Compare Pros and Cons of Solar Panels

Solar panels harness energy from the sun and use it to produce heat and electricity. Although sunlight is a free and eco-friendly method of creating energy, solar power remains highly underutilized, particularly in the United States. However, it continues to grow in popularity as the technology approves and prices decrease.

A solar panel is a collection of solar cells that work together to provide power. The panels then work as a component of a larger photovoltaic system that produces enough energy to power a home or business. Most photovoltaic systems consist of several solar panels, each ranging in power from about 100 to 450 watts.

Solar Panel Costs

The average solar panel system, professionally installed, costs about $4 to $6 per watt - a dramatic drop from just a few years ago, when prices averaged closer to $7 to $9 per watt. To offset most or all of the electricity bill, the average household needs a system with at least 5 to 6 kilowatts. That brings the total price to about $20,000 to $36,000, not including batteries, which can add another 20 percent.

Keep in mind that the size of your system depends on a number of factors, including where you live and how much electricity you use. Contrary to popular belief, it doesn’t have much to do with the size of your home.

A wide range of incentive programs are offered by utility companies or federal, state and local officials to make solar panel installation more affordable, so be sure to research all of those options before beginning a project. In some cases, incentive programs can cut your total bill in half.

Solar Panel Pros

• No pollution - Solar power is a completely clean and renewable form of energy. It generates zero emissions and has no harmful effects on the environment.
• Reduced energy bills - Installing solar panels can cut or even eliminate your monthly energy bills.
• Tax breaks - Federal and state agencies offer tax credits and incentives to homeowners and businesses that install solar panels.
• Energy credits - If your solar panels produce more energy than they use, the local utility company will give you credit for the excess electricity that can be applied to future bills or collected as a rebate.
• Low maintenance - Solar panels require very little maintenance and have long lifespans. Warranties often span 20 years or more.

Solar Panel Cons

• Upfront investment - Installing solar panels requires a substantial upfront investment that usually takes decades to recoup.
• Climate variabilities - Solar panels can be used in most climates, but they perform best in sunny climates. In regions of the country with fewer hours of sunlight, you’ll need more solar panels.
• Dependence on sunlight - Solar panels only work when the sun is shining, so you’ll have to rely on stored energy or another system at night.
• Aesthetics - Some solar panels are big and bulky, creating an unattractive look. They also take up a significant amount of roof space.

Tax Incentives and Rebates

Federal and state governments have created tax incentive programs to encourage consumers to buy solar panels. This means you’ll be able to recoup a portion of the cost of solar panels through tax credits.

The federal tax credit, good through 2016, is a 30 percent of the purchase price with no limit. If your solar panels cost $25,000, you’re eligible for a tax credit of $7,500. Renters are not eligible; you must be a homeowner.

State incentives vary. California offers a 30 percent tax credit with no cap, while Massachusetts offers a 15 percent tax credit. Visit Energy.gov/savings for a complete list of tax credits and incentives in every states.

Many power companies offer rebates for installing solar panels. Check with your power company before installation to find out what’s offered. Some cities and towns also offer incentives, so check with city hall, too.

Return on Investment

Just like the price of solar panels, return on investment is very difficult to estimate. But almost everyone who considers purchasing a solar panel system has the same question: How long until the system pays for itself in reduced energy bills?

The answer depends on the size of the system, how much you pay per year for electricity and the amount of sunlight in your area. Let’s say your electricity bill is $110 a month or $1,320 per year, which is close to the U.S. average. If you purchase a $20,000 system that eliminates that bill, the system would pay for itself in about 15 years. If it takes a $30,000 system to eliminate that bill (because you live in a region with only moderate sunlight, for example), plan for about 22.5 years.

One important caveat: The estimates above do not factor in any rebates, tax credits or incentives. If you manage to pay $14,000 for that $20,000 system after rebates and incentives, the system could pay for itself in 10 or 11 years.

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