Residential Solar Panels | The Cost-Effective Option

In March 1931, legendary inventor Thomas Edison, in casual conversation with manufacturing magnate Henry Ford and businessman Harvey Firestone, said, “I’d put my money on solar energy. I hope we don’t have to wait ’till oil and coal run out before we tackle that.”


Nearly a century later, Edison’s words are coming to fruition. The cost of solar energy has plummeted faster than a ship’s anchor. In fact, for most homeowners dwelling below the 37th parallel or along the Eastern Seaboard, “going solar” could save them $20,000-$40,000 after 20 years.

But the first step is always the hardest. How can Average Joe homeowner get his hands on a photovoltaic solar system? Should he buy it? Lease it? Jury-rig a solar panel system cobbled from secondhand eBay components? What’s the most cost-effective option?

Cash Purchase

During the years 2013-2014, a photovoltaic solar energy system, sized for a single-family American home, cost approximately $15,000-$40,000. That cost factors in overhead, permits, installation and equipment. Is the ante worth it?

That depends. Purchasing a solar system outright is an economic bet, a gamble based on the assumption that the increase in utility electric rates will outstrip the decreasing costs of photovoltaic power systems. The structure of state utility companies, available hours of sunlight, market return on investment – all these figures vary by locality and affect the payback period of a cash purchase.

Caution! Any rooftop solar system should be protected by a home insurance policy.

Sign Up for a Lease

More and more homeowners, up to 75 percent in some localities, have instead chosen to lease their rooftop solar energy systems for 10-20 years. A third party owns, installs and maintains the solar panels. The homeowner pays a monthly premium and, usually, will immediately save 15-30 percent on energy costs.

Although leasing places a potential encumbrance on a home, it reduces the lifespan risks associated with outright ownership.

Alternatives: Home Equity Loans and Power Purchase Agreements

Still others, usually those at the tail end of their mortgages, have chosen to dip into their assets via home equity loans. Others have invested in a new-fangled financing approach called a Power Purchase Agreement (PPA), in which a customer hosts a system owned and sustained by a third-party provider. The PPA contract usually lasts 10-20 years. Some are as short as six. The provider, which receives income and sellable tax credits, sells the electricity by kilowatt-hour back to the customer. The customer pays for the power at a specified rate, ideally lower than “grid price.”

The most cost-effective option for residential solar energy systems varies by locality. Compare quotes from nearby companies. Research past trends. Just don’t jury-rig a system from abandoned eBay parts.