Is Solar Worth It for Your Home?

Start with your electricity bill, not the solar quote

A solar proposal often leads with system size, estimated production and projected savings. Before evaluating any of those numbers, start with your own electric bills.

How much electricity do you use in a year? What do you actually pay? Are your bills unusually high because of a temporary situation, or is that level of usage typical? If you expect to make a major efficiency improvement, buy an electric vehicle, add a pool or change how the home is heated, your future use may be different from the past year.

Solar can only offset electricity you would otherwise buy. Understanding your own usage is the foundation of the comparison.

Compare the quote with the utility path you are actually avoiding

The question is not simply whether a solar system will produce electricity. The financial question is whether the total solar path costs less than continuing to buy electricity from the utility over the same period.

For the utility path, begin with what you pay now and decide what rate-growth assumption you want to test. No one knows future rates with certainty, so treat the assumption as editable rather than as a forecast.

For the solar path, include the quoted system cost, battery cost if applicable, recurring fees, financing payments and any remaining utility bill after solar. Then subtract only incentives you have confirmed apply to your situation.

A system that covers 100% of annual usage may not create a $0 electric bill

Annual production and annual consumption can be equal while the monthly bill still does not disappear. Solar production varies by time of day and season, and utility billing rules determine how excess generation is credited and how electricity taken from the grid is charged. Fixed customer charges may remain even when energy use is largely offset.

That is why a proposal that says a system covers 100% of your annual usage should not automatically be interpreted as a zero-dollar utility bill. Ask the installer to show the estimated remaining utility charges and explain the assumptions behind them.

Cash and financing are different calculations

A cash purchase has a large upfront cost and no solar loan payment. Financing spreads the cost over time but adds interest and may include dealer fees or other financing-related costs.

When comparing proposals, do not focus only on the monthly solar payment. A payment that looks similar to the current electric bill can still produce a very different total cost over 15, 20 or 25 years. Look at the full amount you expect to pay under the financing terms and compare it with the utility costs you expect to avoid.

Use incentives carefully

Tax credits, rebates and other incentives can materially change the economics of a solar project, but rules change and eligibility depends on the household and the project. Do not let a proposal treat an incentive as guaranteed cash unless you have confirmed that you can actually claim it.

A conservative comparison works well without any incentive entered. Then you can add only the incentives you have verified and see how much they change the result.

Payback and break-even answer slightly different questions

Simple payback asks how long it takes first-year savings to recover the net system cost. It is easy to understand, but it ignores changing utility rates and other long-term details.

A break-even comparison asks when the accumulated cost of the solar path becomes lower than the accumulated cost of staying with the utility under the assumptions you entered. That can be more useful for a long-term decision because it compares the two paths year by year.

Neither number is a guarantee. Both are projections based on assumptions that should be visible and editable.

How long you expect to stay matters

A system may have an attractive long-term financial result and still be a poor fit if you expect to move before the break-even point. Resale value is uncertain and depends on the market, the system, the financing arrangement and the buyer.

If you expect to move in a few years, compare the expected break-even period with your likely ownership period. Do not assume that every dollar of remaining project cost will automatically be recovered in the sale price.

Read the proposal as a set of assumptions

A solar proposal is easier to evaluate when you stop treating the projected savings number as a promise and start treating it as the result of several assumptions. Look for:

• Your annual electricity use
• The system's estimated annual production
• Expected utility-rate changes
• The remaining utility bill
• Cash price or full financing cost
• Battery cost, if any
• Recurring solar fees
• Incentives you have personally confirmed
• The length of time used for the savings projection

If one assumption looks unrealistic, change it

If one of those assumptions looks unrealistic, change it and see how the result changes.