Here’s what you need to know about switching to solar power

Like so many other things, electricity from the power grid is getting more expensive, jumping 4.3% last year. But sun-based power keeps getting cheaper. Residential solar costs are now around 8 cents per kilowatt hour (kWh) versus a national average of 10.6 cents per kWh for grid power. And some states’ grid power is far more expensive. Solar power also offers another kind of savings: It’s far less harmful to the planet. For many consumers, doing the right thing can also be the economical thing.

But there are a lot of considerations in deciding whether solar power works for you: the location of your home, how much energy you use, and the cost of grid energy you want to replace are all factors to consider. And keep in mind, there are also economic incentives that can slash the installation cost, and might even allow you to sell any extra power you produce.

Your home logistics

Some regions have far more solar potential. Phoenix, Arizona, gets 85.8% of all possible sunshine; Columbus, Ohio, on the other hand, gets 45.9%. But even cloudy skies produce power. “People in Alaska have solar. Solar is in all 50 states,” says Nate Coleman, chief products officer at national solar provider SunPower. To get a sense of your generating potential, check the National Renewable Energy Laboratory’s PVWatts calculator.

In the U.S., a south-facing roof will absorb the most power. But Kevin Nickels, VP of sales and marketing at Nickels Energy Solutions in New York State, says that advancements in solar-panel efficiency now make east- and west-facing roofs viable, as well.

That’s assuming the roof can hold the panels. New York State, for example, requires an inspection to determine if the roof can support them. Additional bracing may be required, so, if possible, time your solar installation to coincide with a roof replacement, since those panels will be up there a long time. Solar panels are typically warrantied for 25 years but can last much longer. Companies including Tesla Energy and GAF Energy provide panels that double as roof tiles or shingles.

Your power costs

The more electricity you use, the more money you can save with solar power. “I’ve looked at neighboring houses that were carbon copies of each other,” says Nickels. “And one homeowner is using 5,000 more kilowatt hours than the other, he also had two fridges, a hot tub, and all these other things.” If you have or are considering an electric car, that power use can jump by about 1,500 to 2,000 kilowatts (kW).

But solar economics aren’t just about how much electricity you use; they’re also about electricity rates. In the U.S. in 2021, the average grid power price ranged from 7.51 cents per kWh in Louisiana to 27.55 cents per kWh in Hawaii, according to the U.S. Energy Information Administration. Total your monthly electric bills for a year to calculate how much money you could save.

Also, you could save more if your state supports net energy metering (NEM), a billing mechanism that allows you to sell extra power you generate back to your electric utility, at the lucrative retail rate. To account for this, solar installers like Nickels talk about the total power a house generates over the year. “It’s not that solar is necessarily offsetting your winter electric bill,” he says. “It’s the overproduced energy for July, August, September, and October [that] eliminates your winter bill.” He typically builds extra capacity into systems to take advantage of NEM.

But NEM is controversial. It forces utilities to purchase electricity from solar homes that is marked up to the retail rate, which is much more expensive than the cost of producing electricity at its own generating facilities. Since the utility is paying more for power, it may pass the costs on to its nonsolar customers. Some states with NEM, such as California and North Carolina, are considering eliminating or scaling back the practice.

The cost of a system

Once you know how much money you can save—and possibly earn—each year, divide the cost of the system by the savings to determine how long it will take to pay it off. The system cost depends first, on how much power you want to produce. Nickels gives the typical example of a 16-panel, 6.4kW installation costing $19,200.

But you won’t pay the full amount. The U.S. government currently reimburses 26% of the cost via the federal solar tax credit. You’d better hurry, though. In 2023, the rate drops to 22%; and the program expires in 2024. A proposal to renew the credit is contained in President Biden’s perpetually stalled-in-the-Senate (and likely doomed) Build Back Better spending plan. Some states also provide rebates or tax credits that can be significant. Environmental news site EcoWatch maintains a comprehensive list of state programs.

In states like California, which have high energy costs, the payback period can be about seven years, says Ben Airth, senior policy manager at the nonprofit Center for Sustainable Energy. In states with cheaper energy, it’s around 10 years. “I think if you’re beyond 10 to 12 years, it’s not gonna make sense,” he says.

That’s about half the warrantied lifetime of a system, so you’re getting free electricity for the remaining time. You will get a little less power, however. Solar panels lose from 0.005% to 1% of their generating capacity each year. So after 10 years, you could be down to 90%.

If you don’t have the upfront cash for a system, you can opt for financing or leasing. Today,”80% of rooftop residential solar systems in the United States are sold through a financial product, either leases or loans,” says Suzanne Leta, head of policy and strategy at SunPower.

As long as your monthly loan or lease payments are less than your average utility bill, you’re in the clear. You’ll save more money in the long run if you can afford to buy a system upfront, says Airth. If you get a loan, you’re paying interest; if you lease, you don’t get the federal, and possible state, assistance. But, “if I don’t have that money, I can still get into a [solar] system that will save me money from day one,” says Airth, who recommends getting estimates for all financial options.

Going solar makes sense for much of the country. “Nearly a hundred million homes should go solar and probably will eventually go solar,” says SunPower’s Coleman. And while deciding to go solar does involve a lot of factors to consider, there is a straightforward method to help you figure it out: Determine what you’re spending on electricity now and calculate the cost of offsetting it. Then, add in the psychic benefits that come from making the world a greener place.