How is Solar Energy Cost-Effective?

Updated on June 18, 2024


Solar energy is rapidly emerging worldwide as the leading renewable energy resource. And with increasing efficiencies and lower costs, global popularity and approval are on a continuous rise. As the world is getting more concerned about sustainability and clean energy sources, the effectiveness and affordability of solar power have turned it into a competing alternative to fossil fuels.

Households, businesses, and industries are investing in solar energy at record levels.

But why?

Let’s face the truth; fossil fuels come at a fraction of solar energy. Extraction, processing, and transportation combined, fossil fuels are still the cheapest forms of energy. In this blog, we explore how we can see solar energy as a cost-effective alternative to fossil fuels and other forms of energy. 

Continue reading to learn how solar energy is cost-effective.

1. One-time Investment and Long-term Savings

 Solar systems do cost a handful during installation, yet save you money in the long run. According to a study published in Forbes, solar panel costs are based on the type of solar system, its size, and its location. The average cost of a solar panel for a homeowner is $12,700 per 6 kilowatts. However, it ranges from the lowest cost of $8,500 to the highest cost of $30,500

Along with the environmental advantages, solar panels have long-term financial benefits. Most of the solar systems come with a linear performance warranty of 25 years. And if we calculate the annual savings, the energy costs are zero after a few years. Here is a cost break down of the

When selecting the finest solar company, it is crucial to consider the upfront cost which can vary. An average of 3.4% of the electricity is generated from solar energy in the United States, in 2022. Additionally, the cost of solar panels per watt is $3.33. Moreover, the residential solar system in the US costs between $10,290 to $20,580 depending on multiple factors including equipment and installation costs.

2. Government Incentives and Tax Benefits

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 There are federal and state-level incentives available for solar panel installation. However, to qualify for the tax credit, you must own your solar system. Neither a solar panel on the lease is eligible for government incentives nor the solar systems based on the Power Purchase agreement.

The Inflation Reduction Act was passed in 2022, by Congress. It came with substantial amendments to the Solar tax credit that make solar system installation more affordable. Another great benefit given by the US Department of Energy is the utilization of storage devices along solar panels to maximize capacity.

A tax credit or rebate is offered by the government or retailer to incentivize solar energy users. It can be claimed against income taxes to get money back only if you own a solar panel system.

A tax credit is a direct reduction of the total tax owned by the taxpayer (individual or business) to the government. It reduces the tax dollar for dollar. Tax credit is credited based on Investment Tax Credit and Production Tax Credit.

Whereas, a rebate is the amount returned after purchasing a solar panel by paying the total cost. Unlike a tax credit, rebates are offered by retailers or manufacturers. Furthermore, this is a durable approach to offer the customer cash back on purchase.

3. Decreasing Costs of Solar Technology

Technological advancements in solar energy continue to have cost reductions which make solar panel installation and maintenance affordable with every passing year.

Enhancement in photovoltaic efficiency, sustainable energy production, and decreasing cost leads to an overall reduction in the cost of solar energy. Technology has multiplied the energy storage capacity for the days with low sunlight and at night. In addition, the load flexibility enhances the management of total energy demand. Moreover, inverter-based resource capabilities empower solar energy to flow into the grid efficiently.

Power efficiency reduces in winter due to lower sunlight, but connecting batteries to your solar panel will help you store ample energy.

The increasing progression of technology in the solar energy sector tends to have innovative and improved impacts. It empowers solar energy over fossil fuels. A significant reduction has been seen over the last decade. The enhanced efficiency, lesser industrial costs, government subsidies, and substantial innovation are the primary reasons for the increasingly declining cost of solar panels over the years.

4. Low Maintenance and Operational Costs

Solar panels require minimal maintenance and operational costs and give sustainable solutions for businesses and homeowners. However, you need to keep yourself updated and follow certain procedures to increase the durability and longevity of modern solar systems. Regular tasks such as cleaning, monitoring, regular inspection, and identification of maintenance requirements ensure optimal performance.

