Are solar panels worth it in 2023?

Solar panels are one of the smartest investments a homeowner can make, especially as the cost of electricity is rising across the country.

While average electricity rates increase about 2.5% every year, the benefit of going solar is that you don't have to worry about climbing energy costs anymore. Investing in a solar energy system is a practical financial decision because you can save tens of thousands of dollars on your electric bill over two decades.

Understanding how much money you'll save by going solar is one of the most important factors when deciding whether solar makes sense for you.

Solar panels are a worthwhile investment if:

• You own your property: renters or business owners who do not own their property should speak to the owner before making any plans to install a solar system.

• You pay a high price for electricity: the higher your electricity rate, the faster your solar panel system will save you money.

• You get a good price for solar: in 2023, an average 10 kilowatt (kW) solar panel system costs about $20,000 on the EnergySage Marketplace. Prices on EnergySage are usually lower than market prices because we provide you with multiple quotes from installers who know they’re competing for your business.

One of the primary reasons it makes sense to go solar is because electricity costs typically increase every year – but your solar costs won’t. Without solar panels, the average homeowner will end up paying more than $65,000 in electricity bills over the next 30 years, according to EnergySage Marketplace data. So if you install solar panels now at an average cost of $20,000, you can save more than $40,000 over the next three decades.

However, there are some circumstances when installing solar panels may not be the right choice for you. Here are the key factors to consider when deciding if solar makes sense for you.

Solar panels may not make sense if:

• You rent your property: instead, try community solar, which doesn't require installing solar panels where you live.

• You already pay a low price for electricity: the primary way solar saves you money is by offsetting electricity costs with free electricity from the sun. If you're already paying a low rate for electricity, you may not break even on your solar investment for a long time.

• You're paying too much upfront for solar: just as having a cheap electric bill means you'll save less with solar, higher upfront costs will eat into your savings, too. The best way to ensure you're getting a good deal is to compare quotes from multiple installers, which you can do for free on the EnergySage Marketplace.

The key takeaway is that solar panels are worth it if you own your home and have an electric bill. How much money you can save varies for every property, but as the cost of solar panels continues to come down, you'll save tens of thousands of dollars in the long run.

If you're considering going solar, you’re probably wondering how much money you’ll save. Solar is a long-term investment that requires some patience before you see a return, so it’s important to understand what your payback period will be. The average homeowner can save between $20,000 and $96,000 over the lifetime of a solar panel system. Most property owners break even on their solar investment in about eight to nine years – but as you start exploring your solar options, there are a few key questions you should ask to figure out what the return on your investment will be.

How much do you pay for electricity now?

The first step to figuring out your potential savings with solar is knowing how much electricity you use and how much you pay for it. When you go solar, you reduce or eliminate your monthly electricity bill, so the local cost of electricity substantially impacts how much you can save. You pay your local utility company for every kilowatt-hour (kWh) of energy consumption, and your rate varies significantly depending on where you live. In some parts of the country like the South, your provider could charge less than 12 cents per kWh. In the Northeast, you could pay as much as 20 cents or more.

If you're unsure how to determine your long-term savings, try using our solar calculator. Our calculator uses local electricity rates to provide a customized estimate of how much you can expect to save and how quickly you’ll break even on your investment.

How much will your solar installation cost?

Various factors determine the overall cost of your solar panel system, so you'll want to do some research first. As solar deployment continues to grow, the cost of installing solar panels will likely decrease further, but some of the most significant factors that will impact your cost – and ultimately how much you save – include:

• System size: How much electricity you consume determines how much energy your system needs to produce, and therefore the ideal size your solar system should be. Generally speaking, a bigger system with more panels will have a higher average cost than a system with fewer panels.

• Equipment: While cheaper solar panels may feel like the easiest way to save money with your solar system, your long-term savings will usually be greater if you invest in high-quality equipment.

