Installing solar panels for your home is a long-term investment that not only lowers your energy costs and raises the value of your property, but also helps lower our own impact on the environment around us.
The best way to understand if solar is right for you is to talk to a local installer, who can walk you through the entire process.
Editors Tip: Get free information and quotes from top rated local solar panel installers at UnderstandSolarPower.com
If you’re just looking to get up to speed on the state of residential solar or want to install solar panels on your own home, here are twelve key facts everyone should know about installing rooftop solar this year.
12 Facts About Installing Solar Panels on Your Home In 2020
1. Rooftop Solar Costs Have Fallen 60% since 2010
The cost to install solar panels has fallen far quicker than anyone in the energy industry ever expected. In 2010, you would’ve paid $7.34 per watt to install solar on your roof. That means you would’ve had to shell out $51,380 for an average sized system. Yikes.
Fast forward to 2019 and things have changed drastically. Now, installing solar only costs about $3 per watt. That 7 kW system that cost over $50k in 2010 now costs just $21,000! The huge drop in installation costs is driven mainly by the fall in the cost of the solar panels themselves, which have enjoyed a similar jaw-droppingly fast price trend. Installers have also streamlined the installation process, further dropping prices.
As we’ve seen over the last decade, this falling cost has allowed the solar industry to explode. As of 2019, the US has installed 69 GW of solar panels – enough to power almost 10 million homes! Over the next 5 years, that number is expected to double. By 2024, the US will install 15 GW of solar every single year.
2. Solar Installation Costs Vary By System Size
The size of the installation is the biggest determining factor when calculating the cost of your installation. Bigger houses typically require more energy, and therefore bigger solar installations. As installations increase in size, you’ll need more solar panels, more wiring, more mounting equipment, and a larger inverter.
Because the size of the installation is so important to total installation costs, the solar industry actually estimates cost based on the total wattage, or size, of the installation. As you saw it Fact #1 above, the average residential solar installation costs about $3 per watt. With rooftop solar systems generally about 7,000 watts in size, the average rooftop installation then costs $21,000 before incentives.
That cost though varies directly with the size of the installation. A smaller installation costs less; a larger one costs more. Here’s cost estimates for three common installation sizes:
|Size||$/watt Cost||Total Cost|
|Small Installation||4,000 watts||$3/watt||$12,000|
|Average Installation||7,000 watts||$3/watt||$21,000|
|Large Installation||12,000 watts||$3/watt||$36,000|
As mentioned, your energy use dictates the size of the installation. If you use more electricity, you’ll need a bigger solar installation. If you use less, you’ll need a smaller system.
You invest far less money in a smaller system, so lowering your energy use as much as possible before installing solar is a great way to lower your cost investment and save even more money. It might sound surprising, but simple energy efficiency measures like installing LEDs and faucet aerators, adding weatherstripping around doors and windows, and adding insulation to your attic are actually more cost-effectiveness than installing solar in cutting down on your energy bills! Once you’ve lowered your energy use as much as possible, then it’s time to go solar!
3. Expect 5 to 15 Years to Recoup Costs
Rooftop solar can take between five and fifteen years to recoup costs, with most falling between about seven to twelve years. How long it takes to see a return on your investment depends on your installation cost, utility rates, location, net metering regulations, and a few other factors.
If you live in an area with high utility rates and good sunshine, you’ll see a faster return on your investment than a homeowner in an area with low utility prices and cloudy skies. However, some states with less-than-perfect weather for solar, like New York, offer tax credits and rebates to help drop the price of solar, allowing homeowners to see a much better cost-effectiveness than they otherwise would.
Let’s run through a quick example: Let’s say you live in Colorado and installed a 9,000 watt system for $18,900 after the federal tax credit. Your 9,000 watt system in Denver will produce 14,400 kilowatt-hours per year. So, over the 25-year lifespan of your installation, you’ll produce 195,072 kWh of electricity.
If you purchased 195,072 kWh of electricity from the average Colorado utility over those 25 years, you would spend $63,400. So, over the lifetime of your installation, you’ll enjoy a net savings of $44,500 and see a return on your investment after just eight years.
