Solar panels can save you serious money on energy bills — here's what you need to know

Solar panels on roof
(Image credit: Shutterstock)

Rising energy costs have led many to consider using alternative forms of energy, specifically solar panels. In fact, 500,000 solar panel projects were installed on homes in 2021.

While solar panels can be a great way to save money on future electricity bills, it’s important to weigh all the factors before you decide to install solar panels on your home. The upfront investment costs are especially high, and more often than not it will take a while to recoup these expenses through savings. 

How much do solar panels cost?

On average, having solar panels installed on your home will cost $15,000 to $25,000, with prices dropping every year since 2009. However, it is possible to receive a tax credit of 30% off the purchase price of a solar system thanks to the Residential Clean Energy Credit.

Although this credit can knock off a couple thousand dollars of the overall cost, it’s still a large upfront investment. Because of this, it may be hard to determine whether or not dropping this much cash is worth it in the long run. The following tips can help you decide if having solar panels installed will save you money over time. 

How much is your electric bill?

When deciding on whether or not solar panels are the right decision for your home, it’s important to review your electric bill. Because they generate their own power, installing solar panels can significantly cut back, or even eliminate, your power bill.  If your monthly energy bill is expensive, you’ll likely get greater value out of switching to solar panels. The more you spend on electricity each month, the more you’ll be able to save from solar power.

However, savings are dependent on fluctuations in energy usage and rates. Check out the average price of energy per state to get a better estimate of how much you’re likely to save. The Homeowner’s Guide to Going Solar also provides further information on solar installation as well.  

Sunlight exposure and roof conditions  

Another major factor to consider when deciding whether or not to install solar panels is to determine how much sunlight exposure your roof receives. Solar panels absorb sunlight to generate a source of electricity. Therefore, if your home is shaded most of the day, or you live somewhere with very little direct sunlight, then you may want to rethink installing. On the other hand, if you live somewhere where sunlight is abundant, like Arizona, you’ll get more value out of a solar panel installation. 

You’ll also want to get your roof inspected before installing solar panels. Your roof may not be equipped to bear the weight of the panels. Additionally, south facing roofs with a slope between 15 and 40 degrees are most ideal for solar panels. Especially when you take into account that solar panels can last up to 25 years, you may need to go ahead and repair your existing roof, or consider placing panels in your backyard instead. 

How long will it take to pay off installation costs?

Before installing solar panels, it’s also important to determine how long it’ll take to pay them off. Take the initial cost, in this case let’s say $15,000, and then calculate the tax credit by multiplying this number by 0.30. This brings that $15,000 to $10,500.

From there, you’ll want to divide this amount by however much you pay annual for electricity costs. For example, if you pay $1,750 yearly for electricity, it will take you about 6 years to pay off the cost of the solar panels. While it will take a while to make back the money you initially spent, you should also take into account solar panels last for 25 years.  

Bottom line

Solar panels can help you save money on electricity costs, while also cutting back on carbon emissions. If you find yourself paying expensive energy bills each month, and your home get’s a lot of direct sunlight, you could potentially save money by installing solar panels on your home. Just make sure that offsetting the initial cost won’t be a problem. These 7 things you need to know before installing solar panels can further help you decide whether they're worth it for your home. 

Erin Bendig
Staff writer, personal finance

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.