Your financial savings are the ultimate decider on whether solar panels are worth it in your area. If you’re thinking about installing solar panels for your home, you want to know whether you can save money or not, right? Knowing your costs and savings is key to understanding whether rooftop solar is worth it for your home.

Thankfully, estimating your solar costs and savings is extremely easy these days. There are three ways to calculate your solar costs and savings:

1. The Best Way to Get Free (and Accurate) Estimates

The easiest and most accurate way to calculate your own solar costs and savings is to simply talk to multiple installers. All solar companies offer no-cost estimates for any homeowner interested in solar. Estimates typically breakdown cost, solar energy production, annual and lifetime financial savings, and equipment details.

Talking to multiple installers allows you to compare both costs and equipment to find the best value. Just like any industry, some salespeople can be pushy, but installers always provide estimates with no strings attached, so don’t hesitate to contact several companies to find the best deal.

As mentioned, installers actually provide the most accurate savings quotes. They have the specialized tools and knowledge to gather and assess all necessary data – like roof angle and size, shading data, local weather patterns, energy use, utility prices – to create an extremely accurate estimate.

2. Free Online Solar Calculator

If you just want a quick estimate of your solar savings, there are dozens of online calculators that can give you a rough estimate of your solar costs. Earthtechling’s own solar calculator only needs a few basic inputs, like your average monthly electric bill, and will provide a cost and savings estimate immediately right on the same page. Online calculators like this are an easy way to get a feel on whether solar is worth it for your home – all in just a minute or two.

3. DIY – Do The Math

Lastly, if you like to do things yourself you can also calculate your own costs and savings. Though they won’t be as accurate as an installer’s estimate, you’ll be able to either get a rough estimate and even verify the estimates that installers have provided.

Here’s the quick rundown on how to calculate your solar cost and savings:

  1. Find your last 12 months of energy use: Check your utility account and total up your last 12 months of energy use. Totaling a full 12 months is necessary, since you use more energy in some months than in others. For example, you likely use far more energy in the summer months when you’ve got the AC cranked up. In the winter, when most people use a gas furnace for heating, electricity use goes down.
  2. Find your solar installation size: Using an online tool like PVWatts, find the solar installation size you need to produce the amount of electricity you found in Step 1. For example, if you used 14,000 kilowatt-hours of electricity over the last 12 months, you’ll also want a solar installation that produces 14,000 kWh of electricity each year. In North Carolina, for example, a 10 kilowatt solar installation can produce 14,000 kilowatt-hours per year. That’s equal to about 35 solar panels on your roof!
  3. Calculate your installation costs: Now that you know your installation size, you can calculate your costs. The average solar installer in the US charges $3 per watt as of 2020, so a 10 kilowatt installation would cost $30,000. Of course, financial incentives like the federal tax credit can drop that installation cost significantly.
  4. Calculate your solar savings: Now that you know your installation size and installation cost, you can calculate your total lifetime savings. Solar panels last for 25 years or more, so we simply compare the cost of your solar energy against the cost if you were to purchase all that electricity from the utility over the next 25 years. We know the 10 kW solar installation in North Carolina produces 14,000 kWh per year. Over 25 years, that’s 350,000 kilowatt-hours! The average utility in North Carolina charges $0.12 per kWh, so if you purchased all that electricity, you’d spend $42,000. But since you installed solar, you only spent $30,000, so you saved $12,000!

That’s not bad for an investment that just sits up on your roof. Plugging in your own data in the steps above provides a quick DIY method to calculate your solar costs and savings. But like we said, if you really want to know whether solar panels are worth it on your own home, you’ll need to contact a few installers.

Are solar panels worth it in your area?

Above, we looked at how to estimate your solar costs and savings to figure out if installing solar on your home is worth it. Now let’s look at the key factors that affect your solar costs and savings.

1. Utility electricity prices are key

The single biggest determining factor to whether solar panels are worth it in your area, is your utility’s electricity prices.

The cost-effectiveness of your rooftop solar is determined by the difference between your solar costs and utility rates. In essence, the more your utility charges, the more you can save by installing your own electricity-generating equipment (ie, your solar panels) and avoiding those high costs.

In the US, the average electricity price is $0.13 per kWh. However, rates vary from a low of $.09 per kWh in Washington, Idaho, and Louisiana, to $0.22 per kWh in Connecticut and Massachusetts – and even more in some states. Hawaii suffers from the highest rates in the country, at $0.31 per kWh.

