Will a Solar-Powered Home Pay Off?

Since domestic utility costs skyrocket, more consumers are contemplating whether a solar power system could be a worthwhile investment. While it’s known to offset consumers’ monthly electricity bills, going solar is still capital intensive.

It’s therefore best to consider the implications of solar power systems before buying into the hype. In this article, we’ve curated the factors that play into how worthwhile a solar power system would be for your specific needs.

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    Short and Long Term Savings

    Let’s start with the idea that solar energy is a renewable energy source. As long as the sun is around, solar energy is inexhaustible. It has a lower carbon footprint and doesn’t cause pollution, making it environmentally-friendly. Energy imports aren’t necessary anymore as well, so it enables a country to gain independence from foreign fuel. 

    More importantly, many consider a solar panel system a good investment, meaning spending money on it is worth it. If you can’t pay for the system up-front, you can either lease or apply for loans to supplement your budget. Both options will allow you to enjoy the short term and long term savings when you go solar, which include:

    Short Term Savings: Monthly Energy Savings

    Lower monthly energy costs are the main reasons why homeowners love upgrading their homes into solar-powered ones. Going solar offsets around 70-90% of energy bills. That’s saving roughly $100/month.

    For example, if your current monthly bill is $200, you can enjoy $140–$180 savings every month, which adds up over time.

    Long Term Savings: Pay Off Your Installation + Income

    Let’s say you can save $100 on your monthly electricity bill. That equates to $1,200 each year, $6,000 after five years, and $12, 000 in a decade.

    You’d be generating free electricity after paying off the upfront costs of your solar-powered home. You could save $36,000–$60,000 in total for electricity costs because  most solar panels are designed to last for at least 25 years.

    Solar energy also generates income for solar-powered homeowners. If you own a solar panel system, your utility company will pay you for surplus solar energies, which flows back into their house’s power grid.

    Electricity Costs

    Your current energy statement is the best determining factor with how much you can potentially save with a solar system. Generally, the higher your electricity cost, the more likely you would benefit from switching to home solar power.

    Keep in mind the two main “volatile” charges on your bill: electricity rate and usage. If a utility’s energy costs fluctuate and your energy consumption changes, so could the amount of savings.

    Additionally, electricity rates vary significantly depending on your house’s location. You might pay as low as 8 cents or as high as 20 cents per kWh. According to the U.S. Energy Information Administration, as of January 2020, the average national electricity rate is around 13 cents per kWh.

    There are online solar calculators you can rely on if you don’t know how to do the math. With local electricity rate data, these tools provide customized estimates of expected savings and determine how efficiently investment pays off.

    Residential Solar Power System Costs

    You may hear the sales pitch “going solar can save you thousands of money” from all solar power system providers. However, each solar power system cost varies significantly depending on the equipment and company you choose.

    Opting for cheaper solar panels can save you cash, but your overall energy savings can be higher if you choose better high-quality solar arrays. It’s also worth noting that low-quality equipment may call for higher maintenance costs like other low-grade products.

    Financial Incentives

    There are many solar discounts or incentives that bring down the initial cost of a solar power system. Because the federal government started the widespread promotion of the clean energy project, all homeowners are eligible for a 26% federal solar investment tax credit (ITC).

    Local governments offer additional financial incentives to residents who go solar, too. Additionally, several utility companies give cash rebates to consumers who will make their homes solar-powered.

    As of May 2020, the average cost of a solar power system is around $3.18 per watt. That means an average 7 kW installed solar power system will cost around $22,260 or $16,472 once the 26% federal solar tax credit is applied.

    The market for solar panels, alongside the advancement of technology, continues to improve., so expect the manufacturing and installation costs of solar power systems to decrease.

    Solar Power System Financing

    The most common ways to finance solar panels include cash purchase, a $0-down solar loan, and a $0-down lease or power purchase agreements (PPAs). Using the example given by EnergySage, let’s see the differences between the three solar power system financing options.

    Pay Cash $0-Down Solar Loan $0-Down Lease/PPA
    20-Year Net Savings $20,000 $14, 000 $7, 300
    Net/Out-of-Pocket Cost $9,000 0 0
    Payback 4.9 Years Immediate Immediate
    Increased Property Value 3% + 3% + 0%

    As you can see, to save more, paying with cash would be better since you’d own the system and electricity. However, it would require a high initial upfront payment. If you don’t have sufficient money, solar loans and solar leases require no money down, while still providing the opportunity to save tens of thousands.

    If you lease a solar power system for your house, the solar company will retrieve all profits gained from the generated solar energy to serve as your payment for the cost of energy consumed in your house.

    Pay-off Time

    The cost of solar power systems, the value of the generated energy, and the local electricity rate determine your pay-off time. Your pay-back time will be shorter if your system is less expensive and if your regular electricity rate is high.

    Advantages of Home Selling

    In the previous table, notice the advantages of solar panel installation to property value. Not only does it increase the value, but it also helps you to acquire more potential buyers and a higher return of investment (ROI).

    Increased Property Value
    The property value of a solar-powered home can increase by up to $20,000 or more. According to recent research, that’s for every $1,000 worth of annual savings that the house’s solar array offsets. 

    Let’s say your solar-powered house’s monthly energy savings is around $60,000. Since there’s a pre-existing solar power system in your property, $25,000 will be added to your property’s resale value. Adding everything up, you’ll be gaining $85,000 more.

    Despite the upswing, many homebuyers are willing to pay much more for a solar-equipped home than they would for an almost similar property without solar panels. Solar power systems don’t only reduce or eliminate energy bills, but they also protect consumers from increasing utility costs for the next 25+ years.

    Attract Home Buyers

    Nowadays, the mainstream selling advantage of a house includes good upgrades, such as cool roofs, energy-efficient windows and doors, and, of course, solar panels. The U.S. Department of Energy (DOE) reported that solar-powered homes are sold twice as fast as comparable properties without solar power systems.

    Also, a solar-powered home stands out better than a house without a photovoltaic (PV) system. Many homebuyers would want to avoid the legwork and trouble of installing a solar power system themselves. This makes houses with solar power systems more appealing and sought-after.

    In general, if your property has pre-existing solar arrays, you’ll gain more potential buyers. The more interested buyers you have, the higher the possibility of selling your house faster for the highest price in almost any market. Higher energy cost savings give buyers a reason to be interested in your property and offer more than competing homes without solar power.

    Valuable investment

    Turning your house into a solar-powered dwelling is even a better ROI than any other home improvement project.

    We’ve summed up the cost of a 6 kW Solar PV System (from EnergySage) and some sample costs for some home-improvement projects this year (from 2020 Cost vs. Value Report):

    Home Improvement Projects Project Cost Resale Value Added Cost Recouped
    6 kW Solar PV System $13,142 $24, 000 154.40%
    Minor Kitchen Remodel (Midrange) $23,452 $18,206 77.60%
    Bathroom Remodel (Midrange) $21,377 $13,688 64.00%
    Deck Addition (Wood) $14,360 $10,355 72.10%

    Many consumers prefer saving money more than spending it more on home improvement projects like luxurious white kitchen cabinets or black granite tiles. As stated, solar panel installation is a premium most buyers are willing to pay extra for.


    A solar-powered home is worth the cost. It not only relieves you from monthly electricity bills, but it also pays off installation in the long run, generates income, and increases your property’s resale value. All of these factors allow you to earn a solid return on solar energy investments. 

    Author’s Bio
    Tiffany Wagner is currently continuing her studies in Investment Management Analysis. She’s also a copywriter. Her written works usually involve topics relating to finance, real estate, and investments.