4. Solar Leases Are Out, Ownership Is In
Along with the falling cost of solar panels, solar leases drove the residential solar industry to explosive growth in the late 2000s. Big companies like Sunrun and SolarCity (now Tesla) enjoyed massive growth from 2008 to 2015 driven by the popularity of solar leases and power purchase agreements (PPAs, which are very similar to leases).
Under a solar lease, your solar company installs the solar system on your roof. The solar company retains ownership of the installation (as well as the tax credits) and you pay a monthly fee to your installer to use all the electricity the installation produces. When Sunrun and SolarCity began offering leases in the mid-2000s, solar installations still cost far more than most homeowners could afford. Zero-down leases offered a way for homeowners to install solar without footing that huge upfront investment themselves.
By the end of 2015 – the height of the solar leasing craze – solar leases and PPAs accounted for 59% of all new residential solar.
Since then though, leasing and PPAs have fallen out of favor. Homeowners are now turning to cash or loan payments to finance their solar installations. Much of this is driven by the fall of SolarCity, whose installation numbers have fallen drastically since Tesla bought them out in 2016. Today, small solar installers – most of which don’t offer solar leasing or PPAs – install the majority of residential solar. As of 2018, solar leases make up just 33% of all new residential solar.
While solar leases have real benefits – you don’t pay any upfront costs! – there are real downsides as well. First, you’ll save less money over the long run compared to financing via cash or loan. Second, since your installer owns the installation, they are eligible for the federal tax credit, not you. Lastly, a leased solar installation adds no property value to your home, unlike a solar installation owned by the actual homeowner (more on this in a later section).
Purchasing your solar installation via cash or loan allows you to save more money over the life of your installation, increases your property value, and allows you to directly take advantage of all available tax credits and other incentives.
5. Tax Credits Are Still Available
While the full 30% federal tax credit expires at the end of 2019, the tax credit isn’t quite done yet! Throughout 2020, you can still receive a tax credit worth 26% of the cost of your installation. In 2021, the value drops to 23% of your installation. In 2022, it’s completely gone.
For an average installation, here’s how this phase-out will affect your total investment cost for a 7,000 watt installation that costs $21,000:
|Credit Value||Final Installation Cost|
You can see that, as the credit phases out, you’re adding about $1,000 to your installation costs, which adds an additional year or two to recoup your total costs and start seeing financial savings.
Of course, the federal tax credit isn’t the only incentive for homeowners installing solar. Many states offer their own income tax credits, property tax exemptions, and sales tax exemptions for residential solar. Local cities and counties will also offer rebates on building permits for your solar installation, as well as general rebates and other incentives. Lastly, utilities will also offer rebates for installing solar.
New York homeowners, for example, are eligible for a variety of incentives to help drop the cost of going solar. Beyond the federal tax credit, the state of New York also offers a tax credit worth 25% of the cost of installation, up to $5,000. On top of that, in certain areas the state offers rebates for residential solar worth $0.30 to $0.35 per watt (as of late 2019). That works out to over $2,000 rebate for an average solar installation. Lastly, New York homeowners are exempt from both property and sales taxes on their solar installations.
Your installer will know what incentives are available in your area.
6. Solar Panels Increase Property Value
Installing solar panels on your roof is a financial investment, as the cost of installing a solar installation (that produces free electricity for the next 25 years) is lower than continuing to purchase electricity from the utility for those 25 years.
However, if you purchase your own solar installation, there’s an additional benefit as well.
In 2015, the Lawrence Berkeley National Lab studied home values in 8 states over 14 years and found that homes with solar panels sold for an average of $4 per watt more than similar non-solar homes. For an average 7,000-watt installation, that’s a premium of $28,000 – more than the cost of the actual installation.
Of course, your local utility rates and housing market will dictate exactly how much additional value solar adds to your own home. In the LBNL study, researchers found that the age of the solar panels greatly dictated the value added to the property. Newer installations (< 2½ years old) added up to $5.90 per watt, while older systems (6 – 14 years old) added $2.60 per watt. However, even the lower end of the spectrum almost fully covers the initial cost of the installation.
It’s important to note that these premiums only apply to solar installations owned by the homeowner. In a separate study, LBNL found that installations financed via leasing or PPAs added no value to the property, though they didn’t detract from the home’s value or scare away buyers, contrary to what many potential solar homeowners believe.