In comparison, solar energy from rooftop panels generally costs around $0.08 per kWh. Here’s how this works out: In the US, the average solar installation is 7,000 watts, which will produce about 257,000 kWh over its 25-year lifespan. At the average cost of $3/watt, that installation costs $21,000, so your cost per kilowatt-hour is $0.08 per kWh ($21,000 divided by 257,000).

You’d have a hard time justifying installing solar in areas with extremely low electricity prices like Louisiana or Washington, where electricity costs just $0.09 per kWh. However, in states with higher prices, it’s common to save between $12,000 and $20,000 over the lifespan of a solar installation.

2. Does your utility offer net metering?

Net metering is a cornerstone of solar savings. It’s a simple idea, though it can seem complicated. Without a battery to store your solar energy, you have to use all of it exactly when it’s produced. The problem is that no one is home all day everyday, so a lot of that solar energy goes to the electricity grid, to be used elsewhere.

When you enter a net metering agreement with your utility, the utility credits your account for all the energy that goes to the grid – typically at the same cost-per-kWh price that you pay. You can then pull from these credits in months when your solar installation doesn’t produce as much electricity (during snowy winter months, for example).

Net metering allows you to financially benefit from 100% of the solar electricity your installation produces, whether you use it in your home or not. This allows you to see a faster return on your investment and higher lifetime solar savings.

Currently, 39 states have passed mandatory net metering regulations for utilities. These regulations force utilities to offer net metering to residential and commercial customers who install solar.

A handful of states, predominantly in the southeast, have not yet passed any sort of net metering regulations. As such, utilities aren’t required to purchase or give credits for solar electricity sent to the grid. However, homeowners in those states aren’t completely out of luck. Most utilities will still purchase any solar energy you send to the grid, but at their ‘avoided cost’, which is what it would cost the utility to produce that same electricity. Avoided costs are generally about ⅓ of the price you pay for electricity. It’s a far cry from retail-rate net metering, but it’s still something.

Let’s compare the lifetime savings of a single solar installation, both with and without net metering:

SystemNet Metering CreditsPayback PeriodTotal Lifetime Solar SavingsFinancial Loss from Lack of Net Metering
7kW Net Metered InstallationRetail-rate bill credits11 years$22,004-$0
7kW Non-Net Metered Installation (with 40% of solar electricity going to grid)Credits at wholesale cost (1/3 of retail rate)15 years$11,727-$10,277

In the table above, you can see that the net-metered system enjoys about double the energy savings and cuts the payback period down by four years. However, even if your utility only offers avoided costs for your excess generation, installing solar can still be a worthwhile endeavor.

Simply put, the net-metered system offers a far better financial investment than the system without net metering. Installing solar without net metering can still be a wise financial decision, but you’ll need to be more careful about controlling your installation and financing costs. For example, because savings from non-net metered systems are so much lower, you might find it hard to see a good ROI if you take out a loan to pay for your system. 

3. How much does solar cost in your area?

The cost to install solar depends on your local solar industry, but typical installation costs range from $2.50 to $4 per watt, generally falling around $3 per watt. The larger your installation, the higher your total costs. Here’s how the costs for a few common installation sizes pencil out at $3/watt:

 SizeTotal Cost
Small Installation4,000 watts$12,000
Average Installation7,000 watts$21,000
Large Installation12,000 watts$36,000

The lower your $/watt costs, the higher your solar savings can be. Of course, there are solar incentives to help you lower that cost. The federal tax credit offers an income tax credit worth 30% of the cost of your installation (as of 2019). As such, that $21,000 installation would cost you just $14,700 after taking advantage of the federal tax credit.

Seven individual states also offer tax credits for solar installations, similar to the federal government. These tax credits are typically on top of the federal tax credit, not instead of the federal tax credit, so doubling down on multiple credits can really drop your solar investment.

Keep in mind that the federal tax credit is non-refundable, so your tax liability needs to be high enough to take full advantage of the credit, though you can break it into multiple chunks and claim a portion each year until you’ve used up the entire value.

The equipment you choose to install also plays a part in your installation costs. Most homeowners install ‘standard’ quality solar panels and inverter, as they offer a good balance between efficiency and value. This equipment generally includes 10-12 year product warranties and solar panel efficiency falls around 18%.

However, some homeowners opt for premium equipment that is more efficient and/or offers better warranties. This premium equipment, like Sunpower solar panels, can produce 20% more energy and typically includes 20 to 25-year warranties, but they’re far more expensive as well.

If you have a very small roof, premium high-efficiency panels can help you squeeze more energy out of that small space. However, you’ll need to weigh the higher cost against the higher energy production to see if you’ll see a financial benefit.

