Solar is the fastest-growing electricity source in the U.S., with more than 5 million solar installations nationwide.
While it may seem like the environmental benefits might be the primary reason for going solar, the reality is that the vast majority of homeowners (93%) are motivated by utility bill savings.
However, while the economic benefits of solar can be great, they aren’t always straightforward. They can depend on multiple factors, including government incentives, purchase terms, net metering, and grid electricity rates. So, let’s explore the data and see how going solar can benefit you financially.
(And just a quick note: It is impossible to get every benefit and every drawback of solar into a single, 1,000-word blog. Treat this as a guide, learn the specifics in your area, and find a trustworthy installer to help you out.)
In this article
- 4 economic benefits of home solar
- Understanding the solar payback period
- How incentives, tax credits, and rebates can boost affordability
- Limitations and economic considerations
- Solar vs. grid electricity: a cost comparison
- Evaluating your solar investment
- Frequently asked questions
4 economic benefits of home solar
Solar panels, of course, convert sunlight into electricity, and this electricity can be used to reduce your monthly energy bill. But your specific, direct savings will vary. The following benefits depend on a variety of factors, according to the U.S. Department of Energy (DOE), including your energy usage, solar energy system size, local electricity rates, whether you purchase or lease your system, and local programs.
1. Reduced utility bills
When you install solar panels, the electricity generated reduces the amount of power you need to buy from your utility. Depending on system size, location, and energy consumption, you can cut your monthly electricity bills by 50–90% — or more. In summer months, many solar customers generate a surplus and have no electric bill at all. A study published in Nature Communications found that homeowners saved an average of $1,987 annually on electricity costs from rooftop solar.
In addition, utility electricity rates tend to increase over time. Solar lets you lock in your own “production cost,” shielding you from future rate hikes. After you recover the cost of the solar system, the electricity it produces is essentially free for the rest of the solar system’s lifespan (typically 25–30 years). More on solar payback below.
2. Net metering benefits
Suppose your solar system generates excess energy that your home doesn’t need (a common occurrence). In that case, you can likely sell the surplus electricity to your local utility company in exchange for credits. This process, called net metering, provides added value and extra savings for homeowners with solar systems.
So, instead of wasting unused solar power, you get a dollar-for-dollar credit (in states with full retail net metering) or a reduced-value credit (in states with modified policies). This dramatically increases your savings. Plus, if your solar panels generate more energy in the summer than you use, those credits can roll over and reduce winter bills when solar output is lower (again, depending on the specific policies in your area).
3. Solar Renewable Energy Certificates (SRECs)
A Solar Renewable Energy Certificate (SREC) is earned for every 1,000 kWh (1 MWh) of solar electricity you produce. Utilities are often required by state law to buy these certificates to meet renewable energy standards. By selling SRECs, homeowners can generate additional income on top of their bill savings.
The value of SRECs varies by state and market demand — in some places, a single SREC can sell for $50–$300. This income can shorten the payback period of your solar system, making solar even more financially attractive.
4. Increased home value
While the resale value of a home with solar panels will depend on the local market, going solar generally boosts your property value. According to a 2019 study by Zillow, homes with solar sell for about 4% more than those without. That’s about $15,000 more for a home that sells for $373,333, which is the median sale price of a home in the U.S.
This increase generally assumes that you own the solar system and don’t lease it from a third party. Solar leases and Power Purchase Agreements can complicate sales and generally don’t increase value, since the panels aren’t owned by the homeowner outright.
Understanding the solar payback period
The solar payback period is the amount of time it takes to recoup the cost of installing a solar system. Generally speaking, most homeowners will break even on their solar panels in about 6-10 years.
But solar payback periods vary greatly, according to the DOE, because of factors like utility rates, state and local solar incentives, and system costs. For example, someone who lives in an area with high electricity rates will recoup their upfront costs for going solar faster because they’ll be saving more than someone who lives in an area with low energy costs.
