Make Money While the Sun Shines: The Beginner’s Guide to Solar Panels

solar panels
Federico Rostagno under Creative Commons
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If you’re like most of us, you don’t think much about the sun, beyond whether it’s going to shine on a particular day. You’ve probably never considered the fact it could save you money on your utility bills.

But it can save you money: nearly $20,000 over the next 10 to 20 years, depending on your state. All you need is a solar energy system.

You’ve probably heard solar panels are expensive — so had we. That’s why we were surprised to discover you can actually to get solar panels on the cheap, or even for no money down at all.

Intrigued? Below, we answer all your questions about using solar panels.

How Much Do Solar Panels Cost?

If you’re curious about solar — either for economical or environmental reasons — you may not have pulled the trigger because you’re wary of the high upfront costs. After all, household solar photovoltaic (PV) systems cost an average of $23,000 to install. Eek!

Don’t run away yet, though. That cost is before tax credits and other incentives, and doesn’t take into account the possibility of “zero down” options through solar financing. Here’s a great chart that breaks down your total cost, depending on the tax credits and rebates available in your state.

It’s also worth noting that a PV system is a long term investment; it’s not a new (and constantly-changing) technology like your iPhone.

“[Solar energy] was made commercially available in 1954, so it’s been around for more than 60 years,” explains Erica Johnson, director of community development for Sullivan Solar Power.

“It’s a ‘set it and forget it’ technology. It’s not going to need to be replaced in five years… It will be producing solar energy for 40 years.”

With that in mind, here’s what you need to know about the cost of going solar:

Solar Tax Credits

Thanks to a multitude of tax incentives at the federal, state and local levels, you can reduce your taxes by thousands of dollars just for installing solar panels. To learn what your state offers, search this database of renewable energy incentives.

It can get complicated quickly, though, so we recommend enlisting some solar experts to help you navigate the process and save the most money. (Start by entering your address in the search box on their site.)

As for the federal tax incentive, it’s the same across the board: a credit worth 30% of the expenses you incur installing a solar energy system in your home. That means if you purchase a system that costs $20,000, you can reduce the amount you owe the IRS by $6,000.

The credit amount has no ceiling, but you must install your system by December 31, 2016. (In other words, now’s the time to act!)

Buying Solar Panels

If you buy your system outright, it will likely cost you $10,000-15,000 upfront, after taking into account the tax credits and other incentives you’ll receive.

Though that may sound like a huge cost, keep in mind it’s a long-term investment. Over the next 20 years, you’ll save an estimated $20,000-30,000, recouping your initial costs after six to 10 years. (We talk more about how solar panels save you money below.)

Solar Loans

If you can’t afford to put down $10,000 or more to purchase your system outright (which is, um, most of us!), see if you qualify for a solar loan.

You generally won’t have to put any money down and will start seeing savings immediately. And, unlike with solar leases, you’ll still get to take advantage of tax credits or rebates.

Most people use home equity loans to finance their systems. These loans offer the lowest interest rates, and any interest you do pay is tax-deductible. Since these loans use your house as collateral, though, you’re only eligible if you have enough equity; in other words, you may not qualify if you haven’t paid off much of your mortgage.

Also, if you default on a home equity loan, the bank can foreclose on your house. So it’s important to carefully consider your budget and ability to make payments before applying for one of these loans.

Another low-interest option is a Title 1 loan from the Federal Housing Administration. Though the interest isn’t as low as with a home equity loan, the bank won’t foreclose on your home if you miss payments. Also, these loans are typically approved more quickly than home equity loans.

If you don’t own a house or are unable to get either of the secured loans mentioned above, you can opt for an unsecured loan (which doesn’t use anything as collateral), or you can lease your system.

Solar Leases

Leasing a PV system is like leasing a car: Each month, you pay a rental fee to the solar energy company. This form of financing can be attractive because it doesn’t require any money down and doesn’t affect your credit.

It also includes maintenance — but because most systems come with a 25 to 30 year manufacturer’s warranty and require few repairs, this isn’t as valuable of a benefit as it sounds.

