How Cost-Effective Are Solar Panels, Really?

Have you been thinking about solar panels for a while? It’s a big decision – and could either be a costly mistake or a great investment – so you’re right to carefully consider all the pros and cons before you take the plunge.

Here are the most important factors you need to consider before you decide to ‘go solar’.

How to determine if solar energy is worth it for you?

The key questions to answer are:

• Where do you live? Some locations are much sunnier than others, and different latitudes have more hours of daylight, so solar panels will be most cost-effective there. The specific design of your home is important too; the orientation and angle of the roof, and shading from other buildings or trees will all affect the amount of energy your solar panels can generate.

• How much energy do you use? Do you use electricity mostly during the hours of daylight, or mainly at night? Your pattern of use will affect how much a solar PV installation might benefit you.

• How will you pay for the installation of your solar PV system? The interest payments on some finance deals could outweigh the savings you’ll make on your energy bills.

• How long do you plan to stay in your current home? If you spend big money on a solar PV installation but move home after only a year or two, you won’t recoup the cost.

How much sun your house gets?

Although it’s important, you shouldn’t worry too much about the actual sunshine your home receives – solar PV panels need daylight, but not necessarily direct sun.

There are a number of online tools to help you calculate how many hours of usable daylight your property gets each year. Local weather patterns can affect usable daylight hours, so make sure you use data for the closest city to your actual location to get accurate results.

In the northern hemisphere, a roof that faces south, southeast or southwest will receive a good amount of daylight. Panel systems that adjust the tilt to track the position of the sun are more efficient, but also more costly. Most homeowners install fixed panels, so the angle of your roof should not be too steep or too shallow – try an online calculator to work out the optimum angle for your location.

If your roof is unsuitable for solar PV panels because it faces the wrong direction, is more than 20 percent shaded, or the available area is too small, you could consider ground-mounted panels instead.

How much energy does your household use?

Solar PV systems are ideally suited for homes that use a lot of power, because the savings quickly outweigh the initial investment.

If you use a lot of electricity during the daytime, you can benefit directly by using the power generated by your panels – especially on those hot, sunny days when you’re running the air conditioner! Conversely, if there’s normally no-one home during the day, you’ll benefit less… unless you also invest in a battery storage system, so you can use the stored power during the hours of darkness.

Check what’s on offer in your country or state to see what incentives and payments you might receive.

Another factor to consider is the price of electricity where you live. If you are lucky enough to have cheap electricity rates, you’ll save less money by installing solar panels and it will take longer to see a return on your investment. Of course, it’s still a great idea to go solar, but the decision will be more about reducing your environmental footprint and living sustainably than about saving money.

How much does the solar panel system cost?

This is the hardest question to answer because there are so many variables. The cost of installing a solar PV system will depend where you live, the size of the system (number of panels), complexity of the installation, and the panel type and manufacturer.

Always get at least three quotes from local installers before making your choice. Once you have some firm prices, you can compare the cost against the potential savings, and calculate your return on investment.

Subsidies and incentives may be available in your area to reduce the cost of your solar panel installation; check with your government, state or local authorities.

Remember that solar panels and the associated electrical equipment may need cleaning and maintenance, so you should factor in the ongoing costs too.

How are you financing your solar panel system?

If you have the cash available, paying in full for your panels upfront is normally the most cost-effective solution. Make sure to account for any loss of interest you’d otherwise have earned on your savings when you calculate your return on investment, though.

Alternatively, there are now more financing plans available for solar panel systems than ever before. As well as outright purchase, there are leasing plans and solar loans that could help you get your system installed with no upfront payment.

Bear in mind that the interest on loan repayments could wipe out the savings on your energy bill, so do the calculations to see which option is best for you.

Why now is a great time to think about solar power

Thanks to better technology and mass-market production, the price of solar panels is lower than ever. The cost of leading Chinese-manufactured solar panels has fallen by up to 70 percent since 2010, and there are now some great deals available.

In many countries and states, there are subsidies, tax credits or feed-in tariff payments available to make solar installations more cost-effective for homeowners. However, most schemes have a planned phase-out and will not last forever, so if the numbers add up for you it’s best to take advantage of them while you can.

Making the decision

Although solar PV panels are not right for everyone, most households can expect to save money in the long term. Electricity prices will only continue to rise, while the price of sunlight remains the same – zero!

If you have a suitable roof in a reasonably sunny location, it’s likely that a solar PV installation will cut your energy bills and reduce your environmental impact.

Calculate your potential savings today and you could start generating energy from your own solar PV panels sooner than you think!