# Are solar panels cost-effective?

Environmental issues aside, I'd like to know whether solar panels are worth it from a monetary standpoint?

• How long before payoff occurs?
• Pros & Cons?
• Is technology moving too fast, e.g. should I wait a year or two?
• Are you talking about water heating, or elec panels? – Walker Jan 31 '11 at 12:51
• Three years later, I can't help but wonder how the numbers have shifted. – JTP - Apologise to Monica Sep 14 '13 at 1:15
• @JoeTaxpayer The accepted answer links to an article which has been updated thus: [Author's note: when this article was written in 2010, there were very few locations, if any, in the U.S. where unsubsidized photovoltaic (PV) systems were cost-effective. In 2013, however, the economics of PV have changed radically. The installed cost of a PV system has dropped from about $8 to$10 a watt to about $4 a watt. At$4 a watt, PV is a good investment in areas of the U.S. with high electricity costs. If tax credits and subsidies are considered, the investment can pay back very quickly in many areas.] – Digital Chris Jan 16 '15 at 15:28
• These answers seriously need an update. – Harper - Reinstate Monica Sep 9 '19 at 19:03
• Solar thermal is one one of the most convenient improvement, specially if you already have the boiler in your attic (or in a garage with a nerny roof). It's cheap and easy to install and is compatible with almost all the existing tankless boilers, are an easy add-on to a tanked indirect (most system-boiler tanked system double coiled cylinders). Solar PV is much more expensive. – DDS Mar 27 '20 at 16:51

Installing solar should be one of the last things you do. You should first concentrate on those things that will reduce the amount of energy you will be using. "The Green Building Advisor" has a good article on The Energy Efficiency Pyramid.

• Just curious; where would curtains and other "decorative buffer" installations fit? They don't seem to fit with examples of "low-cost/no-cost improvements"; they seem more like "insulation", but I'd consider hanging insulating curtains long before I'd consider replacing appliances. – KeithS Apr 18 '12 at 19:10
• The plug-in energy usage monitoring devices (eg, Kill-a-watt) are also quite useful if you're looking at replacing appliances, because they can help you determine how much you're actually spending. While replacing an old appliance will almost unarguably save you money on your monthly energy bill, in my experience (measuring my own old appliances) the actual payback may actually be longer than the expected lifespan of the new appliance (not mention disposal costs -- both out-of-pocket and environmental). Now, if you're replacing it anyway, then by all means get the low-energy ones. – gregmac Feb 14 '14 at 18:15
• This answer from 2010 is a out of date and no longer accurate. According a 2013 addendum to the cited article, prices for solar fell from ~$10/W in 2010 to ~$4/W in 2013 and thus '...the investment can pay back very quickly in many areas.' Since 2013 prices have continued to fall. It is a great concept, and the key points (e.g. start with an energy audit) are still relevant, but the key message of this answer is no longer valid. – David LeBauer Jul 6 '17 at 22:08
• Now obsolete. Prices have continued in free-fall and the economics are even better than David LeBauer states. However, supporting equipment, installation and support are not falling like that, and have become the lion's share of system expenses. While the "net metering" business model is starting to fail, solar continues to be extremely valuable to the grid because it is peaking load. It runs when air conditioners do. – Harper - Reinstate Monica Jul 24 '17 at 22:49

Payoff depends on the state you live in. NJ allows you to sell your energy credits to other companies so in NJ it is about a 3-5 year payback (which is great). Other states have similar programs or offer rebates. Check out One Block Off the Grid (http://1bog.org/) if you are interested in solar panels. They have been great at getting information about the pros and cons and also the benefits on adding solar panels (plus discounts for your entire neighborhood and a local contractor).

Pros:

