Are Solar Panels Worth It? Experts Pick Sides
Solar energy is supposed to be an elegant solution to our dual problems of high utility costs and climate change. But it seems like the technology has been on the brink of a breakthrough for decades now, providing neither elegance nor much of a solution along the way, thanks in large part to bulky equipment and convoluted pricing. So it’s fair to wonder: Is solar finally ready for show time?
Well, a lot has changed in recent years. Solar isn’t just for hippies and academic debates anymore. Panels are popping up on the roofs of homes nationwide while helping to power everything from street lights and speed traps to buses and spacecraft. Solar capacity has increased by an average of 58% per year since 2010, according to the Solar Energy Industries Association, as its cost has fallen by roughly two-thirds. Solar-panel installations are also expected to double over the next two years.
Nevertheless, there’s a big difference between increased use and mainstream adoption. And the average consumer’s biggest barriers to entry are a lack of familiarity with the product as well as questions over how much, if anything, solar panelists can expect to save in both the short and long term. After all, no one wants to make a years-long commitment when a better option is right around the corner.
With that in mind, we put together a panel of leading experts in the fields of environmental science, consumer studies, economics and energy policy to help connect the dots for you and your wallet. We asked them one simple question – “are solar panels worth it?” – and received a wealth of insightful responses that boil down to 9 Yes votes, 3 Maybes and no outright Nos. You can meet these experts and check out their complete comments below. This will tell you everything you need to know about whether solar panels are a good investment. And if you already have an opinion on the subject, make sure to share it in the Comments section!
Yes, Solar Panels Save Money
- "Let’s start by agreeing that we as a society must shift off fossil fuels in a big way and soon. Humans simply can no longer afford to add gigatons of carbon dioxide to our atmosphere each year. On that there is no debate. So then the question becomes if solar panels are the right solution for a homeowner to participate directly in this global shift. The answer to this question is resoundingly 'yes,' and the proof just keeps growing. For one thing, the price of electricity continues to climb both here and around the world, and the cost of solar energy systems continues to fall. Once almost inconceivable, solar energy is now cheaper than grid electricity in some places, and clearly it is a matter of time before that is true in most places."
Seth B. Darling // Scientist, Argonne National Laboratory
- "In 2012, [Massachusetts] taxpayers spent about $261 to subsidize a megawatt of electricity from solar panels. This was about equal to the $303 saved by each megawatt of electricity generated by solar panels. This comparison indicates that ratepayers got their money’s worth. And the investment looks like a bargain when we consider the environmental benefits of solar panels. So from this perspective, yes solar panels are worth it!"
Robert K. Kaufmann // Professor, Boston University
- "Since the 'fuel' for solar panels is free, the vast majority of the costs are in the capital investment of the system. Fortunately, there are many solar companies that will install and maintain a solar system for little or no up-front cost and provide you the electricity at a fixed rate over the system’s lifetime, which is generally 20 years or more. No more worries about utility rate increases. The bonus here is that you are doing your part to reduce the impacts on the planet by generating clean electricity."
Carol J. Dollard // Energy Engineer, Colorado State University
- "Yes, solar panels are worth it. They save money on electricity bills while cutting back on emissions harmful to both humans and the environment. And lest you think your climate is not sunny enough, remember Germany, with a climate similar to Seattle or Anchorage, leads the world in installed solar capacity. We’d all be better off if individuals would take this opportunity to save more money."
Seth Wiggins // Visiting Professor, Colorado School of Mines
Since the “fuel” for solar panels is free, the vast majority of the costs are in the capital investment of the system. Fortunately, there are many solar companies that will install and maintain a solar system for little or no up-front cost and provide you the electricity at a fixed rate over the system’s lifetime, which is generally 20 years or more. No more worries about utility rate increases. The bonus here is that you are doing your part to reduce the impacts on the planet by generating clean electricity (burning fossil fuels to produce electricity is one of the largest contributors to the increase in human-caused CO2). Now many of my friends in the electric utility industry (where I used to work) will argue that intermittent electric production from solar panels causes negative impacts on the electric grid. While there is some truth to their concerns, there are a growing number of ways to mitigate those effects (storage – which is maturing nicely - being the most obvious example). In the end, we need to move to a carbon free electrical system if we ever hope to slow or stop the increase in atmospheric CO2 that threatens our very existence and solar panels are one of many great tools to achieve that goal – and the bonus part is that you could save money doing it.
The real issue here is how one values the future. Science teaches us that the continued use of fossil fuels to power our economy will seriously degrade the options, quality and access for future generations to the resources upon which all life on Earth depends. So “worth it” is an individual decision each of us must make as we get deeper into the Anthropocene. Hopefully, individuals everywhere on Earth will act together through governmental institutions to put in place policy, a price on carbon, that will make the collective answer an unqualified yes, solar panels are definitely “worth it.”
