Ask Brian: Is It Worth the Cost to Add Solar Panels to My House?

Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries, please email your questions to askbrian@realtybiznews.com.

Question from Winston in GA: Hello Brian, I've been thinking about adding solar panels on the roof of my 1,600 square foot home for several months. I'm not an engineer. I don't know how to figure out how many solar panels I need, how much it will cost, and how much I'll save on my electric bill. I'm assuming there are some financial incentives in the form of tax breaks. There are probably other questions that I need answers to, but I don't know where to start?

Answer: Hello, Winston. I'm not very knowledgeable about solar panels either. But it's about time that I learned more, so I'll share some of the answers that I've learned by doing a little research. One of the first questions I asked myself was if I would add solar power for environmental reasons or only if it was cost-effective? (Note: solar panels are not an option for me because I live in a forest). It turns out that solar energy is both cost-effective and environmentally friendly. According to a 2020 report by the International Energy Agency, "solar power is now the cheapest electricity in history." But, of course, the energy itself is free. It's the solar panels and installation that cost money. So, let's learn something about how this works...

The place to begin is by figuring out how much electricity your solar panels will need to produce. It turns out this is pretty simple. You can review your electric bills for the past year or more to determine that amount. The American average is around 11,000 kWh per year or 30 kWh per day. It seems to me that looking at the peak season for electric use would be useful to find your peak need. In some places, this will be summer during air conditioning use, and in other places, it will be winter for heating.

Once you understand your electricity needs, you can figure out how many solar panels you need to install. This is the expensive part, and it gets more complicated. The basic calculation is relatively simple. For example, if your requirement is 30kWh per day and your roof has five hours of sunshine per day, you'll need a 6 kW system (30 ÷ 5 = 6). If the panels you're going to buy can produce 300 watts of power, you'll need 20 of them to produce 6 kW (300 x 20 = 6,000).

Some of the complications that come into play are based on the efficiency of the panels, the amount of roof space available, and how much sunlight different sections of the roof receive. The more efficient the panels, the more they will cost, but that high efficiency is usually worth the higher cost. Higher efficiency reduces the overall cost of a solar system and decreases the time it takes to recoup installation costs. The environmental impact of producing solar panels is also reduced, as panels with higher efficiency can more quickly repay the energy used to produce the panels in the first place, and fewer, more efficient, panels need to be produced to generate the same amount of electricity.

The roof where the solar panels will be installed also has plenty to do with the efficiency of the total system. Here are the primary ways that the roof interacts with solar efficiency.

1. Which direction is your roof exposed to? In North America, roofs with a southern exposure collect the most sunlight each day. The next best exposure is west facing, followed by east facing. Northern exposures are the least effective.

2. Is your roof fully exposed to the sun? Are you in the shadow of a tall building? Are you in a forest where tall trees block the sunlight? Even large shade trees in your yard reduce the effectiveness of solar panels. You want at least five hours of full sun exposure each day for the most energy.

3. How many square feet of roof receive sunlight? The angle of your roof and the square footage both count. The average home solar system generates five to six kilowatts. This requires 20 solar panels, which require 500 square feet of roof space. This is well within the size of most homes. A roof with a steep angle (45 degrees or more) may not receive enough sunlight on the far side. The best roof angle is 30 degrees. However, flat roofs and low-angle roofs have solar panels installed on brackets at a higher angle to maximize sun exposure. Most roofs do receive plenty of sunlight.

Winston, ultimately, you'll need to consult with a solar organization familiar with your local area. The average cost to install a solar system is about $2.81 per watt. If you determine that you'll need a 6 kW system, your system would cost $16,860.

Financially, solar panels do benefit the average homeowner. You'll benefit immediately with energy cost savings. And there are cost incentives to offset the installation costs. There are over 2,000 federal, state, municipal, and utility-based incentives for renewable energy and energy efficiency. How these work and what they cover vary considerably. Everything from special property tax assessments of solar energy systems to rebates for installing renewable energy. Some incentives apply to residential customers and others only to commercial-scale installations. The most important incentive for installing residential solar is the Federal Tax Credit for Solar Photovoltaics. The exact incentives have changed many times since it was originally approved by Congress in 1978. Currently, taxpayers have until the end of 2022 to claim up to 26% of qualified expenses for investing in a solar system for their homes. Eligible costs include labor, assembling, and installing the system—also the cost of all related piping and wiring. The credit percentage decreases to 22% for 2023.

Winston, if you decide to go solar for environmental reasons, solar panels are definitely worth it. If you are doing it to save electricity costs, it is probably worth it, but you'll need to do all of the calculations to be sure. If you're doing it for home appreciation value, I don't think there is a verdict on that yet – recovering home improvement costs can be tricky.

We could include a ton more information here. Please add your comments.

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