Harbaugh Real Estate

Are Solar Panels Worth It in Texas?

  • By Lee Harbaugh
  • Published January 1, 2024
  • Updated January 1, 2024

With solar panels popping up everywhere and solar companies pushing them, the question homeowners are asking is "are they worth the cost?"

A house with solar panels on the roof

If you are a Texas homeowner, chances are by now you have had multiple sales people knock on your door trying to sell you solar panels for your roof. They tell you that the cost more than pays for itself with utility bill savings and in some cases they say you'll even make money because the electricity providers will pay you to put your excess electricity on the grid. The question is just how true is this?

As you might expect, there really is not a one-size-fits-all answer. Solar panels can be worth it to some people but not others, and it all depends on the individual situation. When deciding whether to install solar panels on your home, there are several factors you need to consider:

Purchasing, Leasing, or Financing Solar Panels

Let's start with the basic question of how much solar panels cost. According to ecowatch.com, the average cost of solar panels in Texas is $30,935 before any tax credits. Once the solar credits are taken, the average Texan pays $21,654 for solar panels on their home if they pay in cash. If you have the ability to pay for the panels in cash, this would obviously be the ideal way to purchase them since you will see the most savings right away. However, most people don't have $20k+ just laying around, so most homeowners end up either leasing or financing the panels.

Financing and leasing terms change almost daily, so it's important that you have a full understanding of your terms before entering into a contract with a solar company. The main thing you want to know is how long it takes for solar panels to actually pay for themselves in savings and Net Metering (the term used to describe selling electricity to an electric provider).

If you purchase solar panels outright, ecowatch.com estimates it will take 13 years for the panels to pay for themselves. If you take out a loan, the estimate is 15+ years and an added cost of about $10,000 in interest. If you lease the panels, you will never own them, and you won't get to take advantage of any solar tax credits. Ecowatch estimates that leasing solar panels will save you $6,000 over a 25-year period in energy costs, whereas financing them will save you roughly $16,000, and purchasing them outright will save you just over $21,000.

One thing to consider with leasing and financing is the impact on selling your home. If you sell a home with financed or leased solar panels, many buyers will stay away because the panels become an added cost for them, and they often make the transaction much more complicated. Additionally, as we will see below, solar panels seldom add value to your home.

The Impact of Solar Panels on Home Value

One of the selling points of solar companies is that adding solar panels to your home will increase its value. This is only true in limited situations. For most people, adding solar panels to your home will not increase its value.

Fannie Mae (the housing lender) issued a statement to appraisers several years ago regarding appraising homes with solar panels. The statement declared:

  1. If the solar panels are owned outright by the homeowner, then the appraiser may include the panels' value in the value of the home. (However, just because they can include them does not mean they always will.)
  2. If the solar panels are financed, then the appraiser may include their value only if the panels may not be repossessed for default of financing terms. In most cases of solar panel financing, the panels are the collateral for the loan, which means the solar company could come remove them if the owner defaults on the loan. As such, most appraisers will not add value to the home if the solar panels are being financed.
  3. If the solar panels are leased, the appraiser may not add any value to the home.

Over the last several years I have had the opportunity to speak with at least three appraisers about their treatment of solar panels. All three said they seldom add value to a home when the home has solar panels. Even in cases where the panels are owned outright, it can be difficult to quantifiably demonstrate their value and how much they save because there are so many factors that go into electricity costs. The savings can be drastically different even for two houses that are next door to one another.

In short, if you are considering adding solar panels to increase your home's value, don't! If they do add anything, appraisers generally only give an additional $5,000 or so to the home's value - certainly far less than the cost of purchasing the panels.

Will Your Home Receive Enough Sunlight?

It seems obvious that solar panels need sunlight to be effective. Solar companies will generally do a study of your home and its ability to receive sunlight prior to selling you solar panels. However, even these studies are best guesses, and remember that the companies have incentive to tell you your home gets plenty of sunlight.

I know of at least one family who purchased solar panels only to find out there just wasn't as much sunlight hitting the roof as the solar company projected. They ended up having to purchase more solar panels just to realize the original savings they were aiming for in the first place.

Also, if you are considering planting trees, you have to think about their impact on the solar panels. While trees take a while to grow, some grow faster than others, and if you plant more mature trees, they could block areas of the roof that currently get sunlight relatively soon.

Other factors may come into play as well. Do you live next to an open field where someone might build a tall building that would obscure the sunlight reaching your house? What about environmental changes? Is your area experiencing fewer and fewer sunny days each year?

Net Metering

Many solar companies will partner with electric companies to provide for selling excess electricity back to the state grid. This is known as Net Metering. In a nutshell, if your panels produce more electricity than you use in a given time period, you can often get credit for the excess.

If you are considering solar panels, it is important to understand just how this would work in your individual situation. Each deal can be drastically different from other deals. Do they cap the amount you can sell? Do credits expire? Are there certain periods when they won't give you credit?

Obviously net metering will have a huge impact on how long it takes for your solar panels to pay for themselves, so make sure you understand this before signing a contract.

Lifespan and Efficiency of Solar Panels

Finally, it is important to understand what the expected lifespan and efficiency is of the solar panels you are considering. As with any other technology, improvements are being made to solar panels every day. Currently, experts estimate that today's solar panels last around 25 years. This means that you have to figure your cost and savings estimates for the next 25 years when deciding whether or not to get solar panels.

Additionally, some solar panels are more efficient than others at converting sunlight into energy. Solar experts say that today's solar panels convert roughly 18%-23% of the sun's light into energy. But, there is also about a 0.5% annual degradation rate in the efficiency of these panels.

With technological advancements, solar panels will continue to improve in efficiency, and presumably their lifespan will increase. 25 years is a pretty long time. The question is, do you believe that newer panels in a few years might run circles around today's panels? No one knows for sure. Solar panel companies will tell you that waiting to purchase will not net you much in the way of more savings. However, there are some vast improvements on the horizon, so I think it is at least worth investigating the timing of purchasing solar panels for your home.

Summary

To sum it all up, buying solar panels might make sense if you plan to stay in your house for many years and you have plenty of surface area exposed to the sun and you plan to pay for the panels with cash. Because solar panels seldom add value to your home, if you plan to move in the next 10 years or so, they probably aren't worth the investment. Also, leasing or financing the panels decreases your savings significantly, so you have to do the math carefully to determine if they make sense for you. Finally, you should consider if your house even receives enough sunlight, and you should consider the efficiency of the solar panels in deciding whether they are right for you. Like any large investment, if you are considering solar panels, take your time and talk with several companies before diving in.