• It will increase your houses value.
• Depending on the state you live in you could hit payback very soon (and make a good profit after that).
• You will just feel good about getting environmentally friendly energy.
• Your electric bill will be much lower each month (you still draw electricity during the night since batteries are just not worth it yet and most electric companies do not pay you money... your bill could be $0 though each month). Cons: • Your roof should be in good condition before installing the solar panels. • Up front cost (some states do not have any incentives). • You end up with something on your roof that will not necessarily increase your house's curb appeal. Is technology moving too fast, e.g. should I wait a year or two? In my opinion if you live in a state that has good rebates or incentives to get solar panels then I would do it. I live in NJ and I am so tempted to get solar panels but my hesitation has to do with not being 100% sure I will be in my house in the next 3 to 5 years and also the age of my roof, it is 15 years old and really needs to be replaced first before installing solar panels. • " if you live in a state that has good rebates or incentives to get solar panels then I would do it " -- If you have to get someone else to pay for it in order for it to be "worth it", that's a good sign that it's not worth it. – Russell Steen Jan 31 '11 at 2:01 • @Russell: those incentives exist for the purpose of biasing people to get solar panels. I think you should definitely take them into account. – Neil G May 10 '11 at 21:50 • @Russell All forms of energy are subsidized, whether it be directly, via tax breaks, etc. IIRC, solar incentives are pretty much on-par with the subsization of the energy industry. – Michael May 27 '11 at 16:12 • If you have to rely on subsidies to make the deal worth it, consider the possibility that the subsidies may not pay out as you expected. For instance in the past year or two residential solar installations have been increasing at 50% per year. Subsidies with a fixed or limited dollar amount to be distributed may run out or pay out at a reduced rate. – stannius Apr 5 '16 at 14:33 It depends on your point of view. PV cells are a gamble from a financial POV... depending on the state you're looking at and if you finance you're looking at a 5-12 year payback. The cells are supposed to last 20-25 years, but you may need to replace some equipment after 10-12. Upsides: Energy prices will probably rise. • Peak energy demand drives energy prices, and is likely to continue increasing. • PV Cells generate power during times of peak demand. • In many states, adding peak generating capacity is near-impossible to do economically PV Cells increase your home's resale value (they are the only things on your home generating revenue) with little or no tax impact. (Versus a kitchen or pool) You're making a positive environmental/carbon impact. Downsides: Tax credits and other incentives are driving the market. Where you live matters more than for most things. It's difficult to shop around, IMO. Is vendor X better than vendor Y? If the tax credits disappear (this happened in the 80's), will your manufacturer be around to honor that 25 year warranty? The financial models all involve risk. If the cells are destroyed in a hailstorm or something and insurance doesn't cover it, there goes your return! Electric rates may not grow! If you finance the system, you're mostly displacing utility cost for debt service for several years! Other Options: From a dollars and cents point of view, the best alternative energy story out there is solar hot water. You spend alot more money heating water than you realize, and you can put in a solar hot water system for a few thousand (versus$40k - rebates) dollars and start recouping your investment in 3-5 years.

• A good list of issues around PV. I've read that solar hot water is not a slam dunk, though. The systems are complex. The output is highly variable. Variable output in PV is solved with grid-tie, but that's not an option in solar HW. – Jay Bazuzi Aug 23 '10 at 15:41
• Good point about the tax credits disappearing, this happened in our area recently and luckily the govt. agreed to keep the credits for those who already installed – going Mar 23 '11 at 2:20

Also, depending on your geographical location, you might not get enough sun every year to make it worth. That would be an issue for me for example (though I'm not from US).

• One can get an idea of the amount of solar energy with Gaisma. – neydroydrec Sep 13 '12 at 6:31

In some places you can lease solar. They maintain all upkeep. You pay a bit extra each month but have no upfront costs.

I can only post one hyperlink, but know of three companies. They are Solar City, SunRun and Sungevity.

However, as mentioned by @jay, generating your own power is the last step. First you need to calculate your usage. Then reduce. Then power. Most people do a basic calculation, and very little reduction...

Assuming only the 30% tax rebate (i.e. not including state, local, REP, etc. incentives,) the payback on PV is roughly 15 years. The good thing about it is that as electricity gets more expensive (a long-standing trend with only one significant exception: natural gas in the past few years has dropped due to frack drilling), its output will be worth more and more each year. Assuming exponential growth, if a system pays itself off the first time at 15 years, it will pay itself off a second time at roughly 23 years and a third time at roughly 28.5 years. Aside from hail (youll have to figure out if that is a problem or not) and extremely high winds (120+ mph), PV panels last roughly 30-35 years, where their end of life is determined by a loss of ouput by some percentage (20-30%... I forget.) They will DEFINITELY pay themselves off... and they should pay themselves off roughly 3 times over.

