"Are home solar panels cost effective?
Solar panels will dramatically reduce the cost of your utility bill as you produce your own electricity. In nearly all cases, this will offset the cost of acquiring and installing residential solar panels after a certain number of years.
The chart below compares the costs of owning home solar panels with the yearly cost of electricity provided by a utility.
Key considerations:
The cost of going solar was set at $14,200. This includes the cost of a 7.4 kW solar system ($10,784), contractor installation fees ($7,400) and permits ($1,000). A discount of 26%, in line with the federal tax credit (2021), was then applied.
Hikes in the solar graph at the 12- and 24-year marks reflect the cost of purchasing a new inverter ($1,700), which in our example comes with a 12-year warranty.
The slight yearly rise in the solar graph is the result of a monthly fee that lets you maintain access to the grid, in this case set at $15.
The cost of electricity was set at the national average of $0.14 per kWh. While electricity rates rise over time, rate hikes are normally in line with inflation. The household in this example consumes 10,649 kWh per year, the national average.
In this scenario, year 13 is when things get interesting, as that’s when the investment in traditional grid power begins to outweigh the cost of owning and operating solar panels. By year 20, the hypothetical homeowner has saved around $9,400 in electricity costs by switching to solar power.
One of the most alluring aspects of residential solar is the ability to “lock in” a fixed energy rate. Maintenance costs are minimal, so the investment made in the first year represents the bulk of the lifetime cost of solar panel ownership. Meanwhile, utility rates often increase at an unpredictable rate. By playing the long game with solar, your savings will increase exponentially.
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