This article is by staff writer Honey Smith.

In my homeownership and priorities progress report in September, I mentioned that Jake and I were considering getting solar panels installed on our new house. Although that was our last priority, our first priority was replacing our HVAC unit. We thought there might be HVAC units that were made to be compatible with solar panels.

As a result, we decided that it might make sense to investigate solar panels sooner rather than later. That would give us a better sense of our timeline as well as help us determine how much cash we needed to start stashing away in our savings account. Here’s what we found out.

Getting our home assessed

The first step was to have someone from a solar panel installation company assess our home. This was free because they simply want your business. They look at factors like:

  • The size of your home

  • How much power you currently use, on average

  • The size/slant/orientation of your roof

  • How much, if any, of your roof is shaded

The solar company uses this information to determine how much power you will need to generate. Then they know how many panels you will need and can figure out the best placement for those panels. After that entire process, they can finally provide you with different options.

Option 1: Buying the system outright

The first option we were presented with entailed buying the system outright. According to our home assessment, the system that would provide us with the power we needed would cost about $46,000. We were eligible for an energy efficiency tax credit of about $14,000 and other rebates and incentives of about $1,000.

This meant that we would be responsible for approximately $30,000. However, we could get the system for no money down. I assume that means the $30,000 would be financed through a loan from the solar company although the estimate doesn’t specify this.

According to the information provided by the solar company, currently we pay 9.5¢/kWh for our electricity and have an average monthly bill of $178. The solar company also assumes that utility rates increase 3.9 percent per year. If we bought the solar panel system, we would pay 11.8¢/kWh for electricity. We would also have to stay on the grid of our current electricity company, so we would still receive a bill from them. According to the estimates we were provided, our average total bill (solar + electric utility) would be $207 initially and there would be a fixed increase of 2.9 percent per year.

We would be eligible for a rate reduction if we paid 30 percent of the total system cost. I imagine they mean we would have to pay 30 percent of the $46,000 and that the tax credits and rebates/incentives don’t count toward that 30 percent, though the estimate doesn’t specify this either. If my assumption is correct, we would pay $13,800 out of pocket and our rate would be 8.5¢/kWh. According to their estimates, our average total bill would be $156 per month, again with a guaranteed fixed increase of 2.9 percent per year on the portion of the electricity being generated by solar.

Not looking good so far, is it? We could have a higher monthly bill than we do currently, plus the payments on a loan from the solar company (30-year term, interest rate unspecified in the estimate). Or we could pay over $10,000 out of pocket and have a slightly lower monthly bill than we do currently plus the payments on a slightly smaller loan from the solar company. Now, a $14,000 tax credit (not a less appealing deduction) is nothing to sneeze at. But overall? Um, no.

Option 2: Leasing the system

We were provided with three estimates for leasing. Under all lease options they install and maintain the system for free. It’s a 20-year lease.

  • The first option was 8.3¢/kWh with zero out of pocket, an estimated total monthly payment of $154 and an annual rate increase of 2.9 percent.

  • The second option was 10.9¢/kWh with zero out of pocket, an estimated total monthly payment of $192 and no annual rate increases over the term of the lease.

  • The third option was to pay 6¢/kWh with $22,000 out of pocket, an estimated total monthly payment of $29 (all of which goes to the utility company/grid) and no annual rate increase over the term of the lease. Essentially, this plan has you pre-buying your electricity for the next 20 years excluding the costs incurred by staying on the grid.

However, it is also important to note that the lease is non-cancellable. This means that not only can you not cancel before your 20 years are up, it also means that, if you sell your house, whoever buys it has to take over the lease. According to our real estate agent, at this point not all buyers are interested in taking over solar leases. While it may add value to the home for some buyers, it may actually be a potential hurdle if you are trying to sell.

Other considerations

Based on the data we were presented, we decided solar panels weren’t for us, at least not right now. I do think that, in another five to ten years, the technology will have advanced enough to make it worth another look. A couple of months after we decided that solar panels were a non-starter for us, we came across an article in our local newspaper relevant to our specific situation.

Nothing is finalized yet, but our electric company is proposing a $50-per-month fee for customers with solar panels. That means our monthly payment would go up under any of the plans except the third lease option. With the proposed fee, even that option might not yield any savings overall. Additionally, that is the option that requires the most ($22,000) out of pocket.

Numerous lawsuits are being filed against solar companies alleging deceptive advertising practices. Whatever the results of those lawsuits, what is clear is that installing solar panels is a huge financial commitment. If you are considering solar, crunch the numbers carefully, ask the solar company a lot of questions, and talk to current solar users in your area if you can to see what their experience has been.

This is just my experience with solar panels, of course. Your mileage may vary. But in the meantime, you may get more bang for your buck slaying energy vampires or implementing these 10 easy ways to lower your electric bill.

Have you gone solar or know someone who has? What was your/their experience? Let us know in the comments below!

GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, and more.