I cannot recommend Solar City. Their contract is somewhat secret... im not aware of it being posted publicly on the internet, but im 99% sure that the following is true: you have to pay something around $3/watt upfront, you have to pay a recurring fee, and at the end of the contract, which i believe is 15 years, you have to pay more or theyll come and take it off your roof. Im not too sure how much care they take in doing so, but it's definitely not good for your roof to have 5/8x 5" lag bolts driven into your rafters and then removed. (There are less destructive ways of attaching the panels, but the overwhelming majority of solar installers drive the lags straight into your rafters.) Ive been told that by the time you are done paying for the system, youve forked over$11/watt, which almost twice what a normal installer would charge ($6-7 depending on size, difficulty of install, etc.) In regards to the possibility of the price of solar dropping, I wouldnt plan on that happening. My guess is that any savings from economy of scale, etc., will probably be offset by reductions of incentives. Even if incentives stay the same, though, the price isnt going down much since trasportation, copper, reasonable wages/profit based on the (high) difficulty of the work, and other unavoidable costs accounts for the majority of the system cost. Systems sell for probably 6.50/watt on average, and the panels only account for about$2.00/watt. Other material costs, like the copper wiring and inverter, arent expected to go down that im aware of. Labor costs arent going anywhere either because people arent going to get up on 120-150 degree roofs (most ppl buy solar in the summer) for much less than $16/hr. What there definitely IS room for is improved efficiency of the solar PV systems, which only transform about 13% of the Sun's energy after inverter losses and voltage drop. Those losses are almost completely unavoidable, and the real room for improvement lies pretty much exclusively in the panels, which are about 16% efficient. Cant think of any other useful information to add in regards to PV, but im a solar installer myself, and i try to answer the solar questions that i see on here. If you have any questions, you can ask in a comment or create a new question. All of that said, solar PV is by no means the most cost-effective solar application out there. Flat-plate solar domestic hot water systems pay for themselves in 2-8 years (vs. electric & propane) depending on incentives and last for 50-100 years (have to replace the pumps every 20 yrs or so, but that's only like$600 incl. labor -- not cheap, but not a huge expense either.) The ones with 3/8 tempered glass can stand up to roughly baseball-sized hail. (WARNING: You want flat-plate collectors, not evacuated tubes, which are fragile garbage. Another thing to avoid is antifreeze, which must be replaced and degrades into acid... go with drainback systems instead.)

Solar pool heating is even better. It pays itself off in 1-2 yrs vs. propane & electric and lasts for 10-20 years if you go with a copolymer/PVC design. (Avoid the collecotrs made out of small free-floating tubes and evacuated tubes.) At the end of its life, a solar pool heating system will have saved at least $10,000... probably$40,000 on average. Only downside is the 10-20 yr lifespan and the fact that solar pool heating requires a lot more panels than solar domestic hot water.

Scott Adams (Yes that one), recently wrote an article,'How I (almost) saved the earth' talking about his experiences with solar cells. Ultimately he concluded they weren't worth it from a ROI perspective.

We have a photovoltaic system for generating electricity. That's the most visible sign of a green home, and probably the dumbest. I expect the system to pay for itself in nominal dollars, perhaps in 15 years. But if I compare it with the most obvious alternative, it makes no economic sense. The smart alternative would have been to wait until the costs for systems like this drop by 50%, which will probably happen in a few years.

I confess that we put in the photovoltaic system partly for psychological reasons. I heard great stories of energy meters "spinning backwards" and I wanted in on that. But thanks to our local power company, PG&E, I've been unable to determine if the system is working at all. I know for sure that during the first four months I generated power for PG&E, gave it to them for free and then bought it back at full price. It had something to do with a delay in PG&E getting the right kind of meter installed.

Now we have the right meter, but no backward-spinning anything that I can detect. And I think I'm getting billed full price, but I can't decipher the impenetrable documents they send me.

• The article is a great read, however Scott clearly indicates that he can't comprehend what the elec company is paying him for the solar. This should have been investigated before installing the panels and should be investigated now, maybe they haven't set up billing correctly. Secondly there are benefits other than the cost saving, the electricity doesn't just disappear it is used in place of other elec sources. – going Mar 23 '11 at 2:39
• Our solar panels were purchased at reasonable price and the costs of systems are getting cheaper. We were sent a cheque for over $300 for the quarter of Jun, Jul, Aug and that is winter in Australia. The$300 was the difference of what we generated above our electricity bill. The system cost us less than $3000 to buy and install. – going Mar 23 '11 at 2:42 • @xiaohouzi79 Do you remember the brand of your system? – Doresoom Apr 19 '12 at 15:03 • @Doresoom - They were Sharp brand panels. – going Apr 19 '12 at 22:57 I looked into PV systems in San Diego a few years back. Got a quotes from 3 or 4 companies, and after rebates, the breakeven in nominal dollars was 20+ years. Total cost to zero out our electricity bill was around$23k. A few years later, there was around $6k or so of new government incentives over and above what was available before, so I went back to a couple of the same companies and got quotes thinking they would come in cheaper. Same house, same everything. The new quotes came in within a few hundred dollars of the quotes from a few years ago...even with the new rebates. The labor costs went up by$6k to soak up the new rebates, and my end cost and breakeven stayed the same.

