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The Pros and Cons of Solar Panels: What You Need to Know

The Pros and Cons of Solar Panels: What You Need to Know

The advantages and disadvantages of solar energy

Thad Warren
September 2022
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7 Minutes

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There are solar panel salespeople on every corner.  It's difficult to separate the sales pitch and gimmicks from the actual benefits for you. 

Investing in solar can be a significant financial decision. Outfitting your home with a solar panel system is not cheap. You will have to deal with it for the next 20+ years.

We’ll go through each of the pros and cons of solar power and what each means for your wallet and carbon footprint. 

Pros and cons of solar panels

There are many moving parts when it comes to making a decision about solar. Your finances and energy goals will dictate how each pro and con affect your decision. 

This chart lists the most common pros and cons of solar power that people have to deal with. 

 

 

Pros of solar panels

Reduce or eliminate electric bills

The biggest pro of solar panels for those looking for cost savings is the potential to reduce or eliminate their electricity bills. This is also what many solar salespeople will start their pitch with. 

The whole idea behind solar panels is to generate electricity. That electricity then goes back into the grid. Your utility will subtract the amount of electricity you put into the grid versus what you actually used. 

Depending on how much electricity you put into the grid you could potentially have a $0 electric bill in months where you generated more than you used. This billing mechanism is called net metering. If you live in an area with net metering, you can also gain bill credits for the excess energy you produce. 

For example, in September you generate 200 kWh of energy but only use 150 kWh. The extra 50 kWh of energy would roll over to your October bill in the form of a bill credit.  

There are many caveats here, so it is extremely important to research local net metering laws. 

Reduce your carbon footprint

For many, the biggest reason for investing in solar is to reduce their carbon footprint. Solar panels do not release carbon dioxide when producing electricity, but there is some carbon footprint associated with their production. 

The general rule of thumb is to account for 50g of CO2 per kilowatt-hour for the first 3 years your panels are up and running. Although there is some carbon footprint, solar panels have 20 times less carbon footprint than traditional coal power generation. After the first 3 years of production, your solar panels will be carbon neutral for the remainder of their lifespan.  

Improve your home value

One of the biggest financial advantages of solar energy systems is that they increase your home value. While the increase will differ based on your location and other factors in the real estate market the home value increase is relatively large. 

The National Renewable Energy Laboratory found that home value increases $20 for every $1 in savings on electricity bills. So a solar energy system that saves $200 per year would also add $4,000 to the value of a home.

Additionally, Zillow data shows that homes with solar panels sell for up to 4.1% more than homes without them. 

Energy independence from the grid

If you have ever had to withstand days or weeks-long power outages the idea of being able to be in control of your own power system is ideal.

Alternatively, those who prefer to keep a house or cabin off-grid for whatever reason can install solar panels to create their own independent source of energy. 

Whatever your reasoning, with the right equipment you can create your own independent clean energy system using solar panels. This generally requires the use of a solar battery system to store energy. 

If this is your goal make sure to consult your solar installer to make sure you get all of the equipment you need to power your home if there is a grid-wide power outage. 

Earn money back from SRECs

Solar Energy Credits or “SRECs” for short are a performance-based incentive that allows you to earn credits for every megawatt-hour (MWh) or kilowatt-hours of electricity your solar system generates. 

For each MWh generated you receive an SREC that can be sold for sometimes hundreds of dollars. Unlike net metering, this is real money you can put in your pocket or use to pay back your solar panel loan. 

The downside is that SRECs are only available in a limited number of states, most of which are in the northeast. States with SRECs vary in how much they will pay, but it’s an added benefit to going solar. 

Take advantage of incentive programs

The United States is going through a solar renaissance. Improved technology and manufacturing costs paired with federal and state incentives make going solar easier than ever before. 

The federal solar tax credit won’t last forever and since many local governments are making a push for more clean energy you can capitalize on these programs to save a ton of money on your system.

Cons of solar panels

Solar panels are expensive

The average 5kW solar panel system costs $15,000 in the United States. Larger systems can quickly reach price tags of $20,000. Not exactly pocket change. 

Many people opt to finance their solar panels which means they will also incur interest, adding to the costs. 

It’s a big financial decision and it’s not something you can get out of. Solar panels are usually a 20 year or more long commitment. 

Long payback period

We established that solar panels can be pricey, which also means that it can take several years for them to pay for themselves aka their payback period

The payback period for solar panels will depend on the cost of electricity in your area, the number of incentives you receive, how much electricity your system generates, and how much your system costs. 

To determine your payback period follow this formula:

Gross cost - Incentives = Total cost

Total cost ÷ Annual savings = Payback period

Here’s an example.

Gross cost of $25,000 - Incentives of $6,500 = Total cost of $18,500

Total cost of $18,500 ÷ Annual savings of $2,000 = 9.25 years

Not viable for all roofs or homes

While just about any roof can have solar panels installed, it doesn’t mean it’s a good fit. Solar panels need a lot of sunlight day in and day out to be viable. 

If your home’s roof is in the shade because of its design or other reasons like trees or other homes blocking sunlight it could mean solar panels aren’t going to work for you. You should also consider the climate you are in. States like Arizona and Texas receive a ton of sunlight almost year-round whereas Maine does not. 

You can use Google’s Project Sunroof to determine how much sunlight your home’s roof gets per year. 

Fewer savings when electricity costs are low

The lower electricity prices are in your area the less financially viable solar is for your home. 

For example in Hawaii where electricity prices are usually 20 cents or more per kWh, your solar panels quickly pay for themselves. In Louisiana, where electricity rates are typically below 8 cents per kWh it could take a significant amount of time for your panels to pay for themselves. 

So unless you are looking to reduce your environmental impact and dependency on fossil fuels, you should think about the energy market in your area. 

To help you determine your payback period and see average energy rates in your area we created a solar calculator that will help you decide if solar is right for you. 

Installation can be difficult

Installing solar panels is not an easy task. While installation is usually done within a day or two, it’s not exactly as easy as snapping your fingers.  

You will most likely need to use a solar installer or contractor to install your panels. There are also some hoops you will need to jump through in order to get city or local permits and get your system connected to the energy grid. 

Also, keep in mind that in many cases your solar installer is the one that supplies the warranty for your solar panels. If your solar installer goes out of business for whatever reason you may be stuck without any sort of warranty to keep your panels up and running. 

Financial liability

If you decide to finance or lease your solar panels you are taking on a hefty financial liability. If you miss payments or make late payments it can impact your credit score negatively. 

You also need to be wary of tricky terms and conditions in your financing agreement. Some unsavory lenders will include variable rates or payment increases that are based on the amount of principal and interest left on your loan after a certain date. 

They will then structure the loan so that you have to pay more than the standard monthly payment to reach the remaining balance after a time period without facing penalties. 

In short, read your agreement carefully and ask questions. 

Making the right decision about solar power

There are a lot of advantages to going solar, but it’s up to you to weigh the pros and cons of your particular goals and system. 

If you are not sure if solar is right for you you can use our free solar calculator that will help you see if it makes financial sense and help guide you through the process. 

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