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Is Solar Worth the Investment?

solar panels on a roof

Most people who are considering a solar purchase ask this question: “If I invest in a solar project for my home, can I expect to pay less for my electric power or at least break even?” While the answer isn’t as simple as yes or no, there are factors you can consider to determine if it makes sense for your situation.

There are many different types of solar projects, so for the sake of clarity, this article will focus on a grid-tied, net-metered, solar system installed at a person’s home. It will not cover concerns specific to those who purchase or lease shares in a community solar array or off-grid systems.


Here are some things you should consider as you determine the answer to that question:

  • How large a solar array do I need? The size of your array will depend on how much electricity you currently use. Your electric utility or your solar vendor can provide you with the information you need to determine your annual electricity usage. That information will help you decide what size array you need to cover your energy needs. It’s a good idea to get proposals from two or three solar providers to compare your options.
  • Are you eligible for the Federal Investment Tax Credit? This will depend on your individual situation, but it’s very important to confirm your eligibility for the Federal Investment Tax Credit with your tax advisor before committing to a solar investment. If you find you can’t benefit from the credit, solar may not make sense for you. In order to qualify, you must have a tax liability. In other words, you must pay federal income tax to be able to receive a tax credit. If you do have a tax liability, but not enough to get the full tax credit refunded in the first year, you can apply to receive the credit over multiple years. Depending on the state, there may be other rebates/incentives available to help reduce the system cost.
  • Are you planning for your solar investment to offset current and future needs? Solar panels and other equipment vary in cost and may have different warranties, so you will want to research the technology you need and how much it will add to your project costs. Make sure to include future needs in your calculations. Are you planning to use more electricity for new technologies, like heat pumps, to heat or cool your home? Are you concerned about having battery storage so you have power during outages? Will you be charging an electric vehicle (EV)? If you decide to use additional energy in the future, you’ll want your new solar system to be sized to produce more electricity than you currently use, but within reason as you may lose the extra credits if you don’t use them.
  • Does your home need roof repairs or other upgrades in preparation for solar? If you need roof repairs, structural or electrical upgrades, tree removal, trenching for a ground mount, or some other renovation to make solar possible on your property, include the added expense(s) in your budget. Most installers will help arrange for these by doing them as part of the installation or by using subcontractors. If you want to price them separately and manage them as the homeowner, be clear with the installers and make sure they provide the requirements subcontractors need to properly complete the work.
  • How will solar affect your monthly electric payments? A solar system that is grid-tied—connected to the electric utility—is called a net-metered system. This means that you have two sources of electricity—the power you use from the grid and the solar produced by your grid-tied system and you are billed for the “net” electricity usage. In the sunny months, you’ll generate more electricity than you use and this excess is stored as a credit, which is applied to your bill in months when your system produces less. In most states, the non-usage charges or customer charges are pass-through and can’t be offset by solar production credits, so plan on paying these regardless of your solar credits.

Each state has its own renewable energy policies, so make sure you understand how your state and utility policies impact your situation. Vermont utilities are currently required by the Public Utility Commission to pay customers for renewable energy they generate. The quotes you receive from solar installers will help you determine your solar credit, which will depend on the net metering rate that is in place at the time you submit your solar permit. Solar installers also include an inflation factor to account for the utility’s estimated rate of inflation over the life of your system. When you purchase a solar system, you lock in your electricity rates for the life of the system (most systems have a 25-year guarantee). As a result, you will save money because you won’t be impacted by the average inflation rate of utility costs, which averages about 2-4% percent each year.

  • What are the best options to pay for solar? Paying in cash for the project will eliminate financing costs and will help you break even sooner. However, most people find that they need to finance their solar project(s). There are several options for financing, including unsecured loans, loans secured by solar equipment, and home equity loans. Research interest rates and terms to find those that fit your budget and timeline. If you are leasing the system, be sure you understand the terms of the contract, including cost over the life of the system. Remember to factor in any tax credits, rebates, and incentives as you determine how much you need to finance.


There may be other factors as well, depending on your situation, but luckily there are tools and resources available to help you determine whether solar is a good option:

  • According to EnergySage, most property owners break even on their solar investment in seven or eight years. They provide a tool to project an estimated system size and cost based on your location.
  • Solar installers are extremely knowledgeable about the policy, utility, and town-specific considerations for those living in your area. You can find a list of installers in your area through resources such as the local solar trade association. In Vermont, this is Renewable Energy Vermont. There are similar resources in every state.
  • You may have neighbors who have installed a solar array, and you can ask them about their experience. Make sure you do your homework, check with your utility to learn about any barriers or steps you will need to consider, get an estimate from more than one installer (and be sure they do a home site visit), and compare the proposals you receive.

Once you select your installer and complete your project, be sure to actively follow your system’s performance to ensure the expected production and application of your solar credits to your electric bill. It’s a very rewarding experience to see how your solar investment is directly impacting your energy use and savings as well as reducing carbon emissions.


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About Laurie Fielder

Laurie directs VSECU’s VGreen energy savings loan program. Previously, she worked for the weatherization program at the Central Vermont Community Action Council (now Capstone), and for a successful residential solar installer. She enjoys helping Vermonters learn about efficiency and renewable financing options that maximize the savings of these smart investments. She lives in Woodbury with her family and enjoys the outdoors, walking the dog, and tackling home improvement projects.
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