Moral of the story: Try to avoid using the solar contractors. Educate yourself and do your own design and purchasing, and hire a roofer and an electrician to do the work for around half the cost.

I've been following the blog from a fellow Canadian, Dennis S., who has installed solar panels on his urban home under the Ontario microFIT program, whereby the province guarantees to buy your solar-generated electricity at a generous contract price... similar to the popular initiative from Germany.

Dennis blogs at greentoronto.me. He's written about the entire residential solar panel process from start to finish, including the monetary savings / return on investment aspect (which I particularly appreciate, since I spend most of my time at money.stackexchange.com ;-)

I suggest checking out his blog if you're in Ontario and considering microFIT. Dennis also covers a lot of interesting technical information about solar panels, efficiency, installation, etc., so even if you're not in Ontario, it's a good resource for people interested in a residential solar panel installation.

PV is great, but it's even greater when a few things come together at once.

First: learn to make yourself NOT waste electricity. This will mean you don't need as large a system. Most people (at least in the US) would be STUNNED to know just how much electricity they waste in a year. You can often cut the cost of a system in half, if you make a real effort to stop wasting.

Second: rebates - there are federal rebates, plus state rebates in many states.

Third: feed-in tariffs. Federal law requires states to implement energy savings programs. Most states do this by requiring utilities to offer incentives of varying kinds (like rebates for efficient appliances, etc.). Several states offer a feed-in tariff in which the utility not only pays you for the energy you produce with your renewable system, but they pay you a rate equal to or greater than the regular grid price.

Here's where it gets good: if you're in a state with a feed-in tariff, usually you can install a system a little larger than what's needed to cover your typical highest use period and still receive the full tariff. If you do that, then take advantage of the federal (and if available: state) rebate(s), you've now got a 30% discount (or more, depending on your state) on the system.

So far so good. This pretty much guarantees a payback in a very reasonable time. At current prices, it's working out to roughly 10 years or less, in turn is a 10% annual Return On Investment (RIO) - better than just about any investment you can make in the markets these days.

But it gets better. You can accelerate the payback period by focusing on not wasting electricity. The more you cut your unnecessary electric use, the more of your system's electricity is freed up to be sold to the grid at the feed-in rate. In many states, the feed-in rate is higher than the standard electric rate you pay to buy your electricity. In some places, using this method, it's possible to get a payback period as low as 2 - 5 years. That's a 20% to 50% ROI, and after they payback period is done, you're getting all your electricity for free AND making money on it.

But, it gets even better - at least in California, though likely everywhere: homes powered by solar have been selling in CA for a premium over the expected sals price, exceeding the cost of the system. If this phenomenon holds throughout the country, then if you have to sell a home with solar panels installed, you will make more money than if you don't have the panels installed.

That's only for grid tied installations. For off-grid, the calculations get a bit more challenging - though still, even a 20 year payback is a guaranteed 5% ROI, which you're not going to find in a lot of places. If you're thinking of going off-grid, you will generally do best by cutting energy waste first, which will reduce the cost of the system you need. But for people far enough from a power pole, the cost of running power to the house often far outweighs the cost of an off-grid renewable system.

• Fwiw, with rebate and carbon credits I'm looking at payback in 3+ years, my system is under full service warranty for 10, and at that point there'll probably be a new generation of panels anyway... Northeast US, 45-degree roof facing ssw, net metering, group-purchase discount organized by my town (about 15% off installation cost). – keshlam Sep 28 '15 at 13:51

Last I looked at the numbers the price of the panels was dropping faster than the value of the power they generate. So long as that is true you're better off buying power and waiting for the panels to drop.

Given the confusion about what I'm saying I'm going to expand on this:

http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

Specifically:

http://blogs.scientificamerican.com/media/inline/blog/Image/naam-solar-moore_s-law-2.jpg

Averaged over 30 years, the trend is for an annual 7 percent reduction in the dollars per watt of solar photovoltaic cells.

So long as the payback period is longer than 1/7% = 14.28 years (I'm ignoring interest and inflation but they'll approximately counter each other) you end up with more in your pocket if you wait.

More data that shows the issue:

http://www.earthtechling.com/2014/02/doe-sunshot-hitting-mark-with-solar-price-plunge/

(Note that this is discussing utility-scale power production.) The price has nearly halved in 3 years--unless your payback was less than 6 years you lost out by installing in 2010 instead of 2013.