• Roof characteristics: A south-facing single roof plane that slopes at a 30 degree angle is ideal for solar. However, that doesn't mean solar isn't worth it if you don't have a roof perfectly suited for solar panels. Your installation may be a bit more complex (and therefore cost more), and your sun exposure may be less direct – potentially meaning less savings.

• Labor: What solar companies charge to install your solar system can vary substantially, even if they’re installing the exact same equipment. Different solar installation companies vary in labor warranties and skill levels, so it's essential to find pre-vetted, high-quality installers through a trusted source like the EnergySage Marketplace.

• Location: Solar prices differ from state to state. Generally, you'll see a lower price per watt ($/W) in warm states and a higher $/W in cold states, but you may need a larger system size in a warm state due to using more air conditioning. Other important factors that impact your solar savings based on location are local tax rebates and incentives, which we'll cover next.

What rebates and incentives are available to you?

Rebates and incentives significantly reduce your total solar cost and can put money back into your pocket each month, which translates to even more substantial long-term savings. The most valuable solar incentive is the federal investment tax credit (ITC), which allows you to deduct 30% of your solar installation cost from your federal income taxes. Depending on where you live, you may also qualify for other various incentives that help you save more. In addition to the federal tax credit, local incentives like state tax credits, cash rebates, solar renewable energy certificates (SRECs), and performance-based incentives (PBIs) can increase your solar savings up to 50%. You may also be eligible for exemptions on the sales tax of your solar panels, as well as any ensuing increase to your property taxes.

Net metering is another important aspect of solar savings to understand as it’s a valuable way to offset your costs. Essentially, net metering allows you to store any excess energy produced by your solar system in your local electrical grid for use at a later time. With net metering, you won't receive a monthly payment. Instead, you receive utility bill credits for the electricity produced by your solar panels. Not all states offer net metering, so you'll want to check out the Database of State Incentives for Renewables and Efficiency (DSIRE®), which tracks net metering and other policies. For example, California, one of the most popular states for solar, recently changed its policy on net metering, which you can learn more about on EnergySage.

How will you pay for your solar power system?

There are different financing options for going solar, and whether you choose to buy or lease your solar panels will significantly impact your savings. If you're in a position to make a cash purchase, you'll save much more than any other option. Keep in mind that a zero-down solar loan can also save you tens of thousands of dollars. While solar leases and power purchase agreements (PPAs) require no money down and promise a maintenance-free option, they come with a trade-off: your total savings will typically be just 10% to 30% of your utility electricity bill and you won't own your solar panels when your contract ends.

How does this play out in the real world? Try using the EnergySage solar calculator to see how your long-term savings will differ depending on whether you choose a cash purchase, a solar loan, or a solar lease – or community solar if that's something you're considering.

Are you planning on selling your home in the next ten years?

If you think you might move, purchasing a solar system may not be worth the investment because of how long it can take to break even on your solar costs. Instead, consider options like community solar that don't lock you into panels on your roof for decades. It's important to remember that adding a solar system can significantly increase your home's value – which means investing in solar can still benefit you financially even if you move. Be wary of leasing solar panels if you think you might move, as leases are typically long-term and can be difficult to cancel, making it more challenging to sell your home.

The initial cost of solar panels is often the biggest consideration for homeowners thinking about going solar, leading many people to question whether spending so much money is worth it. While most homeowners can expect to break even on their investment in less than ten years, you can get a more specific estimate with a simple calculation. If you want to estimate how long it will take your solar panels to pay for themselves, you can use this formula:

(total solar system cost - upfront incentives) / (annual savings + additional state and/or utility incentives) = estimated payback period

Let’s use the following example:

Your new solar system costs $15,000, and you received a tax credit of $4,500 in addition to a $1,500 rebate from your state. In this case, your total solar system cost is $15,000, with the upfront incentives ($4,500 + $1,500) totaling $6,000. This means that your combined cost is $9,000.

