance and repairs.

7. Government Policies

Politics play an important role in solar energy costs. While tariffs can raise the cost of solar-related imports, other programs help reduce costs. The United States Department of Energy (DOE) aims to cut solar costs by 60% within the next decade and has provided funding to research and development programs to help drive solar-related costs down.

Direct funding into research is one way the government influences solar costs. In addition, federal, state and local governments often make solar more affordable with financial incentive programs.

8. Rebates and Incentives

Solar rebates and incentives will influence the cost and ROI of your solar system, as well. Solar incentives vary based on where you live and when you install your system. Keep in mind that you need to own the system to claim these benefits, not lease it.

Some incentives include:

  • The federal investment tax credit (ITC): The ITC applies no matter where you live in the United States. Tax credits offset what you owe in taxes, whereas tax deductions reduce your taxable income. In other words, the ITC directly reduces how much you owe and might even come back to you as a refund. In 2020, congress extended the solar ITC program to 2024, but they'll have to renew it again after that. So, if you want guaranteed access to the ITC program, you'll need to have your system installed before the ITC expires.
  • State tax credits: Some states also offer state-wide incentive programs, which might help further offset your investment costs.
  • Cash rebates: Your state or local government, or your utility company, might offer cash rebates when you install a solar panel system. If rebates are available, take advantage of them as soon as possible — their supply is usually limited.
  • Solar renewable energy certificates: In some states, utility companies must generate a certain percentage of energy from renewable sources like solar. In those states, utility companies will buy solar renewable energy certificates (SRECs) for the environmental attributes of solar panels, like reduced carbon emissions. Depending on how much each SREC is worth in your area, you could make money by selling SRECs to utility companies.
  • Performance-based incentives: You can also earn money from performance-based incentives (PBIs). PBIs award you a credit for each kilowatt-hour your solar panels produce. While SREC is a variable market, PBIs have set, predetermined values.

9. Net Metering

If you choose to install an on-grid solar system, you'll be able to partner with your utility company in a process called net metering. Net metering can help decrease your regular energy expenses. The process is simple — when your solar panels produce more electricity than you need, the excess will go to the utility company for a credit. When you need more electricity than your panels produce, you'll get it from the utility company like normal.

Your monthly bill will be the net energy — the energy you produced minus the energy you used. Using net metering, you may be able to bring your energy costs down to nothing. It depends on how much energy you use and how much you produce. Your solar energy partner will help you decide where and how to install solar panels on your property, ensuring the system is powerful enough to meet your needs and drive down your utility expenses.

10. On or Off-Grid

Whether you decide to install an on-grid or off-grid solar system will affect its long-term costs and financial benefits. If you choose to go off-grid, you'll have total independence from the local utility company. You'll produce all of your own energy, using a storage battery or backup generator when necessary.

If you live in an area where the grid is inaccessible or unreliable, going off-grid is your best option. It will offer you total energy independence, allowing you to keep operating during grid outages. The costs of an on-grid or off-grid system will depend on where you're located. Off-grid systems are more complicated. But staying on-grid may be impractical — extending long power lines to a distant grid can get expensive.

11. Buying or Leasing

You'll also need to decide whether to buy or lease your solar panels. Although leasing is a popular option, it presents a few disadvantages. When you lease, you're not able to claim federal tax benefits or other incentives since you do not own the panels or the energy they produce. Lease agreements may also include escalator clauses, increasing the amount you pay each year. Not to mention, at the end of the lease, you'll lose your investment.

For these reasons, buying may be the better choice for you. When you buy solar panels, you'll pay off a predetermined loan instead of making endless rental payments. Once you've finished paying your loan, your savings will increase — buying is a future investment. You'll also be able to claim any incentives you qualify for. On the other hand, leasing is a viable option if you are ineligible for incentives or unable to qualify for a loan.

Choosing to buy or lease comes down to your personal goals and priorities. If you're looking for a long-term return on investment, buying is the way to go. You'll be able to claim ownership of the energy your solar system produces.

12. Property Value

If you choose to buy your solar energy system, your property value could increase. Increased property value is another way your solar panels could pay for themselves. Homebuyers are willing to pay premiums for homes with solar arrays installed. Research also suggests homes with solar panels sell faster than those without. Keep in mind, leasing solar panels has not been shown to yield the same results.

When to Expect an ROI

When you can expect an ROI depends on the various choices you make regarding your solar panels. It also depends on your system's scope and effectiveness. The experts at S&H Solar will provide you with a property evaluation and help you understand your financing options. Then, you'll have a better idea of how much your system will cost and when you can expect an ROI.

Are Solar Panels Worth It?

So, is solar worth it? Solar can save you a great deal of money over time. Installing a solar system is a smart investment for many reasons. It can offset or eliminate your regular electricity expenses. Thanks to incentive programs, net metering plans and property valuations, investing in solar could mean more money in your pocket, both today and decades from now.

What's more, many of solar's benefits are intangible. As a clean energy source, solar power promotes a safer and stronger environment. Choosing solar helps reduce carbon emissions and pollution. In addition, generating your own electricity gives you independence and improves your long-term sustainability. It can make your home, farm or ranch more resilient for years to come.

Get Started With S&H Solar

Solar panels for homes, farms and ranches have proved to be a strong investment. When you can expect savings from your solar panel investment will depend on several factors, such as the system's scope and placement, whether you decide to buy or lease and whether or not you stay on the grid. Also significant are your current energy expenses and your location.

Your location will determine what incentives are available, and some regions are naturally better suited to solar than others. Solar panels in Oklahoma, Texas and other parts of the Southwest are bound to be effective. These states have consistent access to sunlight, making solar panels more practical and productive.

If you're interested in solar panels for your home, farm or ranch, we'd be happy to work with you at S&H Solar. We specialize in helping rural home and landowners like you make the most of solar energy. We'll offer support and expert service every step of the way — we'll be your solar partner for life with our long-term monitoring and maintenance. Feel free to contact us to get started.

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