Are Solar Panels Worth the Cost?

Amid concerns over the rapid rate of global climate change, 77 percent of U.S. homeowners are open to embracing alternative energy sources such as solar power rather than continuing to look for new fossil fuel reserves, according to a survey by Pew Research Center.¹

While many people are concerned about global climate change, only six percent of homeowners are currently utilizing solar power systems. However, 46 percent have given it serious considerations in an effort to protect the environment and save money on electricity.¹  

There are multiple benefits to installing solar panels on your home. But before jumping in, it's important to weigh the cost of installation and insurance impacts against the potential energy savings.

How Much Do Solar Panels Cost?

A 6kW residential solar power system will likely cost you around $19,080.² However, the solar Investment Tax Credit was enacted in 2006, offering a 30 percent tax credit to homeowners and commercial properties who chose to install solar energy systems.³ Since the initial legislation, Congress has continued to renew this available tax credit.

In 2015, a multi-year extension was granted, but the tax credit percentage is slated to decrease from 26 percent in 2020, to:

• 2021: 22 percent
• 2022: 10 percent (commercial) & zero percent (residential)⁴   

State Incentives

You may live in an area that's eligible for a state or local incentive. To find this out, you can check with your local utility company. Or, you can use tools such as the NC Clean Energy Technology Center's Database of State Incentives for Renewables & Efficiency to determine whether or not you may eligible. DSIRE lists dozens of potential incentive programs in each state, many of which may be applicable to you.

We found 8 programs specific to Nevada, and hundreds of programs specific to California. 

Electricity Savings

The amount of money you’ll save in regards to switching to solar will actually depend on a variety of factors. Since you are producing your own clean energy, your dependency on the electrical grid may decrease dramatically. In fact, some solar energy systems deliver a surplus of energy that homeowners can sell back to the local utility company.

Here are the main factors impacting your savings potential, according to The Department of Energy:

• Household energy consumption
• Size of solar panel system (measured in kilowatts)
• Whether you lease or buy your system
• Exposure to direct sunlight
• Roof angel and size
• Local utility rates⁵

Many people switch to solar energy for the long-term savings potential. Others enjoy the independence of a renewable backup energy source to power their homes. Whatever your reason may be, it’s important to be realistic and informed on what your future savings may look like.

Solar Panel Installation and Maintenance Costs

Look for licensed and insured installers when collecting bids for your solar panel system. You can also check with the North American Board of Certified Energy Practitioners to obtain a list of reputable installers.

Bids should include the total cost of setup and installation such as:

• Hardware
• Permitting
• Connection to the grid
• Installation
• Sales tax
• Warranty⁶

To help ensure you are comparing apples to apples, ask installers to provide a cost/watt or estimated cost/kWh.

You may be able to use the same company for maintenance of your solar panel system, and some companies offer discounted maintenance packages if you hire them to install your system. According to HomeAdvisor, homeowners pay an average of about $150 to get their solar panel system cleaned.⁷ Roof pitch, home height and system size influence what companies will change to maintain your system, with prices varying from $3 to $10 per panel. Additionally, yearly inspections average about $150.⁷

Is Your Home Suitable for Solar Panels?

The more direct sunlight your property receives, the better your chances become of benefitting from the use of solar panel systems. There are many free mapping tools that can help you calculate the potential to generate solar power efficiently.

In determining whether or not your home may be suitable for solar panels, consider the following:

• Nearby shade trees that can block the sun
• Roof condition - how soon will you need to replace it
• Homeowner association (HOA) restrictions

Insurance Impacts of Solar Panels

Most insurance companies include solar panels as permanent structures on your home. As such, they are typically protected by most home insurance policies.⁸ A quick call to your insurance company can verify this. It is important, however, to meet with your financial advisor or agent to review your insurance policy limit. Ideally, your coverage limit will cover the cost to repair or replace your panels if they are damaged by a covered event.

According to the Insurance Information Institute, your insurance premium will likely increase for two reasons: solar panels typically increase your home's value and you may need a separate endorsement to cover the solar panel on your existing policy.⁸

Green Energy Insurance

Selling excess power back to your local utility can create passive income for homeowners. However, check into the insurance requirements prior to signing an interconnection or net-metering agreement.

According to the NAIC, most municipalities require or urge homeowners to get additional general liability insurance if they have a contract to supply excess energy back to the grid.⁹ When you enter into an energy contract, your meter is adjusted to run back when you transfer energy to the electrical system. This is offset by the forward meter movement indicating when you use grid power.

After weighing the cost and benefits of installing solar panels on your home, you may need assistance in finding the proper coverage. An agent or your financial advisor can help you understand your options when it comes to preserving your renewable solar energy system.