Your payback period can also be difficult to predict because of ever-changing inflation, energy rates, and solar policies. However, there is a simple formula you can use to roughly estimate how long it will take you to see a return on your solar investment, accounting for total installation costs, incentives, and monthly energy bills:
Total Solar Installation Cost – Federal/State/Local Incentives = Net cost
Net cost ÷ Annual Energy Costs = Solar Payback Period (in Years)
How incentives, tax credits, and rebates can boost affordability
Most customers can take advantage of incentives, like tax credits and rebates, when installing a solar system. These can significantly reduce your payback time and the return on your investment.
One of the most notable incentives in recent years was the 30% federal tax credit called the Residential Clean Energy Credit. While that policy was repealed, there are still plenty of other solar incentives.
Several states offer incentives for residents who adopt solar, from tax exemptions to net metering opportunities. According to CNET, New Jersey is the most solar-friendly state in the U.S., with sales and property tax exemptions for solar panels, statewide community programs, low-income solar programs, and more. On a local level, homeowners may be able to take advantage of smaller-scale incentives, such as tax exemptions, tax credits, and rebates.
Limitations and economic considerations
Not all solar systems will deliver the same savings, which is why payback period and home resale value can be hard to pin down. For example, physical factors, such as roof orientation, regional climate, and shading, can impact how much solar power a solar system produces.
The type, number, and age of the solar panels can also affect your payback. For reference, most solar panels last about 30 years, and yearly degradation rates should be outlined in the performance warranty provided with your panels.
Financing options can also make solar energy more accessible in the short term but may extend the payback period and reduce savings. For example, if you lease solar panels from a third party, the company can take advantage of tax credits, but you won’t be able to. Additionally, the interest on solar loans may offset some of the incentives you receive after installing solar panels.
Still, homeowner interest in third-party ownership (TPO) is growing – more than half of installers (51%) now report that their customers prefer TPO over cash or loan financing.
Solar vs. grid electricity: a cost comparison
Although the upfront cost of going solar can be intimidating, the long-term savings are preferable to a lifetime of reliance on the grid, especially when you factor in the longevity of solar panels, energy price inflation, and net metering policies.
Here’s a quick breakdown of the economic pros and cons of adopting solar power.
| Pros | Cons |
| Not reliant on the grid or subject to inflation | Upfront costs can be high |
| Government incentives, like tax credits, rebates, and exemptions | Weather dependence |
| Net metering and feed-in tariffs offer additional savings | Potential additional costs like maintenance and battery storage |
| Generate free electricity |
Evaluating your solar investment
From tangible long-term savings to faster payback periods with incentives and potentially increased home value, going solar is worth it for most homeowners, thanks to its many economic benefits. 76% of homeowners agree that solar panels are a good investment. However, the right solar system for you will depend on local utility rates, available incentives, and the range of upfront costs.
If you’re exploring going solar, Aurora’s marketplace can help you find a great installer and compare solar quotes to find the best fit for you.
Frequently asked questions
Will installing solar increase my home’s resale value?
While there’s no guarantee, in many cases, installing solar will increase a home’s resale value. The exact increase will depend on local electricity rates, whether you outright own the solar panels, and how old the equipment is. Additionally, resale value for homes with solar can vary by region, so consider consulting local real estate experts.
What incentives are available for my solar installation?
There are a variety of financial incentives offered at the federal, state, and local levels for going solar. Research solar incentives in your state or local communities for additional savings on going solar.
Do solar panels require ongoing maintenance costs?
Solar panels are typically low-maintenance but may require occasional cleaning and inspections that you can do yourself or outsource to a professional. Some solar providers offer service packages that can cover these costs, but otherwise, ongoing maintenance costs will be minimal.
How do I compare installer quotes effectively?
When comparing solar installation quotes, evaluate system size, equipment quality, financing terms, and available warranties. Aurora’s quote comparison tool allows you to quickly compare solar quotes and streamline your decision-making.