7. You Can Cover 100% of Your Energy Use with Solar
Most homeowners install a solar installation that is big enough to cover 80% to 100% of their energy use. So, let’s say you use 10,800 kilowatt-hours of electricity each year. If you want to cover 100% of your energy use with solar, you’d want an installation that can produce 10,800 kWh of electricity each year.
Solar panels produce different amounts of energy depending on the location (Desert southwest vs rainy Washington), orientation of the panels (south vs south-west), and angle of the panels (horizontal vs flat). Solar installers will take all this into account to work out the exact number of panels to fit your energy needs.
In some cases, the physical constraints of your roof might limit the size of your solar installation. Maybe your roof isn’t big enough to hold as many panels as you’d like. Maybe your beloved tree in the front yard is shading too much space. In these cases, installers have a few different options:
- Move a portion of your solar panels to another area of the roof. Solar panels produce the most electricity when facing south, directly towards the sun. But sometimes your south-facing roof isn’t big enough for all your solar panels. In this situation, your installer might move a portion of the panels to a west- or east-facing roof. You’ll likely need a couple more panels, since a west- or east-facing solar panel doesn’t produce as much electricity as a south-facing panel, but it’s a very common solution to a very common problem.
- Decrease the size of your installation. If you don’t have enough roof space for all your panels, you’ll likely need to decrease the size of your installation. Instead of covering 100% of your energy needs, you might drop down to 80% or 70%. At this size, you’re still producing clean energy and you can still see savings on your energy bills.
- Opt for premium, high-efficiency panels. High-efficiency panels, like Sunpower solar panels, are generally able to produce about 20% more electricity than standard panels most solar companies use. As such, you’re able to generate the same amount of electricity with 20% less space. They’re a great option for small roofs, but their high costs mean it’ll take you longer to recoup your investment, potentially negating the greater energy production you’re enjoying.
If you’re crafty, you might think that with net metering you could actually make some money by installing more solar panels than you need. While that would be true, net metering really isn’t intended as a money-making venture. In fact, most utilities cap your solar installation size to cover 100% to 120% of your energy use.
8. Local Installers Can Offer Better Prices
While big names like Sunrun and Tesla are the best known solar companies, there are thousands of smaller, local solar installers working across the US as well. Today, these local installers make up the largest percentage of residential solar. In early 2018, they installed ⅔ of all residential solar in the US!
In a 2017 study, the Lawrence Berkeley National Lab found that smaller, local installers generally provide estimates that are 10% lower in price than big nationwide companies. Local installers don’t have the large sales and marketing expenses of bigger companies, so can offer lower prices. For an average installation, that 10% difference is equal to about $2,100 – a major savings which can knock two to three years off your time to recoup your investment.
Local installers generally don’t offer leases or PPAs, which require huge amounts of capital to offer. Instead, they support cash payments or loans. If you’re looking for a lease or PPA, you’ll need to focus on big installers.
9. Your Solar Installation is Connected to the Utility Grid
Unless you’re installing solar on a mountain cabin or remote building, you’ll remain connected to the utility grid even after your solar panels are on your roof. Your panels only produce electricity during the day, so you still need the utility to provide electricity at night. You could add batteries to your system, which would allow you to use your solar electricity at night, but those are still expensive and outside a few key areas like Hawaii and California, still aren’t very cost-effective.
On top of that, connecting your solar installation to the grid allows you to enroll in your utility’s net metering program, which can help you recoup your solar investment much more quickly (read the next section for more on net metering).
When you install your rooftop system, your solar company will send an application to your utility on your behalf for permission to connect to the grid, a process known as interconnection. This allows your solar electrician to physically wire your solar installation to the electricity grid so electricity can both flow to your house, as well as from your house.
10. Net Metering Allows You to See a Faster ROI
Net metering is a program that many utilities (typically forced by state governments) offer to encourage homeowners to install solar. When you connect your solar installation to the grid, any solar electricity that you generate but don’t use directly in your home goes to the grid, to be used by nearby homes or businesses.
In a net metering agreement, the utility actually pays you – typically via bill credits on your account – for that excess electricity you send to the grid. ‘True’ net metering means your utility credits your account at the retail rate for all excess solar energy. So if you pay the utility $0.13 per kWh for your electricity, the utility will also credit your account at $0.13 for each kilowatt-hour of solar electricity you send to the grid.
