Are Solar Panels Worth it?

Solar panels offer various advantages from reducing our carbon footprint to saving electricity, however, ROI (Return on Investment) is one of the main reasons why people invest in solar energy. The ROI or the payback period is the measure of how the cost of something compares to the income it generates. Payback periods vary for every individual and solar system. So, calculating the ROI will tell you whether the money you initially spent on equipment and installation (the investment) is balanced out by the money you save on energy or the money you make selling extra energy back to the grid. A typical photovoltaic system or PV system will see a 20% ROI in the first year.

Figure 1: Solar Farm

Source: Shutterstock



Figure 2: Total installed (cumulative capacity) solar energy capacity

Source: Our World in Data

Cost of Solar Panels

Factors That Affect Solar Panel Costs:

  • When assessing the cost of solar panels, the size, weight, and technology are things to consider. The cost of solar panels will also vary from one company to another when it comes to installation.
  • The efficiency of the panels: The solar panel efficiency can be found in the solar manufacturer’s datasheet. The amount of sunlight that the solar panels can convert into electricity determines the efficiency ratings of the panels. Silicon mono-crystalline panels are the panels with the highest efficiency in the market right now followed by multi-crystalline panels and followed by thin film panels.
  • Solar panel costs also vary from one place to another, especially in the United States where some states have tax incentives, etc.
  • Rooftop panels will also determine the cost of panels. Typically, the solar company will charge for the installation, and having a complex roof to install will increase the costs of the total installation.


Figure 3: Price for monocrystalline silicon solar modules

Source: Bloomberg NEF, PV Info Link


Advantages of tax credits:

A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. The solar energy credit is a tax credit that allows you to deduct up to 30% of the cost of your solar energy system from your federal taxes. By helping to reduce the cost of purchasing solar panels the tax credit is designed to get more homeowners to install solar panels, increase the dependence on solar energy and create more innovation in the industry and increase the pace of solar investment. As a homeowner, one can claim a federal solar tax credit for the amount of money that you pay towards installing solar and reduce the amount you owe when you file your yearly federal tax return.


State solar incentives:

In the states, different states have different state incentives for solar installations. Each state has different incentives in place, but there are a few common ones including solar tax credits, energy rebates, and renewable energy certificates. The most popular states in the US when it comes to such incentives are California, Texas, and New York.


Net Metering:

Net metering helps utility customers to offset the electricity they draw form the grid through the billing cycle. The customer is typically compensated on a Kilo-watt hour basis (KWh). So, homeowners will be credited for the excess electricity produced by their installed solar panels. This kind of compensation will be given by the utility provider in the form of energy credits. One way is you can build up these credits whenever the excess amount of electricity is produced normally during summer and use these credits in the months when the production is lower. In certain cases, at the end of every single billing month, the charges for the customers' electricity import and the energy credit charges are netted against each other. You can find more about Net metering and its advantages in one of our previous blogs.


Energy Payback for PV:

The term Energy payback refers to how long the installed system has to operate to offset the CO2 emissions that went into the making of the system in the first place. The idea that PV cannot pay back its energy investment is simply a myth. Based on the models and data examined by the National Renewable Energy Laboratory (NREL), the Energy payback estimates for rooftop PV systems in the USA is 4 years for systems using current multi-crystalline-silicon PV modules, 3 years for current thin-film modules, 2 years for anticipated multicrystalline modules, and 1 year for anticipated thin-film modules.

The bottom line is if your house has the right roofing and a proper incentive system and you experience high energy-saving bills then you will be able to generate some savings with solar energy. For the right home, solar energy is the perfect option and it is an investment that will pay itself off over the item. With the right equipment, right planning and the right support solar panels are definitely worth the option to consider.


Authors: Vidhyashankar Venkatachalaperumal, Afshin Bakhtiari

Sources: Energy Payback: Clean Energy from PV; National Centre for Photovoltaics PV FAQs (Fact Sheet). United States: N. p., 1999. Web.



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