Solar Nerd articles about: Finances

Going solar is a big investment for any household. An average sized home solar system will cost several thousand dollars even after incentives, so knowing how long it will take to pay back the investment is a key question for most people. On average, an investment in home solar panels will be paid back in roughly six to eight years, but this will depend on the amount of sunlight the system receives, the net metering agreement, and other factors.

Installing solar panels on your home is typically a five-figure purchase, so a majority of people take on financing to pay for it. It’s often easiest to get financing directly from your solar installer. The installer will give you a solar installation proposal with a financed price, and you won’t have to deal with your bank or any other lending institution. Simple, right? We're solar nerds, not finance nerds. Be sure to consult with a professional financial advisor before making major financial decisions.

Do you already have solar panels on your home? Normally that’s a great thing, but maybe you’re looking at your monthly utility bill and wondering why it’s not lower. For most people, helping the environment is one reason why people go solar, but the top reason according to market research is saving money on your electric bill. This is why it can be so frustrating if you’ve spent thousands of dollars on a solar installation or committed to a 25 year solar lease and you’re looking at a monthly electric bill that’s still pretty high.

A couple decades ago, home solar panels were prohibitively expensive for the average homeowner and were limited to enthusiasts running low power, off-grid setups for small homes, such as a cabin in the woods. Today, prices have dropped to the point where an average homeowner can affordably install enough solar panels on their roof to provide 100% of their electricity needs. So what can you expect to actually pay for a system like this?

If you’ve ever heard of getting “free” solar panels, that’s usually referring to solar leases. With a no-money-down lease, a company installs solar panels on your house. There’s no loan principal to pay off either: you simply get to use the panels for 20 years or more in exchange for a small monthly cost. Sound too good to be true? Often it is. What are solar leases and power purchase agreements?

Buying solar panels for your home is a large investment. How many years will it take for that investment to pay itself back? In the US, the best case is that a home solar panel system will break even financially in about 5 years. That’s if you live in a state with excellent financial incentives such as Rhode Island or New York. The average in the US is to break even in around 8 years.

One of the big reasons that people go solar is to reduce or get rid of their monthly electricity costs. If you use The Solar Nerd calculator, you can estimate how many solar panels you’ll need to generate 100% of your electricity needs. If your roof is large enough to fit all of those panels, you can reduce your annual electricity supply costs to zero. However, having solar panels on your house does not get rid of your electric bill.

Thinking about solar panels for your home? It’s a major investment: even in states that offer multiple incentives, you’ll still be paying multiple thousands of dollars. Fortunately, the price of solar continues to drop, and in 2022 the cost of renewable energy - especially wind and solar - has fallen to the point where it’s cheaper than fossil fuels in many locations. But how about for the homeowner? Home solar panels can be worth it, but it depends on a few key factors: whether your home is suitable for solar, what your financial opportunity cost for purchasing solar is, what type of financing you’re prepared to use, and how personally important the environmental benefits are to you.