Net metering allows you to see a much faster return on your solar investment, since you’re benefiting from each kilowatt-hour of electricity your solar panels generate, whether you actually use it in your home or not.
If your solar installation was designed well, you probably won’t have too many bill credits left after a full year. However, if your system produced more energy than you used in the last year, you’ll probably have a few bill credits hanging around. Each year, utilities typically ‘true up’ your account and bill credits, which can mean a few different things:
- Your utility sends you a check for any bill credits you haven’t used. This can be at the retail rate or at the utility’s wholesale cost. Wholesale rates are generally about ⅓ of the retail rate.
- Your bill credits move forward indefinitely. This allows you to pull from your bill credits at anytime. However, since your installation will likely be designed to cover 100% of your energy use in a given year, you probably won’t have many credits to carry over.
- You forfeit any bill credits you haven’t used. In some states, utilities are allowed to simply forgo any payment and you lose all your bill credits after every 12 months.
If your state doesn’t require utilities to offer net metering, you can still connect your solar installation to the grid. However, your utility will likely only offer to pay you at their wholesale rate for all your excess solar generation, which again is generally about one-third of retail rates.
11. Batteries Increase Your Versatility, But Are Still Expensive
Like the solar panels themselves, the cost of batteries has also decreased drastically over the last decade and homeowners in states with high electricity prices – notably Hawaii and California – are already adding batteries to their solar installations.
Batteries increase the versatility of your solar installation and offer a number of benefits to both your lifestyle and wallet.
First, if the utility grid goes down, solar with batteries can continue to provide electricity both day and night. With the right size solar installation and battery bank, you can run appliances, TVs, computers, and other equipment almost indefinitely. If you have life-support equipment at home, use a CPAP machine, or have any other necessary electronic gadgets, adding batteries to your solar installation allows you to keep them running long after the power is out elsewhere.
Second, if you don’t have retail rate net metering, adding batteries can help shorten the ROI of your rooftop solar, as you’re able to use more of your solar electricity at home instead of sending some of it to the grid and receiving bill credits at your utility’s wholesale rates (generally about ⅓ of retail prices, read more on this in the section above). Without retail-rate net metering, your solar electricity is actually worth more if you use it at home, instead of sending it to the grid.
Lastly, if you’re on a time-of-use rate with your utility, you can store up solar electricity for use during peak times when utility electricity is most expensive. This process, known as load shifting, can help you cut down on your utility bills and increase the cost-effectiveness of your solar and battery installation. Solar panels only produce electricity when the sun is shining. Depending on your location and time of year, that means your solar installation stops producing electricity anywhere from 4PM to 8PM. If you’re on a TOU rate, peak electricity prices generally fall between 4PM and 9PM. With a battery, you’d still be able to still use your solar electricity from 6PM to 9PM, thereby avoiding those costly peak rates.
All the major solar installers now offer batteries as well. Tesla installs their Powerwall and both Sunrun and Vivint Solar install the LG Chem RESU battery. In states with high electricity costs and TOU rates, batteries add a new layer of versatility to a solar installation. But while battery prices have fallen drastically in the last decade, they’re still far from cost-effective in many areas of the US.
12. Renters Can Still Go Solar
If you rent your home or apartment, you can still join the solar revolution! Community solar gardens allow renters and those who can’t install solar on their roofs to invest in solar – all without installing a system on their own roof!
With community solar (also known as a solar garden), a solar developer (typically a non-profit organization or your utility) builds a large solar installation on a plot of unused land. Individuals can then purchase a block of solar panels (generally in ‘chunks’ of 4 panels or so) to cover a percentage of their energy use. Through a ‘virtual’ net metering program, all the solar electricity generated from your share of the panels is credited to your utility account, just like if you installed solar panels on your own roof.
Community solar projects now exist in 40 states and nationwide boast a cumulative capacity of 1,523 megawatts – the same size as a coal-fired power plant! Community solar is expected to enjoy huge growth over the next five years as well, reaching 3.5 GW by 2024.
If you’re thinking about solar panels for home, but simply can’t add them to your own roof, a plot in a solar garden is an easy, cost-effective solution! Get free quotes from solar installers at UnderstandSolarPower.com