Are Solar Panels a Good Investment?

Q: We were considering installing solar panels on the roof of our home in Nassau County, New York, even though we expect to move within five years. Several real estate agents advised us not to install the panels as they would adversely affect the resale value down the road. What is your advice on this?

A: Solar panels can be a valuable investment for a homeowner, with benefits that extend beyond resale value. But not all homes reap those benefits, and you’ll need to do some research to figure out if the considerable upfront costs are worth it. Once you figure that out, you can start thinking about resale value.

Expect to pay anywhere from $15,000 to $25,000 to purchase and install a solar system for your roof, according to the Center for Sustainable Energy. There are tax incentives to offset the sizable upfront costs. The Inflation Reduction Act includes a tax credit to cover 30 percent of the cost of purchasing and installing a solar system. The credit does not apply to leased systems. Consider state incentives, too, like in New York, which provides a 25 percent tax credit, up to $5,000, for purchased or leased systems.

You also need to consider how much solar panels will reduce your energy costs. Confirm that you can sell any excess electricity you produce back to the grid, otherwise it might not be worthwhile for you to do it. Next, look at how much you spend on electricity over the course of the year, a calculation that will vary based on where you live, the size of your home and how many people live in it. An expert should evaluate your roof and your home, weighing factors like the direction the house faces, the age of your roof and tree cover.

“What you’re trying to determine is how long it will take to justify that upfront cost,” said Kimberly Palmer, a personal finance expert at NerdWallet, adding that, on average, the payback for solar panels is six to nine years.

Solar panels do not add significant value to a home, but they don’t harm it, either. Homeowners who sell their homes within five years of installing a system “are almost getting 100 percent of their investment back,” said Ben Hoen, a research scientist at the Lawrence Berkeley National Laboratory in California, who studies the cost, benefit and market analysis of solar systems. He added that buyers are willing to pay a premium for homes with newer solar panels that is roughly equal to the current market value. Homeowners do not, however, reap that benefit for leased systems.

So, if solar panels become significantly cheaper by the time you list your home, you might not break even on the purchase and installation costs. However, you will have enjoyed years of cheaper energy costs, which might offset that.

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