Rooftop Solar Panels: Benefits, Costs, and Smart Policies

Published Sep 11, 2015 Updated Dec 24, 2015

Table of Contents

Rooftop solar has never been more affordable for home owners, business owners, and their communities.

The shift toward clean, reliable, affordable electricity in the United States is most visible in the rapid proliferation of solar panels mounted on the roofs of homes and businesses. Between 2008 and 2014, residential, commercial, and institutional rooftop solar grew an average of more than 50 percent per year [1].

Solar is, to a great extent, an equal opportunity renewable energy, with sufficient sunshine across the nation to make solar an attractive option in every state. A well-sited five-kilowatt solar (photovoltaic, or PV) system can generate the equivalent of two-thirds to three-quarters of a typical household’s electricity use.

Individuals and businesses have been attracted not just to the environmental benefits of solar power, but also to the ability to generate their own power and to the fixed and competitive price of electricity that these systems provide.

The economics of rooftop solar

Rooftop solar is increasingly cost-effective for home owners, business owners, and their communities. Reductions in technology prices, innovative financing, and growing networks of solar installers and financial partners all helped drive down the prices for household systems in the United States by 45% percent from 2010 to 2014 [2].

In addition, a federal solar investment tax credit returns 30 percent of that purchase price, and state and local tax credits, rebates, and other support in leading states can then cut the total cost even further [3].

Dropping prices are due to economies of scale and technological advances. The falling price of rooftop PV systems results from improvements in the technology and economies of scale among manufacturers. Global solar panel production (for rooftop and other markets) increased from 24,000 megawatts (MW) in 2010 to 40,000 MW in 2014 [4]. PV costs in the United States are also affected by global market conditions, including the emergence of lower-priced solar products from China.

PV prices in the United States have also benefitted from reductions in “soft” costs, such as those related to sales, permitting, inspection, connection to the electricity grid, and the profit margins of retailers and installers.

These reductions are due in part to larger volumes and concentrations of system installations [5] as well as local agencies streamlining permitting processes and some community-led efforts to pool local home owner demand for solar.

Ownership options abound

Solar’s increasing success is also due to innovative ownership structures.

Many home owners and businesses are taking advantage of third-party ownership options. Under solar leases or power purchase agreements, electricity customers typically pay little or nothing up front for rooftop systems, then get electricity from the systems over a long period at attractive fixed rates. The systems (and maintenance responsibilities) remain the property of the project developers, which may be private companies or electric utilities themselves.

In 2014, more than 70% of new residential systems were third-party-owned [6].

Rooftop solar is going mainstream. The falling prices and innovative financing structures mean that rooftop solar is more broadly available, and that the pool of customers comes from increasingly diverse economic backgrounds. What’s more, some states have policies to specifically assist low-income or disadvantaged populations, such as in California.

Companies have also embraced rooftop solar not only to improve their environmental profiles but also to lower their operating costs. By 2014, U.S. businesses had installed more than 900 MW of rooftop solar across the country. These businesses include well-known companies such as Walmart, Apple, Costco, and Kohl's as well as many other department stores, consumer goods manufacturers, and car companies [7].

Jobs and solar power

Solar power, including rooftop solar, has proven to be a strong driver of economic development. In 2014 the U.S. solar industry employed more than 170,000 people, experiencing a job growth rate that outpaced the overall economy’s rate by 20 times [8]. By 2014 the United States was home to more than 6,000 solar companies, spread across all 50 states and is investing almost $15 billion in the U.S. economy annually [9].

Because rooftop solar can be installed in cities and towns, as opposed to remote locations, it offers job possibilities for local workers. Labor unions, community colleges, and nonprofits across the country have established job training programs and other community partnerships to train local workforces to install solar. For example, GRID Alternatives, a nonprofit solar installation organization active in various states, works with volunteers and workers in job training programs to install rooftop solar in low-income communities.

The environmental profile of rooftop solar

Unlike the fossil fuels that still provide the bulk of the U.S. power supply, solar panels generate electricity with no air or carbon pollution, no ash or other waste products, and no inputs other than sunlight. While the manufacturing of solar panels, like all other energy devices, involves emissions, PV electricity generation itself:

  • generates no carbon dioxide or other heat-trapping gases that contribute to climate change [10]
  • produces none of the other harmful emissions or wastes associated with coal power, such as mercury, sulfur dioxide, nitrogen oxides, lead, and arsenic [11]
  • creates none of the long-lasting waste or environmental risks associated with nuclear power [12]
  • avoids the environmental risks associated with natural gas, including potential water pollution during extraction [13]

What’s more, rooftop PV electricity generation involves little to no water. That stands in contrast to almost all power plants that make electricity using steam. These include coal and nuclear plants, many natural gas plants, and some other renewable energy facilities, which depend on water for cooling. That dependence can cause problems when cooling water becomes too scarce or too hot. PV systems, in contrast, require no water to make electricity [14].

In most cases, solar panels also have no impact on wildlife because they are typically installed in already built environments [15]. Solar panels do involve materials that need careful handling while the panels are manufactured and at the end of their useful lives. As with computer chips, manufacturing solar panels involves a range of hazardous materials—for example, hydrochloric acid, sulfuric acid, nitric acid, and hydrogen fluoride. Non-silicon solar cells, including ones made from gallium arsenide, copper-indium-gallium-diselenide, and cadmium telluride, contain more toxic materials than those used in traditional silicon cells [16].

