With the costs of electricity and fossil fuels rising and the price of solar panels continuing to drop, home solar systems are looking more and more attractive. But will the savings be worth the cost of installation?

Here are some general factors to consider, though you should contact a specialist to understand costs, efficiencies, and tax incentives specific to your home.

Cost of home solar systems

The price of solar has plummeted in recent years. These decreases were mostly due to sharp declines in the price of photovoltaic (PV) panels. “Soft costs” such as installation labor and inspections have also fallen, but they currently make up around 64 percent of the total price of installation.

The federal government’s SunShot Initiative, launched in 2011, is helping to make solar more cost-competitive, in part by reducing soft costs. A new innovation program called SunShot Catalyst addresses those costs specifically.

Installation costs

The average cost of installation dropped by about 50 percent between 2008 and 2013, and fell an additional 5 to 12 percent in the first half of 2014.  Solar’s definitely gotten more affordable overall, but is it a practical solution for you? It depends on a number of factors, including:

  • How many hours of direct sunlight your home gets each day
  • The size of system your roof can accommodate
  • Whether your system will be stand-alone or attached to the grid
  • Local permit requirements

As of June 2014, the median cost of a home solar system was $3.74 per watt. The average residential system is 5 kilowatts, making the average installation price around $18,700. But that’s just a baseline. No 2 situations are exactly alike, and the best way to figure out installation costs is to get a professional estimate.

Operation and maintenance costs

Once installed, solar panels don’t need a lot of maintenance. They should be inspected regularly and washed every few months with a garden hose (if you can’t reach them safely, hire a professional cleaner), but overall the cost of upkeep isn’t high. This depends somewhat on your location — ice can damage the panels, so if you live in a climate with cold winters, you may need more frequent inspections.

Other operational costs might include performance monitoring and insurance. In addition, you’ll usually need to replace your solar inverter (which converts DC power from the panels into the AC used by most appliances) at least once during the life of the system. Total operational costs generally run from $4,000 to $8,000.

PV systems have a life span of about 25 years. Most solar companies offer warranties guaranteeing the panels will operate at no less than 90 percent efficiency for 10 years and no less than 80 percent efficiency for 25 years. They also usually offer a “workmanship” warranty (2 to 10 years) on parts and labor. The solar inverter is covered by a separate warranty, which can be 10 to 15 years for a high-grade brand.


Tax incentives and rebates can substantially reduce the cost of going solar. A federal tax credit currently allows you to claim up to 30 percent of the cost of your system (the credit expires in 2016).

Many states also offer tax incentives, rebates, grants, and other programs that promote solar. But as the cost of PV systems has dropped, these incentives have declined as well, falling 85 to 95 percent in the past 10 years.

Energy savings

If your PV system’s hooked to the grid, you’ll still receive backup power from your local utility, but you can expect to see a big drop in your electric bill. Just how much depends on the size of your system, how much power you use, and the current price of energy. But on average, you could save about $84 per month.

Solar panels work with light, not heat, so they’ll produce just as much (or often more) energy on a bright winter day as on a sunny summer day. They also produce energy on cloudy days, but at a lower rate. Snowfall can actually increase the efficiency of the panels due to the reflected light. However, snow accumulation on the panels can lower output, and a thick layer may stop production entirely until the snow melts off the panel.

Credits for excess energy

If your PV system generates more energy than you’re using, the utility company often credits you for the excess energy, which goes back into the grid to be used by other households. Your credit pays for any electricity you consume when your panels aren’t generating power. This is called “net metering” because you’re only charged for the net amount of energy you use.

Net metering’s allowed in 43 states and the District of Columbia. However, utility companies in many states are now fighting these laws, arguing that the cost of hooking PV systems to the grid outweighs the revenue generated by those customers.

Increased home value

Solar’s become a big asset in the eyes of homebuyers. According to a recent study, PV systems add an average of $24,705 to a home’s sale price. This is especially true if your system was recently installed (the market value depreciates by about 9 percent per year).

Renting solar

If the up-front cost of installing solar is more than you can afford, you might consider a leasing program. You’ll still enjoy the energy savings, and the leasing company’s responsible for any maintenance costs.

There are some drawbacks, though. If you rent the system, any tax credits will go to the leasing company instead of you (though the company may pass along savings in the form of free installation). Also, most leases cover a period of 20 years. If you decide to sell your house in the meantime, the potential homebuyer may not want to take over the lease.

Is solar right for you?

So, will installing solar be worth the cost? With many factors to consider, it’s hard to say for certain. Along with the economics, there’s also the social and environmental value of choosing green energy to keep in mind.

To get an idea of the size of your investment, use a solar calculator to generate a ballpark estimate of the cost of your system. Students at Tuck School of Business at Dartmouth have also developed a dashboard that helps homeowners in 5 states determine if solar’s right for them, based on factors like location, tax incentives, and how long they plan to stay in their home.

If you choose to install a home solar system, check with your homeowners insurance company to see that you’re properly covered. You can also find out what factors go into determining your rate.

Want to know more about renewable energy? Here are some important facts about hydrogen fuel cells.



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about Ellen

Ellen has spent many years as a professional wordsmith, helping to shed light on such topics as world travel, cargo pants, and the porosity of bath tiles. As a freelance copywriter for Esurance, she brings her boundless curiosity to the world of insurance. Outside work, she can be found cheering on the San Francisco Giants, hiking in the Oakland hills, and (barely) resisting smuggling penguins home from Antarctica.