Exactly how much your premium equipment would affect your final installation costs depends on your specific situation. But for an average-size system, premium panels could add around $3,000 to final installation costs. Talk to an installer to see if high-efficiency equipment is worth the higher cost in the long run.

4. Can you finance in cash or do you need a loan?

The last step in figuring out if solar panels are worth it is simply assessing your own finances. If your bank account can handle paying for the installation in cash, you’ll see a much higher return on your investment than if you take out a loan or finance with a solar lease.

Loans add interest to your investment, which can really eat into your savings. For example, let’s say you install an average solar system in North Carolina for $21,000. Over 25 years, that installation will produce 260,000 kWh. If you purchased all that electricity from an average North Carolina utility, you’d pay $0.12 per kWh, for a total of $43,000. By installing solar, you will have saved $12,000 over the 25-year lifespan of the installation ($43,000 minus $21,000).

That’s pretty good, right? Even though North Carolina’s electricity prices are pretty low ($0.12 per kWh), you can still save quite a bit of money with solar.

Now let’s say you take out a 12-year loan at 4% interest to pay for the installation. Those interest payments will add up to $5,500 in total, cutting your savings to just $6,500! That’s still a positive investment, but far lower than you could realize if you paid in cash.

In states with higher electricity prices like California and most northeastern states, the savings you can see by installing solar is so good that, even with loan interest, it’s an easy financial decision to make.

Your installer can help you figure out whether taking out a loan makes financial sense for your own situation. And because interest adds up so quickly, be sure to take some time to shop around for the best option. Installers often partner with one or two loan companies dedicated to financing clean energy projects, but local credit unions and even city governments can offer low-interest loans for solar or other renewable projects, so ask around to find the lowest interest rate you can find.

Financial benefits of solar

Now that you’ve seen what factors play into whether solar is financially worthwhile, let’s look at some of the benefits that solar offers – both financial benefits and environmental benefits. Just like anything in life, there are pros and cons to solar energy, but we think the positives far outweigh the negatives.

Lower energy bills

Installing rooftop solar can drastically decrease your electricity bills. In fact, that’s probably the reason you’re interested in solar in the first place. As we’ve seen in the sections above, exactly how far you can lower your energy costs depends on your utility prices, solar installation size, and many other factors.

Let’s take a look at an example of the typical savings a homeowner can see:

In Florida, the average utility charges $0.12 per kilowatt-hour of electricity that you use. In comparison, how much does a rooftop solar system cost? Let’s calculate!

Let’s say you installed a 7-kilowatt solar installation in Orlando, FL. Florida actually has some of the cheapest solar installation costs around, so that 7-kW installation will cost just $18,550 (before any incentives).

Your installation will produce about 10,600 kilowatt-hours of electricity in the first year and around 260,000 over its 25-year lifespan. So, you’ll pay an average of just $0.07 for each kilowatt-hour of electricity your solar panels produce ($18,550 divided by 260,000).

Comparing your solar costs vs utility costs, you’ll be paying about 40% less with solar!

And while your solar price remains constant (since you’ve already paid for the installation), Florida utilities raise rates an average of 2% each year, as their own costs increase. With solar, you’re also avoiding these rate hikes. Let’s take a look at this a bit more in depth in the next section.

Safe, long-term investment

The long-term value proposition of solar hinges on two key components: 1) that utility electricity prices are more expensive than installing solar and 2) that utility prices will continue to increase, while your solar costs remain the same.

We’ve seen in the example above that the $/kWh cost of solar electricity can be far lower than utility costs. In our example above, solar electricity cost just $0.07 per kWh, while electricity from the utility cost $0.12 per kWh.

As utility prices increase, that difference grows even bigger, increasing your savings. Like any investment, no one knows the future, but there’s pretty good evidence that utility prices will continue to increase.

From 2001 to 2016, US utilities raised rates an average of 2.6% annually. That doesn’t sound like much, but over 20 years that adds up quickly. At 2.6% annually, if you pay $0.13 per kWh now, you’ll pay $0.21 per kWh after 20 years – a 62% increase in total.

And while 2.6% is the US average, homeowners in the majority of states suffer from even faster rates:

Average Utility Rates

As you can see, Hawaii, Connecticut, and Maryland suffer from the highest rate increases, at around 4.5% – almost double the national average. With solar, you don’t have to worry about these rate increases. You’re ‘locked in’ to your energy prices, since you’ve already bought and paid for all your equipment and all the fuel (ie, sunlight) is completely no-cost.

