Should I go solar now or wait?

Going solar is a big expense, so you'll want to do it at the right time. The cost of solar declined by 3.3% on EnergySage over the past five years, but we've seen a spike in recent years, primarily due to lingering pandemic-related supply chain constraints. If you go solar now, you could pay a bit of a premium compared to last year. But, as inflation causes electricity rates to spike, you'll also miss out on substantial bill savings if you wait. So how should you decide when to go solar?

Every year you delay your solar decision is another year that you miss out on the financial benefits your solar energy system provides, called your opportunity cost. Today, the average 10 kilowatt (kW) solar panel installation costs $20,650 after considering the federal tax credit. On a cost-per-watt ($/W) basis, solar panels cost $2.95/W before tax credits and rebates, down 3.3% from $3.05/W in 2018 but up 6.5% from 2021.

While we expect prices to fall again in the future as supply chains recover following the COVID-19 pandemic, we don't know when this will happen. You could save hundreds or even a few thousand dollars on the cost of your system by waiting to go solar, or it could cost you even more money. Either way, the longer you wait, the more you'll miss out on electric bill savings, and your loss in financial benefits could ultimately outweigh your potential savings in upfront costs.

We'll explore five reasons why the opportunity cost of waiting to go solar typically outweighs the benefits, including increasing electricity rates and the phasing out of government incentives:

1. The price of electricity continues to rise

If you wait to go solar, you're stuck paying your utility company every month, and energy costs continue to rise: According to the U.S. Energy Information Administration (EIA), electricity prices have increased by about 27% over the last ten years, with an annual increase rate of about 2%.

The average U.S. household uses 10,632 kilowatt-hours (kWh) of electricity each year, and as of April 2023, the national average electricity rate is $0.16/kWh. If your system meets 100% of your electricity needs, you'll save $1,700 on energy bills over the next year. If the current electricity inflation rate continues the following year, you'll save about $1,734. These savings will continue to grow for the 25 to 40 years that your system is generating electricity: Every year you don't go solar, you'll pay this money to your utility company.

2. Rebates values are dropping as the popularity of solar grows

Many states offer rebates to encourage homeowners and businesses to go solar. States often cap or reduce these rebate programs once they reach a set amount of installed solar capacity. Here are some examples of states that have already lowered or eliminated their rebate programs: 

• California used to offer rebates worth up to $15,000, which they've since stopped. 

• In New York, the Megawatt Block Incentive Structure provides solar energy system owners a rebate based on the size of their system. As more people install solar, the value of the rebate drops. The highest incentives available through the program were $1/W but are now between $0.4/W or $0.8/W (depending on your utility) and will eventually drop to $0.15/W as adoption increases.

• Massachusetts had a solar rebate program that initially provided rebates of around $9,000. Now, the rebate program is over, and homeowners are only eligible for a tax credit, which is capped at $1,000.

Rebate programs differ from state to state, so make sure to explore the incentives available where you live so you can determine how delaying your solar purchase could impact your cost of solar.

3. You could receive lower compensation for electricity exports

Net metering is one of the best solar incentives available. If your utility company offers a net metering program, they'll provide you with credits for excess electricity your solar power system generates and sends to the grid. During times when you need to pull electricity from the grid (like on a rainy day or at night), it will count against your credits. The rate you pay for electricity is equal to the credit rate for the electricity you export, meaning if you properly size your system to meet your energy needs, you may not owe anything on your utility bills. 

As more people go solar, some states and local utility companies are switching to net billing programs, which lower the compensation rate below what you pay for electricity, or they're eliminating net metering. For example, in April 2023, California switched to net billing, which cut the value of net metering credits by 75% and it lowered 20-year solar savings by 60%. Homeowners who submitted solar applications before the switch to net billing could lock in net metering for 20 years. 

4. SREC programs earn you money but won't be around forever

Some states and utilities have solar renewable energy certificate (SREC) programs and other production-based incentives that pay you for your solar energy production. However, these programs also won't last forever. If you live in a state with an SREC program, you could miss out on the opportunity to generate thousands of dollars in extra income from your solar energy system while you wait to go solar.

5. The solar tax credit will eventually disappear

The federal investment tax credit (ITC) is the best federal solar incentive: It provides a credit worth 30% of your solar panel system cost on your federal tax bill. The Inflation Reduction Act, passed in August 2022, extended the ITC for another ten years for residential solar energy systems. But, if you wait too long to install your system, the ITC will drop in value to 26% in 2033 and 22% in 2034, disappearing entirely in 2035. 

In most cases, the sooner you go solar, the more you'll save, but there are some reasons to wait to install a solar panel system:

1. You plan to move soon

Ideally, you'll want to break even on your solar investment before you move, so if you plan to move in the next few years, you may want to wait. However, multiple studies have shown that solar increases the value of your home by about 4%, so it still could pay off to switch to solar energy soon. 

2. You need to replace your roof but aren't ready yet

Removing solar panels from your roof and reinstalling them is costly and can void your warranties. Solar panels can last up to 40 years, so if you'll need to replace your roof soon, it's better to do so before you go solar. If you need more time to install a new roof, you should wait to go solar until you feel confident your roof will last at least 25 years (the typical product warranty of solar panels). 

3. Now isn't the best time for you financially

While solar panels will lead to savings, they're still a big investment. If you're currently worried about finances, now may not be the best time to go solar. However, if you're interested in going solar now but don't have the cash on hand for an upfront purchase, there are many other financing options available: Solar loans and solar leases or power purchase agreements (PPAs) make it possible to install solar on your home affordably. 

Some financing options even require $0 cash down, so you won't have to pay anything out of pocket, and if your monthly loan or lease payment is lower than your current electric bills, you could start saving on day one. 

Are solar panels better now?

Solar technology is continually advancing. Compared to just five years ago, many solar panels are more efficient, have lower temperature coefficients, provide higher power outputs, and come with better warranties. If these trends continue, you may be able to install a larger system on a lower surface area footprint in the future, but you'll still miss out on significant electric bill savings in the meantime.

What's the current status of solar energy?

According to the Department of Energy (DOE), as of 2023, U.S. photovoltaic solar capacity is currently at about 110.1 GW. However, we still need to grow solar power significantly: The Solar Futures Study predicted we need 1,000 GW by 2035 to decarbonize the electric grid.

Are solar panels worth it?

For most people, solar panels are worth it. You'll likely break even on your solar investment in about 8-9 years, so considering many solar companies cover panels under warranty for 25 years, you can feel confident in your investment. Also, solar panels don't emit fossil fuels, so by going solar, you'll lower your carbon footprint and reduce your contribution to climate change.

What are the best solar panels?

The best solar panels for your neighbor may not be the best for you, but three brands consistently display top performance: SunPower, REC, and Panasonic.

Solar costs may drop in the future, but they could increase, too. We can't predict the future solar market, so we recommend going solar as soon as possible to avoid rising electricity costs and to lock in the great incentives available today. To compare multiple free solar quotes from vetted installers, check out the EnergySage Marketplace. We'll provide you with a dedicated Energy Advisor who can help you decide if now is the right time to go solar so you can feel confident.