Our sister institution Lawrence Berkeley National Laboratory recently released a study examining over 20,000 homes and documenting that home values increase significantly when solar panels are installed — assuming the homeowner also owns the solar panels. And it isn’t chump change. It works out to something like $15,000 in added value for a typical residential solar panel system, or about $4 per Watt. Considering the system cost is in the same ballpark, it is a pretty low risk move to make considering you also reap the value of the electricity produced by the system for decades. The return on investment is fantastic, often exceeding 20%. If you live in a place with so-called net metering, your electric meter will actually run backward when you are generating extra power, and the utility has to buy that electricity from you — a rather gratifying twist on the typical relationship. Incorporating energy storage with battery banks or the like in your home can push things even further in your favor by letting you use the energy when you need it and even sell it back to the grid at the most profitable times.
Not all homeowners have cash available to purchase a solar panel system outright, and the market has produced numerous financing options such as leases and power purchase agreements (PPAs) that, in some cases, cost little or nothing up front. In these instances, the jury is still out on the effect on home values, but regardless, you still reap the benefit of affordable, reliable electricity in your home and the peace of mind knowing that when you charge your smartphone or pull the ice cream out for a snack you are participating in the 21st century of energy.
The real question, though, is how one supports solar electricity. Do you own a roof? If not, your options are likely limited. A few utilities do offer ways to purchase electricity specifically generated from solar; check with yours to see if a similar program is available. You can also support both the policies and their proponents that mandate the increase of generation from renewable sources. However, if you do own your home, you have many options of putting solar panels on your roof. The purchase and installation of solar panels requires large upfront costs, but then the system will produce electricity for less. Better still, in most places you can sell the electricity you don’t use back to the grid, lowering your bill further. Depending on the price of electricity and the amount consumed, solar panels can pay for themselves, plus interest, quickly. Even ignoring all the associated environmental benefits, solar panels present a great way of saving money.
So much so, in fact, that businesses have gotten in on it. A number of companies, such as SolarCity, Vivint and SunRun will finance up to 100% of the upfront costs, meaning the homeowner can pay nothing for the installation. They make money by owning the panels and selling the electricity to the homeowner over a certain number of years. This innovative financing can allow people who don’t have the resources to get the benefits of cheaper, renewable electricity.
So yes, solar panels are worth it. They save money on electricity bills while cutting back on emissions harmful to both humans and the environment. And lest you think your climate is not sunny enough, remember Germany, with a climate similar to Seattle or Anchorage, leads the world in installed solar capacity. We’d all be better off if individuals would take this opportunity to save more money.
Solar panels seldom make sense as the first investment in a plan to reduce one’s carbon footprint and / or save money. There are several steps one should take before making a major commitment to purchase photovoltaic panels or other forms of renewable energy. The priority should be on less-expensive renovations and maintenance tasks on buildings. The first step is weatherization to address air infiltration – eliminating gaps around openings that allow heating or cooling to escape the building. Caulk and weatherization products are cheap.
Next, it is important to assess the ‘thermal envelope’ of the building, and make sure to maximize it with high-performance insulation. This includes eliminating ‘thermal bridging’ where the building structure and / or materials do not have any insulation – allowing energy to be wasted needlessly.
Replacing any inefficient equipment, lighting, mechanical systems and appliances are the third step. A PV system makes no sense until energy use has been reduced in these low cost ways.
From a purely practical point of view solar panels, are an excellent investment. The technology is generally low-maintenance, and over time, most forms of renewable energy can substantially reduce both carbon emissions and energy costs. The added advantage of tax breaks for solar panels makes them more appealing.
As for individual homeowners, there are an increasing number of options to procure solar energy: purchasing clean energy from a utility, where the technology is not on your property; long-term leases that reduce up-front costs and maintenance; lease-to-own strategies; directly purchasing a system; and more options likely to come.
So, yes, solar panels make sense – for homeowners, for business owners, for non-profit organizations, for governmental organizations and for anyone concerned about climate change or the future of energy costs. It is worth noting that the first major organization to invest in renewable energy and innovate with these technologies is the U.S. military. The Department of Defense has long recognized the importance of dependable, low-maintenance and low-impact energy.