Your annual savings is your monthly power bill multiplied by 12 months, so if your monthly solar energy bill is say, $100 a month, you'll save $1,200 per year on your electric bill. Some states and utilities also offer incentives that pay you extra for the solar energy your panels generate, like SRECs or the SMART program in Massachusetts. It's not uncommon for those incentives to put an additional $600 a year in your pocket in addition to your solar savings, meaning total annual savings of $1,800.

($15,000 - $6,000) / ($1,200 + $600) = 5 year payback period 

By dividing your combined cost of $9,000 and your annual benefit of $1,800, you get an estimate of a five year payback period.

Let’s use the following example:

Your new solar system costs $15,000, and you received a tax credit of $4,500 in addition to a $1,500 rebate from your state. In this case, your total solar system cost is $15,000, with the upfront incentives ($4,500 + $1,500) totaling $6,000. This means that your combined cost is $9,000.

Your annual savings is your monthly power bill multiplied by 12 months, so if your monthly solar energy bill is say, $100 a month, you'll save $1,200 per year on your electric bills. Some states and utilities also offer incentives that pay you extra for the solar energy your panels generate, like SRECs or the SMART program in Massachusetts. It's not uncommon for those incentives to put an additional $600 a year in your pocket in addition to your solar savings, meaning total annual savings of $1,800.

($15,000 - $6,000) / ($1,200 + $600) = 5 year payback period 

By dividing your combined cost of $9,000 and your annual benefit of $1,800, you get an estimate of a five year payback period.

Most likely, you'll save money by going solar – but how can you maximize those savings? We have a few tips to help you make the most of your solar system:

1. Get multiple quotes

As with any big-ticket purchase, shopping for solar requires a lot of research and consideration, including a thorough review of installation companies in your area. By comparing multiple solar quotes, you’ll have increased competition for your business and transparency, which should ultimately mean a high quality installation at a competitive price.

Data from the EnergySage Marketplace shows that when you receive multiple solar quotes through EnergySage, you'll save 15% to 25% on the cost of solar compared to going solar without logging onto the EnergySage Marketplace. When you compare as many solar options as possible, you help yourself avoid paying inflated prices.

2. Check out smaller installers

Some customers lean towards working with bigger installers because they’re well-known or have brand name recognition, but smaller installers often quote EnergySage customers lower prices than larger installers, so it’s worth considering working with a smaller company as long as you do your research. Quotes from large installers were typically 10% higher than those from mid and small-sized installers, according to a report from the U.S. Department of Energy's National Renewable Energy Laboratory.

3. Compare equipment options

Getting multiple solar quotes will also allow you to compare the equipment offered by each of those installers. While certain equipment will have higher efficiency ratings than others, investing in top-of-the-line solar equipment doesn't always result in higher savings. The only way to find the most cost-effective system for your specific property is to evaluate multiple quotes with varying equipment and financing offers. You can use the EnergySage Buyer's Guide to compare the equipment options offered by our installers.

How much do solar panels cost?

As of 2023, an average 10kW solar panel system costs about $20,000 for a 10 kW system. That includes the generous 30% federal solar tax credit, but doesn’t take into account any additional local rebates and incentives you may also be able to take advantage of.

Should you wait to buy solar panels?

Even though the cost of solar panels continues to fall, it's usually not worth it to wait. The longer you wait to go solar, the more savings (opportunity cost) you're missing out on. In the long run, it's worth it to go solar as soon as possible for most shoppers instead of hoping for a much lower price down the road.

Why should you not get solar panels?

There are some situations where a solar system may not be the right choice for your specific property. If your roof has too much shade over it or you don’t need that much energy to power your home in the first place, you may not save that much money by going solar. In some cases, a home may require extensive renovations to support the weight and needs of a solar energy system, vastly increasing the cost of installation.

If you’re curious about how much money solar panels can save you, check out the EnergySage Marketplace to maximize your savings. You'll receive up to seven quotes from our network of pre-vetted solar installers, which allows you to compare multiple installers and equipment so you can get the best deal possible.