Most solar companies offer manufacturer or labor warranty. Furthermore, basic maintenance is required to ensure its better functioning. Solar panels have a lifespan of more than 25 years.

Traditional electricity bills for a few months get more expensive than solar energy installation expenses. Therefore, it has low operational costs compared to traditional energy resources. Moreover, it is a one-time investment and long-term advantages plus savings.

5. Energy Independence and Price Stability

Solar energy system provides energy independence and price stability to its users (businesses and homemakers). With their production of electricity, they secure a reliable, clean, and sustainable supply of energy. Furthermore, using batteries with solar panels can maximize optimum energy storage for emergencies such as cloudy days or nights.

Utilizing solar energy to generate electricity leads to Individual and nation’s independence of energy. Countries that have more solar panels have reduced the import of fossil fuels and secure the world from disruption. Moreover, it brings economic stability by offering job opportunities for people and off-grid solutions.

Find a reliable solar system provider and you pay a fixed price to get your solar panel installed. Therefore, the cost of electricity production remains constant and there is no fuel needed. Since sunlight is free, solar energy consumers secure themselves from increasing electricity rates.

California, with the maximum number of residential solar installations in the United States, provides stable and reliable solar energy. Additionally, Germany is investing hugely in solar energy and generating more electricity which has prominently stabilized electricity costs. Moreover, Australia has a rapid installation rate, particularly in far-flung areas with less electricity.

6. Environmental and Social Benefits

Overall, solar panels have countless environmental and social benefits as compared to traditional energy resources. Solar energy generates electricity without greenhouse gas emissions which helps reduce carbon footprints. It also helps to reduce climate change effects due to power generation processes. 

The manufacturing industry of solar energy offers numerous work opportunities in the industrial, installation, maintenance, and examination sectors. As a result, it enhances the local economic growth.

The United Nations ‘Sustainable Development Goals ensure that solar energy Is affordable, reliable, and workable for the world. Hence, solar energy promotes viable environmental and social progress.

7. Return on Investment (ROI) and Payback Period

Solar panels have become much more cost-effective than they were in the past era. Installing a solar panel system is a great future investment for business and personal usage. Additionally, calculating the income generated by the investment to its cost is important. ROI of solar energy panels is calculated by taking the total cost of the system and subtracting it from the total savings from the system. ROI is used to evaluate performance, efficiency, and viability. Thereby, a higher ROI means a better profit whereas a lower ROI specifies a less profit on investment.

A typical payback period for solar installations ranges from 8 – 12 years. However, it varies from place to place, for instance, the common payback period in the United States is between 6 – 12 years. The factors that affect the payback include; the rate of utilization, government incentives, and size of the system. The time of payback is measured by dividing the total cost of the solar equipment by the annual savings generated by energy.

 Homeowners have witnessed significant ROI from their solar energy investments. Savings on energy bills, solar incentives by the state, net metering, Rebate, and tax credits are the perks of investing in solar panels. The Federal Clean Energy Tax Credit is offered by the federal government which is the 30% repayment of the net cost of installation. Solar energy system owners get Solar Renewable Energy Certificates based on the system output.

Homeowners must do a deep analysis before the installation of a solar panel system and consider the factors affecting ROI.


Solar energy is a cost-effective solution for several reasons. The upfront payment on the initial installation of solar panels leads to long-term savings on electric bills. Secondly, incentives offered by the government, tax credits and rebate increases the affordability of solar panels. Additionally, the minimal requirement for maintenance and low operational costs provides an economical energy solution.

Other than financial benefits, solar energy promotes energy independence and price constancy. Furthermore, it contributes to enhancing environmental and social well-being. Offering job opportunities supports local economies and brings sustainable progress. The return on investment is extensive with a payback period typically of 8 – 12 years.

The profound advantages of solar energy led to its emergence as a cost-effective and viable option for efficiently fulfilling energy requirements. It has not only provided opportunities to save money but also promotes fresh air and a progressive future.

If you want a better investment, then SolarEmpower can assist you with a free consultation.

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