Why are Solar Panels so Expensive?


Written by qualified solar engineer Leonardo. Last updated:

Solar panels are expensive because they use large amounts of high-purity silicon, and they require qualified installers. They must also be complemented with inverters and electrical protections to provide a reliable power supply. However, the savings achieved by solar panels during their service life are normally much higher than their upfront cost.

Solar power costs are determined by several factors, and the project budget can vary from home to home. The most efficient solar panels tend to be the most expensive, since they are the most difficult to produce. Also consider that the number of solar panels needed increases for larger households, driving up the cost of the project.

Comparing the Costs and Benefits of Solar Panels

Solar panels may seem more expensive than conventional diesel generators when you only compare their upfront cost. However, solar panels operate with sunlight, which is a free energy source. They also have much simpler maintenance requirements than other power generation systems. On the other hand, a diesel genset depends on fuel deliveries to stay operational. Maintenance is also more demanding, since the generator is exposed to mechanical wear and combustion at high temperature.

In a few words, solar panels are more expensive than diesel generators if you only compare their upfront cost. However, when total ownership costs are considered for the entire service life of equipment, the balance tilts in favor of solar power systems. Since sunlight is free and maintenance needs are minimal, solar panels can achieve some of the lowest costs per kilowatt-hour produced.

The price of installing the solar panels determines in great part how they will perform financially. Getting quotes from several solar companies is strongly recommended to make sure you find the best deal available. You should also ask for a detailed breakdown of what the solar offer includes to ensure there are no extra costs like permits and taxes.

Installing Solar Panels as an Investment Decision

For many homeowners, going solar can be as lucrative as investing in a small business. While solar panels are normally installed to reduce power bills, they bring many other benefits. Keep in mind you need reliable information to decide if it is worth installing solar panels. The recommended first step is contacting a qualified solar provider to get a professional assessment of your property. This will give you accurate data on solar system prices and how much you can expect to save.

Solar panel installer fitting a set of solar panels on the roof of a home

After installing solar panels, the money you save on electricity bills is strongly determined by local conditions:

  • Solar panels are more productive in sunny locations. There is more solar radiation hitting their surface, which means they can produce more electricity.
  • Solar energy is more valuable in places with expensive electricity. If two solar panel systems in different cities have the same energy output, savings will be greater in the city with the highest kWh prices.

A lesser-known benefit of solar panels is that they increase property value. A building that is capable of producing its own electricity is worth more than an identical building that depends 100% on the power grid. In addition, many states give you a tax exemption for any increase in home value that is due to a solar panel system. In other words, your home is worth more and it has smaller power bills, but your property taxes stay the same!

Depending on local regulations, it may be possible to make money from your solar panels. Consider that panels are only productive during the day, and most of their energy output occurs in the hours around noon. On the other hand, homes consume energy during the day and night. However, if the local utility company offers net metering, you can become a small-scale electricity supplier.

  • With net metering, the local power company purchases any electricity produced by your solar panels that is not used at home.
  • On the next power bill, the balance in your favor is subtracted from the electricity consumed from the grid.
  • Depending on how large your solar panel system is, it may be possible to bring the power bill down to zero, or even accumulate a balance in your favor.
  • Some power companies carry over your balance to the next power bill, while others actually pay you in cash.

If solar panels will pay back what you spent on them within a reasonable timeframe, they can be considered a solid investment. Solar panel manufacturers normally offer a 10-year warranty against factory defects, and a 25-year warranty for energy production above 80% of the rated value. However, the payback period can be less than 5 years under favorable conditions.

Using high-quality products is important to get the best results with solar power, but also make sure you check all the solar financial information available. Ideally, a solar panel system should be properly installed and covered by warranties, but it should also offer an attractive return for every dollar spent.

How Solar Panels Can Pay for Themselves

For homeowners with access to low-interest loans, it may be possible to go solar with zero net cost. The solar panel installation can be paid with the bank’s money, and then you can use power bill savings to cover the loan. If the annual savings are higher than the loan payments, your solar power system can purchase itself.

Couple checking their solar energy bills together

Consider there is also a 30% federal tax credit for solar power systems in the US. This means you can cover part of the project cost with money that would have otherwise been paid in federal taxes. Depending on where you live, there may be additional incentives such as state tax credits, solar power rebates, or renewable energy credits.

Solar panel systems seem expensive if you only focus on their sales price. However, their operation and maintenance costs are very low and they have a long service life. The upfront cost of solar panels is normally recovered multiple times in the form of power bill savings.

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