• Isn't this a favourable situation? Unless I am reading your answer wrong, aren't you saying that power becomes cheaper to produce faster than the money you get back from it, so the disparity in your favour continues to rise logarithmically? – user66001 Feb 2 '13 at 8:12
• @user66001: You're reading it wrong. – Loren Pechtel Feb 2 '13 at 17:04
• Okay.... Care to rephrase (just for me)? :) – user66001 Feb 2 '13 at 19:17
• @virtualxtc What's that got to do with it? I don't see the relevance at all. – Loren Pechtel Feb 5 '14 at 21:12
• @LorenPechtel ahh - I see now, the OP didn't ask about "home" solar, just solar in general and thus could include a power company and thus isn't out of date. I would fix my down vote but apparently my vote is locked?! Perhaps you can add the homeowners perspective on your answer so I can up-vote? – virtualxtc Feb 6 '14 at 5:55

My neighbour has a solar grid and one gotcha he told me is that if any of the panel is in the shade, then the whole panel produces 0 volts. He cops shadows from my house plus a house 30+ metres away. Check your prospective panels to see if they suffer this limitation and check your roof to ensure you get constant sunlight.

Another gotcha (in Australia) is that if you sell your electricity back to the gird then the power companies may charge you more for the electricity you consume from them. YMMV.

• Most systems do have the potential for this shading problem. So called micro inverters which are dedicated inverter/panel systems do not. There are several companies with various methods to reduce or eliminate the problem but if you don't ask for one of the solutions, you should be sure there aren't any shadows on your panels. – Philip Ngai Jul 12 '12 at 17:23

There have been lots of answers with complex equations regarding ROI and speculations about cost of energy and/or solar panels going up or down.

You might consider a different point-of-view. You might consider the "insurance value" of having electricity when others do not.

Smithsonian Magazine recently examined the prediction of the much-maligned Club of Rome study, Limits to Growth, and they concluded that we are basically on track with predictions. Notably, they left out some of the scarier curves showing crashing energy availability and steeply rising death rates.

This means that things are approaching a nexus, and it is probably not wise to make future predictions based on past performance. So the complex ROI calculations and price trends may have a great deal of uncertainty.

The certain thing is that if you buy solar panels today, and for whatever reason, the power goes out tomorrow, you'll still have electricity. Unless your solar panels make you the target of energy thieves.

• So you're saying ignore Return On Investment predictions, and focus on the Limits to Growth predictions? – Tester101 Apr 18 '12 at 20:11
• I said no such thing. I suggested that RoI might not be relevant in the long term. Look at Greece, Spain -- the entire EU might be melting down, financially. Can the mortgaged-to-the-hilt US be far behind? In times of financial instability, financial predictions may be worse than useless. The RoI argument is totally based on financial predictions that are looking increasingly dubious. – Jan Steinman Apr 19 '12 at 18:46
• Most panels are not allowed to supply power when the grid is down. This is built-in to the design of the inverters that convert the DC from the panels to the AC that your house uses. – Philip Ngai Jul 12 '12 at 17:25

I had 38 x 175W solar panels installed in September of 2008, amounting to a photovoltaic system of 6.8KW.

My system has been "cost effective", and has already "paid for itself", but only when taking into account the rebate I received from Austin Energy, as well as the tax deduction I took in 2008. Without those two subsidies, I would still be 15-20 years away from breaking even.

A short couple of data points.

My house is a "super insulated" house in the northern part of the US, famous for our cold and snow, built in 1983. In 2005, I replaced my (still working) air source heat pump with an open loop geo source heat pump. Other appliances in the house as well as lighting have had continuous incremental improvements are are now LED with remote/wifi switching. The big energy hog is the geo source heat pump.

In 2010, I installed enough PV to satisfy 90% of my need, and with rebates and incentives, it was paid for in just under 7 years. I am now adding PV on a barn, to handle emerging needs, which will likely include an EV. It will be almost 50% more energy than was created by my first system (so the total system capacity is more than doubling). It will support new projects, such as a geo sourced HVAC on an outbuilding, and an EV. The (incremental) system cost will be about 1/5 of my first system, after rebates and incentives.

PV prices continue to drop, and I will be "overbuying" simply so that I never have to consider a solar upgrade again, and so that I have flexibility in how I spend my energy. I don't worry about break-even because the price has gotten low enough that I can buy excess capacity for a very low price.

One should still do the analysis to determine an appropriate system size, but the prices are lower and the exactness required when prices were high is greatly diminished.

To answer the OP last question, for many people, the time to buy may well be here, rather than in the future.