Solar panels seem to be popping up on everyone's roofs these days. But are solar panels really worth it? Most people can see a financial and environmental benefit from solar panels, but the real answer to whether or not it’s worth it is: it depends. 

Whether solar panels will work for your lifestyle depends on a lot of factors, such as how much sun your roof gets, how much electricity you use, whether you can get any tax credits for your solar setup, and more. We'll give you the rundown of what factors to consider as well as how to easily calculate for yourself whether solar panels are worth it for you.

How Much Do Solar Panels Cost?

Most people think solar panels are expensive, and they often are. But they might not be as expensive as you think. The cost of solar panels has actually gone down by 36% in the past five years alone, according to the Solar Energy Industries Association, and the cost keeps dropping.1

Currently, the average home solar panel setup for a solar photovoltaic (PV) system—the most common kind of system—costs between $15,000 and $25,000.2 That's before any tax incentives or other cost-saving programs, though, which can shave off a significant amount of that cost. 

Generally, solar panel costs and savings aren't one-size-fits-all. Below are some of the different aspects that can affect the cost. 

Size of the Solar Array

The size of the system you need depends on how much of your electric bill you want to offset, what type of panels you purchase, and your home's solar potential. A solar-specific electric company can help you determine the size system you need.

Type of Solar Panels

Silicon solar panels are the most common and the most expensive, but they are also the most efficient in capturing light and converting it to power (at about 33%). Thin-film panels are cheaper and flexible but not as efficient (10% to 19%).  

Roof Orientation

You'll get more out of your solar panels if your roof faces the sun. As an alternative, you could build a ground-mounted system if you have the room.  For the best results, your solar electric system needs about 100 square feet of unshaded roof space.3 Trees, clouds, fog, snow, and other solar blockers will reduce the efficiency of your system. 

Hiring Help

You can install a solar panel system yourself and hire someone to check your work. However, most people prefer to hire professional installers (often the company selling the panels) because it's quicker and they can assist you with setup. 

Another aspect you need to consider is the cleaning cost. Cleaning your panels improves the output by about 6% to 7.4%, according to the U.S. Department of Energy.4 While professional cleaning costs can range from $3 to $10 per panel or a flat rate of $100, it is possible to do the cleaning yourself.

Using Batteries

Most people don't use batteries unless they're off the grid in a remote area. However, if you use a small renewable energy system that is not connected to an electricity grid, you will need batteries to accompany it. 

Having this type of system may be more cost-effective in remote locations, as extending a power line to the electricity grid can cost you between $15,000 and $50,000 per mile.6

How to Figure Out If Solar Panels Are Worth It

Solar panels are an investment, and just like any investment, it pays off to analyze what you'll gain. Unlike a mutual fund that can give you an estimated return in a simple number, there are a lot of factors to consider when deciding whether solar panels are a good investment for you, including the following:

• How "green" do you want to be? Having a positive impact on the environment tends to be a key reason for people to purchase solar panels. Using solar energy can reduce the strain on typical energy sources. 
• How much would a solar system cost? The amount of money you save with solar panels depends on how much electricity you consume, the size of your system if you buy or lease it, and how much direct light you can generate. A solar panel company can help you compare a cost-benefit analysis.
• What are your electric company's solar policies? Not all utilities offer solar-friendly policies. For example, if your solar panels produce more than you need, it will backflow into the grid, and your utility might pay you for it—or they might not, depending on their rules.
• How long are you planning on living in your home? Solar panels typically take a few years to pay off. If you're planning on moving before the break-even date, you could end up losing money. Plus, the life expectancy of solar panels is about 30 years.7 On the other hand, solar panels often increase property values. 
• What tax and incentive programs are you eligible for? The federal solar investment tax credit is a popular way to save on your solar system. But many states and cities also offer incentives that can bring the cost down too, which you can find in the DSIRE database. 

How to Pay for Solar Panels

Given all of the buzz around solar panels, there are several ways you can finance them. 

The Federal Solar Investment Tax Credit

As mentioned above, the federal solar investment tax credit is a great way to save money on your solar panel system. It can be claimed on federal income taxes for a percentage of the total cost of a solar photovoltaic (PV) system. Passed in December 2020, it provides a 22% to 30% tax credit, depending on when the system was installed. The tax credit will expire in 2024 unless Congress renews it. 

To be eligible for the federal solar tax credit, the following conditions must be met:

• The solar PV system was installed between Jan. 1, 2006, and Dec. 31, 2023.
• The system is located in the U.S. 
• You individually own the solar PV system and do not lease it to another person.
• The system is new or being used for the first time; the credit only applies to the “original installation” of the equipment.8

In-House Loans

Many solar retailers partner with lenders to offer financing for your solar setup. This can expedite the process, and lessen the burden of setup work for you. While in-house loans are a convenient option, make sure you still shop around for rates. 

Personal Loans 

Banks, credit unions, and online retailers offer personal loans for just about anything you need, including solar panel systems. Make sure to check around, as some lenders may have special rates if you'll be using the funds to specifically purchase a solar system. 

PACE Loans

These new loans are offered by local governments and are tied to your property, rather than you as an individual. They give you the ability to finance typical home improvement projects, such as failing heating and cooling systems, or in this case, solar panel system installation. They can be a good option, but they introduce some complications into the mix that you need to be aware of ahead of time. 

The Bottom Line

Solar panels are expensive, require some time to figure out, and aren't quite as attractive as a bare roof. But if you're smart about it and your home is in an optimal location, solar panels can help you save more than you paid for them over their long life span. Plus, they offer great benefits for the environment and tend to be easy to care for.