Why (and How) Some Homeowners Lose Money on Solar Panels

By Leigh A. Morgan

March 21, 2025

In many cases, going solar is a smart idea. Who wouldn't want to slash their utility costs while making the world a cleaner place? Before you invest in solar panels, it's important to weigh the up-front costs versus the expected benefits.

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Here are some reasons homeowners might lose money on solar panels — and what you can do to avoid making the same mistakes.

Do Solar Panels Always Pay for Themselves?

Many homeowners benefit from installing solar panels, but the panels don't always pay for themselves. Additionally, it takes anywhere from 9 to 12 years to break even, making solar panels a long-term investment instead of a short-term one.

6 Reasons Homeowners Lose Money After Installing Solar Panels

Careful research and attention to detail can help you avoid some of these common reasons homeowners lose money on solar panels.

1. Purchase Power Agreements

A purchase power agreement gives a third party the right to install solar panels on your property. In exchange, you get to buy electricity from the third-party developer at an agreed-upon price. The major benefit of signing a PPA is that you can start using solar energy without paying for the panels and installation out of your own pocket.

If you don't own the solar panels, however, you can't deduct the cost on your tax return or take advantage of other financial incentives. You can avoid this problem by buying solar panels instead of signing a PPA — if you can afford the up-front costs, of course.

2. Poor Solar Generation Potential

Your solar ROI hinges partially on the generation potential of your panels. The amount of power generated depends on several factors, including the angle of your roof and the amount of shade your home receives. If your panels aren't installed at the right angle or they're covered by tree branches, they won't produce as much energy as expected.

Avoid losing money by keeping trees trimmed and removing other sources of shade near your roof. Choosing a reputable installer can also help you avoid having your panels installed at the incorrect angle.

3. Failure to Take Advantage of Incentives

Many homeowners qualify for tax incentives designed to make solar energy more affordable. For example, the Residential Clean Energy Credit allows you to deduct up to 30% of the cost of an eligible solar system on your federal tax return, assuming the system is installed between 2022 and 2032.

The catch? These incentives aren't automatic. You must claim credits on your tax return or fill out a rebate application with the appropriate agency. Maximize your potential savings by keeping good records, paying attention to deadlines and remembering to submit required forms.

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4. High-Interest Loans

Due to high up-front costs, some homeowners borrow money to purchase solar equipment. This isn't necessarily a bad thing, but if the loan has a high interest rate, interest payments can quickly eat into the amount of money you save by switching to solar energy. Break even faster by shopping around for a loan with a reasonable rate.

5. Changing Utility Policies

One reason solar power helps homeowners save money is because many utility companies offer net metering, which allows you to sell excess energy back to the grid. When you sell the energy produced by your solar panels, you get a credit on your monthly energy bill, reducing your overall utility costs.

Unfortunately, utility companies can change their policies at any time. For example, they may increase electricity rates or do away with net-metering incentives. You can't control your utility company, but you may be able to negotiate better terms. If you live in a state with energy choice, you may even be able to switch suppliers, reducing the effects of unfavorable policy changes.

6. Moving Too Early

Solar panels are a long-term investment, so you shouldn't expect to break even immediately. As a result, one of the top reasons homeowners lose money on solar panels is because they move just a few years after installing them.

In some cases, it's possible to take your solar panels from one house to another. However, you might discover that the roof of your new home isn't suitable for solar panels or that you need different panels to maximize the amount of energy generated. In these situations, using the same solar system isn't an option, so you have to spend more money to continue generating solar power.

To avoid this mistake, think carefully about your plans before investing in solar panels. If you think you'll have to move within the next 10 years or so, you may want to put off purchasing a system.

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