The big downside of leasing — besides the fact you aren’t investing in something you’ll eventually own — is that you can’t get the federal tax credit. In the event you’re not eligible for the federal tax credit for other reasons, though, this can actually be advantageous.

“If you can’t take advantage of the tax credit, then leasing is the best option,” explains Johnson.

“The company takes advantage of the tax credit and gives you a lower payment… but if you have a tax appetite [the ability to take advantage of the incentive], then owning the system is more economical.”

The bottom line: Solar financing doesn’t have to be expensive, but it is complicated.

“Do your research,” urges Johnson. “Look at all the financing options… make the decision for yourself. There are [companies] that are only pushing their financing onto people, and it’s really important [you] look at all that.”

How Do Solar Panels Save Money?

Installing a solar energy system will undoubtedly save you money in the long run. Depending on your state, you could save up to $2,640 a year! Here’s how.

Lower Utility Bills

The amount of energy solar panels produce depends on their efficiency, size and the amount of light they receive. (It doesn’t have to be warm outside, however, for them to work; cold solar panels actually generate more energy.)

Many people completely eliminate their electric bills after going solar, while others vastly reduce them — a factor that depends entirely on your panels, location and electricity usage.

Software engineer Kevin Morland, who lives in Southern California, recently decided to sign a 20-year lease for a PV system. Even with a pool and a 2,100-square-foot house, his system will provide all of his electricity.

His monthly solar lease costs $105. Compared to his average electric bill of $175, Morland estimates he’ll save more than $600 a year.

Protection Against Rising Utility Costs

The cost of electricity increased by 3.1% in 2014, which was the largest gain in six years.

Though the U.S. Energy Information Administration predicts that rate will slow, the cost of electricity will continue to rise with inflation — something you won’t have to worry about if you have solar panels.

Non-Variable Bills

Another big bonus of solar panels? You won’t have to guess how much your electric bill will be each month.

Fixed bills make it much easier to create and follow a budget, which will save you money in the long run.

Solar Renewable Energy Credits

In some states, public utility companies are required to produce a certain amount of electricity from solar sources — which means they’ll pay you for the solar energy you produce.

(Though it might sound like you’re selling your energy back to the grid, it’s not; you can use all the electricity you generate.)

Even if you don’t quite understand SRECs, here’s what’s important: In certain states, solar panels could do more than save you money — they could put some cash back into your pocket.

Higher Property Value

If you were house hunting and found one that already had solar panels — thereby eliminating your electricity bills — would you pay more for it? We sure would, and as it turns out, so would many others.

In California, for example, homes with PV systems sold for $17,000 more than homes without them, according to a 2011 study by the US Department of Energy’s Lawrence Berkeley National Laboratory.

Even better: 38 states have property tax exclusions for solar panels, which means even though the value of your house will increase, your property taxes will not. Win-win!

Should You Get Solar Panels?

Whether or not you should get solar panels is an individual decision that greatly depends on your location, current electricity bill and financial situation.

For someone who owns a house in an area with a lot of sunshine, generous tax credits and high electricity bills, it’s a no-brainer. For everyone else, we still think it’s worth careful consideration.

“Call and get estimates and have somebody look at [your] roof,” suggests Johnson. Also, take a good look at your “electric bills to see whether solar is financially a good decision for [you].”

And lastly, be wary of scams, which appear to be rampant in the solar industry, and be sure to thoroughly review any contract before signing it.

To find a reputable solar energy provider, get recommendations from friends and neighbors, then check your potential contractor’s reputation with the Better Business Bureau and on Yelp or Angie’s List.  

As we discovered in our research, solar panels probably aren’t as expensive as you think, and could save you a lot of money in the long run.

Morland, for one, is excited about the money he’ll save with his new solar energy system. “I’ll probably go and pay off debt,” he says. “Or pay off my boat, or my truck, or put the money in the bank.”

If you could use some extra cash, get in touch with a solar expert to learn more about your options. We’re betting your future self — and your planet — will thank you!


Susan Shain is always seeking adventure on a budget. Visit her blog at, or say hi on Twitter @susan_shain.