By solar power, here I am talking about so-called photovoltaic solar technology (PV) that converts sunlight directly into electricity – generally with no moving parts and completely silent operation. The warranted lifetime of PV modules is 25 years, but ones manufactured today are likely to work for 40-50 years. To the question, are solar panels worth it, the market believes strongly that the answer is Yes. In the U.S., most new electricity generation from the past two years has been from PV, and the cost of PV electricity has dropped to as low as 3-4 cents per kilowatt-hour (kWh), without subsidy, in places such as India. While the average costs of PV electricity in the U.S. today remain slightly higher than for onshore wind and combined-cycle natural gas, the costs of PV power are declining dramatically (down 80% since 2010) thanks to continuing cost reductions in modules, installation and permitting. Retail electricity prices change with fuel costs and will rise further with the expected implementation of carbon pricing. But one can “lock in” PV electricity for 25 years at a price of $0.05 to $0.15 per kWh, depending on location and the size of the PV system.
With that being said, here are the current strengths and weaknesses of PV electricity:
- Helps reduce air pollution caused by our burning of fossil fuels, which may be the cause of the rising number of children and others who suffer from asthma.
- Zero carbon or other emissions helps to reduce our impact on the environment and avoid catastrophic climate change.
- Fixed price (sunshine is free) for the “fuel” (sunlight); no moving parts, silent operation, minimal maintenance.
- Reduces environmental damage inherent in hydraulic fracture methods commonly needed for economic natural gas and oil extraction.
- With the gradual electrification of our transportation infrastructure, PV reduces our reliance on foreign energy sources, reducing political conflicts and price uncertainties.
- Provides home owners with stabile and low electricity prices.
- Creates jobs, and lots of them: Even with PV at less than 1% of our electricity supply, solar energy has already created more than 200,000 jobs as of 2015.
- Typical PV installations work well in all U.S. climate zones and still generate considerable electricity on most cloudy days.
- Number one has to be the intermittency of PV electricity, which generates only during the daytime. Two things that help here: forecasting solar power production based on changing weather and time of day (we’re getting better at this) and energy storage (large-scale battery banks are too pricey for widespread use). Switzerland has it made because the best solution is to pump water uphill and use hydro-generation at night or as needed. But that takes a certain type of topography (and water!), which most of the U.S. lacks.
- Land use. Some will note this as a weakness, based on environmental impacts or the cost of land. It takes roughly 5 square miles to build a 300 MW plant. Building rooftops (think warehouses) provide great space for PV arrays, and with careful consideration, environmental impacts on ground-based arrays can be minimized. PV plants may be an excellent use for brownfield land, such as former coal plant sites.
Surprisingly, it is also difficult to measure the economic costs and benefits of solar panels. Even the seemingly easiest calculation, the monetary costs and benefits to the individual who purchases a solar panel, are incomplete. One person’s decision to install solar panels imposes costs on or confers benefits to all ratepayers. The following paragraphs focus on one benefit to all ratepayers in Massachusetts.
Here in Massachusetts, the price of electricity varies each hour. As consumption rises, producers generate additional quantities of electricity from power plants that are increasingly expensive to operate. This ‘merit order’ dispatch means that air conditioners drive up the price of electricity during the hottest summer-time hours. The highest hourly price for electricity on August 2, 2006 was five times larger than its lowest price on that day.
Solar panels have the potential to reduce these summer-time spikes in electricity prices. The rate at which solar panels produce electricity is correlated with summer temperatures. In Massachusetts, high temperatures are associated with sunny days. On these sunny days, solar panels generate electricity at high rates.
Producing more electricity lessens the need to turn on the most expensive electricity-generating plants. Idling the most expensive power plants reduces electricity prices by about 1 cent per kilowatt hour (in 2015, residential customers were charged about 15 cents per kilowatt hour). These price reductions are passed on to all ratepayers, not just those who own solar panels. By idling power plants with highest cost, solar panels saved Massachusetts ratepayers $184 million between 2010 and 2012.
Are these savings ‘worth it’? One answer compares the savings to the subsidies used to encourage homeowners to install solar panels. In 2012, taxpayers spent about $261 to subsidize a megawatt of electricity from solar panels. This was about equal to the $303 saved by each megawatt of electricity generated by solar panels.
This comparison indicates that ratepayers got their money’s worth. And the investment looks like a bargain when we consider the environmental benefits of solar panels. So from this perspective, yes solar panels are worth it!
But the original question is certainly intended to address short-term, individual issues. Are solar panels a good financial investment currently? Fortunately, the answer there is “yes” as well. The following analysis is what a typical homeowner might go through to determine costs and benefits, using very round figures that are susceptible to change (but are generally becoming more favorable over time).