End-of-life recycling is one approach to keeping solar materials out of landfills. European PV manufacturers have a region-wide program and some manufacturers in the United States have their own programs [17].

Smart policies: What makes rooftop solar grow

Federal, state, and local policies are key to the success of rooftop solar and the clean electricity that these systems provide. Examples of effective policies being used today include:

  • Net metering. Net metering policies give system owners credit on their utility bills for generating more electricity than they use, generally at the full retail electricity rates.
  • Feed-in tariffs. Under feed-in tariffs, home owners and businesses are paid under standardized contracts offering fixed prices for solar generation over an established, often long-term period. Available in some parts of the United States, similar feed-in tariffs have helped drive substantial renewable energy development in Europe.
  • Value-of-solar tariffs. System owners can also be paid based on the calculated value of the broad suite of benefits that solar systems provide. Such value-of-solar tariffs quantify not only the benefits of providing electricity but also the value of providing instantaneous power to the grid, a solar installation’s contribution toward delaying or avoiding system upgrades, and specific environmental benefits from avoiding the use of fossil fuels [18].
  • Solar carve-outs. Some states target small-scale solar within their broader efforts to increase investments in renewable energy, requiring utilities to invest in solar energy and/or distributed generation as part of their broader renewable electricity standards. Such “carve-outs” offer solar system owners potential additional revenue.
  • Tax incentives and subsidies. In addition to the 30 percent federal tax credit, almost all states have tax incentives for home owners and businesses for renewable energy purchases, and some local governments offer incentives such as property tax exemptions. Municipalities with property-assessed clean energy (PACE) programs provide financing for purchases of solar systems (or other renewable energy or energy efficiency projects) on homes or commercial properties, then recover the costs through property taxes over time.

Innovative policies in many jurisdictions mean that rooftop solar is not limited to home owners with sun-drenched roofs. Renters, condominium owners, and people with shaded roofs may not be able to take advantage of solar on their own roofs, but “shared solar” solutions broaden opportunities for all electricity users.

These solutions include “virtual” net metering, which allows households to take advantage of solar generation that is not directly connected to their electricity meters. Such policies allow customers in multi-family buildings to take advantage of solar generated from one meter on the building or allow electricity customers to subscribe to electricity generated from a larger off-site solar system—or even own it outright—and apply the solar generation as a credit on their electricity bills.



[1]  GTM Research and Solar Energy Industries Association (SEIA). 2014a. U.S. solar market insight report 2013 year in review. Boston, MA, and Washington, DC.

U.S. Energy Information Administration (EIA). 2015. Monthly Update May 2015.

[2]  Solar Energy Industries Association (SEIA). 2014a. Solar Industry Data.

[3]  Internal Revenue Code. 2011. Title 26: § 48—Energy credits.

[4] Renewable Energy Policy Network for the 21st Century. 2015. Renewables 2015 Global Status Report.

[5]  Ardani, K., D. Seif, R. Margolis, J. Morris, C. Davidson, S. Truitt, and R. Torbert. 2013. Non-hardware (“soft”) cost-reduction roadmap for residential and small commercial solar photovoltaics, 2013- 2020. Golden, CO: National Renewable Energy Laboratory.

[6]  Greentech Media (greentechscholar). 2015.  72% of US Residential Solar Installed in 2014 Was Third-Party Owned.

[7]  Solar Energy Industries Association (SEIA). 2015b. Solar Means Business Report.

[8]  The Solar Foundation. 2015. National solar jobs census 2014.

[9]  GTM Research and Solar Energy Industries Association (SEIA). 2014a. U.S. solar market insight report 2013 year in review. Boston, MA, and Washington, DC.

Solar Energy Industries Association (SEIA). 2014c. Depreciation of solar energy property in MACRS. Washington, DC.

[10]  Dell, J., S. Tierney, G. Franco, R.G. Newell, R. Richels, J. Weyant, and T.J. Wilbanks. 2014. Energy supply and use. In Climate change impacts in the United States: The third national climate assessment. Washington, DC: U.S. Global Change Research Program.

[11]  Freese, B., S. Clemmer, and A. Nogee. 2008. Coal power in a warming world: A sensible transition to cleaner energy options. Cambridge, MA: Union of Concerned Scientists.

[12]  Gronlund, L., D. Lochbaum, and E. Lyman. 2007. Nuclear power in a warming world: Assessing the risks, addressing the challenges. Cambridge, MA: Union of Concerned Scientists.

[13]  Union of Concerned Scientists (UCS). 2014a. How natural gas works: Water use and pollution.

[14]  Averyt, K., J. Fisher, A. Huber-Lee, A. Lewis, J. Macknick, N. Madden, J. Rogers, and S. Tellinghuisen. 2011. Freshwater use by U.S. power plants: Electricity’s thirst for a precious resource. Cambridge, MA: Union of Concerned Scientists.

[15]  Environmental Protection Agency (EPA). 2013. Clean energy: Non-hydroelectric renewable energy.

[16]  Hand, M.M., S. Baldwin, E. DeMeo, J.M. Reilly, T. Mai, D. Arent, G. Porro, M. Meshek, and D. Sandor. 2012. Renewable electricity futures study. Golden, CO: National Renewable Energy Laboratory.

[17]  Solar Energy Industries Association (SEIA). 2014b. PV recycling.

[18]  Rábago, K. 2013. The “value of solar” rate: Designing an improved residential solar tariff. Oxford, CT: Zackin Publications.

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