Evaluating the Potential Returns of Solar Panels: Tips and Considerations

Individuals are attracted to the thought of using solar panels for both environmental and economic reasons. While there is no question that solar panels are a more environmentally-friendly way of producing electricity, questions remain as to whether it is an economically sound decision. Previously, solar panels have been extremely expensive and battery storage systems inefficient. Technology advances and increased production is bringing solar panel costs and installation fees down, however. This has more people consider a solar option for their homes.

There are Three Types of Solar Power

The three types of solar power are passive, thermal, and active. Passive systems use more design elements like skylights and windows. Thermal systems use the suns heat to warm pools or heat water for water heaters. Active solar energy is a system that collects the sun’s power using solar panels and other electronics to generate electricity. This is the type of solar energy that many homeowners are are considering investing in.

How Solar Panels Gather the Sun’s Energy

Solar panels or PV panels (photovoltaic) use PV cells to gather photons from sunlight and converts it to direct (DC) current. This DC electricity is then converted to alternating (AC) current to be truly useful in the home. It is managed and distributed through a home’s electrical box and wiring.

Consider a Grid-Inter-Tied System

Those looking for the greatest return on their investment in solar panels will typically want to choose a grid-inter-tied system which connects to the electric company’s grid. This allows homeowners to use their own solar-produced power when panels are producing electricity and “resell” any excess power to the electric company, usually in the form of credits. It also ensures adequate power is available from the electric company as it is needed.

While an “off-the-grid” system will disconnect a property from the electric company totally, it is not legal in all areas.

Is the Home in a Solar-Friendly Location?

The amount of sunlight available to solar panels will have a significant impact on their ability to produce power and impact your ROI. A solar professional can evaluate the position and shade on a property and advise if investing in solar panels would even begin to make sense for a particular location.

What is Being Spent on Electricity?

The return on investment on solar panels will improve as costs per kilowatt hour increase. These rates vary widely across the country , ranging from about 10 cents per kWh to over 30 cents per kWh. This impacts both the amount of money saved through the use of solar panels and the value of credits earned from a power company. How much is being paid each year to the electric company will dictate whether a solar investment is worthwhile.

Weigh the Pros and Cons of Buying vs Leasing

Renting, leasing or financing solar panels will make it more difficult to realize a return on a solar panel investment, but it does make solar panels more accessible. Any savings will at least be partially compromised by interest rates or higher rental fees. Paying cash helps improve the prospects of an ROI on solar panels. Do not use a higher interest rate credit card if you want to maximize your return.

Investigate Tax Incentives and Rebates

There are frequently a variety of tax incentives and rebates available for those who purchase solar panels that can be significant. These can be discovered through an internet search or through a local solar panel company who will likely have the latest information available. In many cases, these tax incentives can make the difference in whether solar panels are a worthwhile investment or not.

Consider All Costs

When projecting ROI, be sure to consider all associated expenses including site preparation and installation, permitting fees, wiring, and electric panels. Make sure you fully understand any maintenance involved in the coming years and how long solar panels are guaranteed.

Compare Efficiency Levels of Panels

More efficient panels will be more expensive, but they will produce more power. Whether that additional expense is worth it will depend on how much less you have to pay your electric company or how much more the panels will produce in credits.

How Long Will the Home Be Owned?

Investing in solar panels will rarely pay off if a home will be sold soon after installation. If, however, a home will be lived in for five or more years, they can pay dividends.

Do the Math

While there are a lot of complexities involved in evaluating the ROI of solar panels, it can start with some simple math. If a homeowner averages $200 per month in electric costs, that means over the course of ten years they will pay at least $24,000 (10 x $2,400) to the electric company. This at least provides a starting point in a quest for determining solar panel ROI.

The realities are there are many reasons why solar panels are becoming more attractive. Panels and battery storage are becoming more efficient. Solar panels are getting less expensive and installation costs are coming down. Electric costs continue to increase and more people are interested in reducing their carbon footprint. Narrowing down your specific ROI will be impacted by many, if not all, of the above factors.

Even if solar panels do not currently make financial sense, knowing how far you are away from that decision may be valuable in revisiting the situation in the future.  Homeowners may also consider small or more passive or thermal systems that can operate a hot water heater in their home. Solar energy is certainly becoming more reachable and now may at least be the time to investigate its value for your property.

GUEST POST: John Quinn REALTOR® – http://www.johnquinnteam.com/blog/ 

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I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

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