Increase in home value

Installing rooftop solar doesn’t just cut your energy bills. It can also add value to your home as well. In 2015, the Lawrence Berkeley National Lab studied the resale value of 22,000 homes – both and without solar panels – across 8 states and found that, on average, solar panels add a premium of $4/watt to the value of the home.

At this rate, an average system would then add about $28,000 to a home’s resale value. The researchers found that the age of the solar panels generally determine the value added to the home. New solar systems added almost $6/watt, while older systems added around $2/watt.

An important note: these premiums are only for solar installations owned by the homeowner – financed via cash or loan. A leased installation or one financed via a power purchase agreement (PPA), wherein the installer owns the system, doesn’t add any value to a home.

Of course, the additional value that rooftop solar adds can vary according to local real estate markets, so talk to some local realtors that are experienced in homes with solar to get a feel for your own area.

Environmental benefits of solar

Solar Panels

We all know that solar energy is better for the environment than coal or natural gas, but why exactly? In a sentence: Solar energy is both 100% renewable and 100% clean.

Clean means that solar panels produce zero emissions when they create electricity. Burning fossil fuels like natural gas or coal, we release CO2 – the main greenhouse gas scientists say is contributing to global warming – as well as other toxic pollutants like mercury, nitrogen oxide, and particulate matter. These emissions are proven to contribute to smog, acid rain, respiratory issues, and lung disease.

As we move towards more and more clean energy, which includes solar and wind, all of these emissions will continue to fall. The electricity industry actually accounts for ⅓ of all CO2 emissions in the US, so decreasing our reliance on fossil fuels for electricity can make a major impact in combating global warming and bettering our own health.

Solar energy is also renewable, meaning that we’ll never run out of solar energy’s fuel – ie sunlight. Fossil fuels, including coal and natural gas, are finite resources that we must extract from the earth and that we’ll eventually run out of. The faster we use these resources, the faster we’ll run out.

Sunlight on the other hand, doesn’t care if we use it to create electricity. We can harness more and more sunlight for electricity and we’ll never cause it to go kaput. Sunlight can’t be traded, bought, or sold. There’s no need to mine or extract it from the earth, it can’t be shipped or burned, and it’s 100% locally harvested. That’s pretty cool to us.

Tips to make solar as worthwhile as possible

Let’s finish up with a couple tips to make sure you get the best deal on your solar installation.

Talk to multiple installers for quotes

We’ve mentioned this several times, but the easiest way to make sure you get a good value on your installation is to simply talk to multiple installers for estimates. Just like any home contractor, there’s a wide range of solar installers. Some install premium equipment and charge higher prices. Most install standard-quality equipment and charge somewhere in the middle. And there’s probably a few that are too cheap and you should probably avoid.

Talking to multiple companies can give you a better understanding of what sort of cost and savings you can expect and then help you weed out any estimates that seem too high.

And don’t just focus on big installers like Tesla or Sunrun. In 2017, the National Renewable Energy Lab studied solar estimates and found that smaller, local companies typically offer estimates that are 10% less than big companies.

These small companies generally have lower overhead as well as sales and marketing costs, so installation costs are lower as well. On a large purchase like a solar installation, a 10% discount can be a difference of thousands of dollars, so it pays to shop around!

Reduce energy use beforehand

Reducing your energy use as much as possible before going solar is a great way to cut your energy bills. Simple stuff like LED lightbulbs and low-flow showerheads, as well as weatherstripping around doors and windows can all make a major impact on your energy use. If you’re really serious, you can look into energy-efficient appliances and even adding extra insulation around your house or a vapor barrier in your crawlspace.

Reducing your energy usage isn’t just the most environmentally-friendly way to green up your home. It’s also the most cost-effective way to save on your energy bills – even more so than installing solar!

Once you’ve taken a few of these steps and lowered your energy use as much as you’re comfortable with, you’ll be in great shape to see the most effective return on your solar and energy upgrades.

Whether rooftop solar is worth it for your own home is simply a matter of cost vs savings. Like we’ve said again and again, talking to an installer is the best way to ensure solar is right for you. They have the knowledge and tools to provide accurate estimates of cost, savings, and energy production. They’ll also help you assess financing and equipment options as well – all to make sure you can save as much as possible.

How to Get Free Solar Quotes for Your Home

UnderstandSolarPower.com is here to help you connect with the best solar panel quotes. Submit a little information about your specific home and location on their website to get the answers to these questions and more from a reputable solar pro. They will provide you with real estimated costs and savings based on many factors and your personal energy needs. They can also provide you with information about any money-saving local or federal rebates or incentive programs that you might qualify for.

Get started online to find out if solar is right for your home.


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