An average home may use 10,000 kWh (kilowatt-hours) of electricity per year at a cost of about $1,500 per year (you should check your bills to see how they compare). Half of that electricity could be provided by installation of solar panels rated at 5 kW (here in Portland, we get the equivalent of 1,000 hours of peak sunlight per year, so a 5 kW system would yield about 5,000 kWh per year - you may get more where you live). Costs of purchasing and installing solar panels are dropping; current total costs are about $3 per watt. So a 5 kW system would nominally cost about $15,000; however, current subsidies can reduce out-of-pocket expenses immensely. A federal tax credit of 30% ($4,500 in this example) is in place through 2019. In the state of Oregon, a tax credit of $6,000 is available (taken over 4 years), as well as a $0.50 per watt incentive ($2,500) from the Energy Trust of Oregon. You can find information about rebates and incentives for your state in the Database of State Incentives for Renewables & Efficiency.
After all this, a 5 kW system could have a net cost of only $2,000. Since that 5 kW system produces $750 worth of electricity every year, it will pay for itself in less than 3 years, or even quicker as electricity prices rise. Considered as an investment, your initial cost of $2,000 gives back electricity worth $750 each year, a 37% return. Solar panels are one of the few products with warranties of 20 years or more, so these returns will continue well past the payback period. If your rooftop is big enough, you should consider getting all of your electricity from solar. If you ever produce more than you need, you can send it back to the electric company and get paid by them. Solar water heating can be analyzed similarly, with comparably short payback periods. The simple solar architectural approach of daylighting (skylights or solar tubes) reduces the need for artificial lighting and also gives great value.
The sun has been powering the earth for millennia through photosynthesis. As we run out of the fossil fuels that have been laid down in the past, a more direct use of solar is required. Converting solar to heat or solar to electricity (photovoltaics) is just the beginning. Solar research underway is promising to generate novel fuels (hydrogen from water or methanol from carbon dioxide) and other products to power our future.
Solar’s Value Depends On The Situation
- "There is no one-size-fits-all in solar-panel adoption. It can be cost-effective in a suitable climate condition, where electricity prices are high, considerable incentives are offered, there is no high demand charges and the household can consume most of their solar generation locally instead of selling it back to the grid."
Reza Arababadi // Postdoctoral Scholar, Arizona State University
- "Solar panels used to heat domestic hot water will typically provide 50 to 75 percent per year of the domestic hot water for a family in the contiguous 48 states of the U.S., as well as Hawaii. Solar energy is only useful in late spring, summer and early fall in parts of Alaska. ... The amount varies depending on the climate and the time of year, as solar energy is less available in winter than in summer and collection is easier in warmer southern climates than in colder northern climates."
Justin Poland // Associate Professor, University of Maine
For instance, many electrical utilities have started introducing demand charges for their solar customers, which is a move toward constant electricity bills that is less dependent on the amount of energy consumed. In fact, customers who are on demand-charge plans are charged based on their maximum monthly demand (kW) rather than the amount of energy (kWh) that they consume. These demand-charge price plans have significant impact on the profitability of solar investments. Additionally, the effectiveness of solar panels is highly related to the energy consumption pattern. In the presence of net metering, homeowners would benefit from consuming their total electricity generation locally rather than selling it back to the grid, since the per-kWh price that the grid pays for excess generation is usually only a few cents,. Solar panels reach their peak production between 11:00AM to 3:00PM, and if a household can shift their electricity demand from other hours to this time period, they can considerably benefit from their solar investment.
In short, there is no one-size-fits-all in solar-panel adoption. It can be cost-effective in a suitable climate condition, where electricity prices are high, considerable incentives are offered, there is no high demand charges and the household can consume most of their solar generation locally instead of selling it back to the grid.
The amount varies depending on the climate and the time of year, as solar energy is less available in winter than in summer and collection is easier in warmer southern climates than in colder northern climates. These systems will typically recover their cost in 15 to 20 years, with an expected system life of 30-plus years. If one is going to own their property for 15 to 20 years, they will recover the cost of initial installation. A system could even more than pay for itself, enabling it to be refurbished or totally reinstalled after its useful lifetime, with some money still saved.
Let's take a specific situation in the Southwest U.S., where the incident solar radiation on a south-facing surface tilted towards the equator at an angle approximately equal to the latitude is about 6.5 kWh per square meter per day and electricity costs $0.12/kWh. We will assume all generated electricity has a value to the owner equal to the retail price (i.e., the meter runs backwards, the system is small enough compared to the load that there is never any excess or the system has battery storage). The simple 20-year value of this system is then found from:
20[year] x 6.5 [kWh solar/sq m/day] x 365 [day/year] x 0.1[kWh electricity/kWh solar] x 0.12[$/kWh electricity] = 569[$/m]
So if the system costs less than $569 per square meter than the "solar panels are worth it". There are a lot of simplifications in this calculation, but a more detailed analysis can be found using PVWATTS available here.
Image: girafchik123 / iStock.
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