Are residential solar panels worthwhile?

Solar panel basics

Solar panels are devices that convert the sun’s energy into usable electricity. They are part of a photovoltaic (PV) system, which includes several basic components:

• solar panels (aka PV modules)
• an inverter, which converts direct current (DC) into the alternating current (AC) needed for home use
• a battery to store energy from the system

Rooftop systems also require mounts to secure the panels to a roof or other structure. There will also be cables and safety switches, and a meter if the system is connected to the grid.

A PV system can be tiny (like the ones that have powered calculators since the 1970s) or massive (like the over-600 km² Talatan PV Power Station in China).²

Much of the world’s solar energy comes from large-scale solar power installations like Talatan. However, a sizeable chunk comes from residential solar — usually in the form of solar panels installed on a house’s roof.

How solar panels work

A solar panel is comprised of many small photovoltaic cells protected by a transparent layer of glass or plastic.

PV cells are made of semiconductive material (usually silicon).³ When light shines on the cell, the energy is transferred to electrons in the material, causing them to flow as an electrical current. From the cell, this current flows into a battery or the electrical grid.

Solar panels for your home

Residential solar panels aren’t yet widespread in Canada, though more homeowners are adopting them. Thanks to falling installation costs and rising energy costs, it makes sense for more Canadians to consider solar for their homes.

Benefits of residential solar power

There are several benefits to adding a solar installation to your home:

1. Reducing your energy bills. This is the big one. The savings depend on the system’s installation cost, the power it generates, and how much your electricity bills are. But most Canadians stand to save in the long run with solar — we’ll get more into the financial math in the next section.
2. Increasing the value of your home. Like any home upgrade, it ultimately depends on the buyer whether solar panels are an attractive feature. But homes with solar panels have been shown to sell for 4% more than comparable homes without.⁴
3. Backup during power outages. Home solar systems typically include a battery, which provides power if the public electricity goes out during a storm or other event.
4. Reducing your carbon footprint. Solar panels provide green energy, but how much greener it is than grid power depends on where you live. In BC or Quebec, where most electricity is generated by hydroelectric plants, the difference between solar and hydro is a 41% reduction in lifetime CO₂-equivalent emissions. In Alberta, where 85% of electricity generation is through natural gas or coal, the difference is greater — the CO₂-equivalent emissions of rooftop solar are 92% less than natural gas power.^{5 6}

Cost

The installation cost of a solar panel array on your home is the most important factor in deciding whether it’s worthwhile. Expect to pay five figures for a solar system that provides enough power for a household.

A 7.5 kW solar system would meet the bulk of most households’ energy needs. The estimated cost of a 7.5 kW system in Ontario is $25,000.⁷ A similar system in BC would cost an estimated $22,500.⁸ The price of solar panels continues to drop as the technology improves and grows in popularity.

There are many incentives available from all levels of government to help with the cost of installing residential solar panels. If you’re considering solar, make sure to check with your local provincial and municipal governments.

There’s another important thing to consider: your home’s roof.

If your roof is aging, and you may need to repair or replace it in the near-to-medium future, consider doing that before installing rooftop solar. Otherwise, you’ll need to add the cost of removing and reinstalling the solar panels as part of the roof repairs. Alternatively, you can consider ground-mounted panels, but that adds costs and requires open space.

Now, more important than the upfront cost is the payback period: how long will it take for the energy cost savings to equal the installation cost?

Payback period

This is where it gets complicated.

An accurate estimate of the true lifetime cost of solar panels requires many inputs. You can find calculators online that do the math for you, but you still need to know what to plug in.

1. System cost

The cost of the system is one of the main things affecting the payback period. That’s why incentives are important — a $5,000 rebate would shave years off the payback period.

2. System output

The outputs of your potential solar system are harder to estimate. A 7.5 kW system produces 7.5 kW only under ideal conditions. One of the drawbacks of solar energy is that it doesn’t work at night. It also suffers in cloudy weather and during short winter days. Your home’s location is very important in calculating the potential output. You’ll need to look up the local photovoltaic potential, or peak sun hours.

Fortunately, most of Canada’s population lives in areas well suited to solar. The best region in Canada is the southern prairies, including famously sunny Calgary. Southern Ontario is also favourable. Even BC’s southwest coast has decent solar potential despite long rainy seasons. The potential drops as you move further north, thanks to less intense sunlight throughout the year.⁹

Factors specific to your property matter, too. Trees or tall buildings can limit direct sunlight. The orientation and angle of your roof have an impact, too. Consult with local solar installation companies for a detailed analysis of your home’s suitability. They can provide estimates on costs, energy production, and potential savings.

3. Electricity prices

The price you typically pay for electricity has an enormous impact on the payback period of a solar system. For that reason alone, solar systems are well worth it in Alberta, where energy prices are high. Meanwhile, in Quebec, paying back a solar installation takes much longer due to the low electricity prices.¹⁰

Residential solar systems are often connected to the electrical grid. When that’s the case, homeowners can earn credits on their energy bill when their system produces more electricity than they use. The excess electricity flows into the public grid, and the homeowner receives a credit on their electricity bill. While there are some added costs to setting up a grid-connected system, it’s usually worthwhile.

Check with your local electricity provider to find out how their self-generation program works.

Lifespan

Solar panels don’t last forever. If you’re thinking long-term, you’ll need to consider the cost of replacing the panels when they reach the end of their useful life.

The expected lifetime of a solar panel is 25 to 30 years. With recent improvements in the technology, this could even be as long as 40.¹¹ And, a bonus for Canadians: some research suggests that cold climates can be beneficial to solar panel lifespans.¹²

As a solar panel reaches the end of its life, it will lose efficiency, producing less electricity with the same amount of sunlight. Fortunately, replacement is cheaper than installation, as the mounts and cables will already be present.

Home insurance considerations

As with any major change to your home, keep home insurance in mind when you add solar panels. Make sure to tell your home insurance provider before you begin the installation. Some providers aren’t willing to cover homes with large PV systems.¹³ Others may limit coverage, which matters a lot when you’re talking about a $25,000 system.

For Square One customers, residential solar panels are not an issue.

We don’t ask about solar panels during the home insurance application process. However, it’s important to let us know if you have a solar system. For building-mounted systems, the cost of the system will be added to the building coverage limit. For freestanding systems, you would have to add the appropriate amount of detached structures coverage. Systems must also be installed by a qualified professional.

Another consideration is whether power from the residential system is sold back to the grid. Most of the time, only excess electricity gets sent to the grid in exchange for a billing credit. However, large solar systems that primarily send power to the grid may be considered home-based businesses, and need to be insured as such. Again, Square One can accommodate this in most cases.

Just make sure your home insurance provider is aware of your plans to install solar panels.

Commonly asked questions

How much does insurance go up with solar panels?

When you add solar panels (assuming your home insurer is willing to cover them), your insurance premiums will likely increase. However, in most cases, the increase should be relatively modest.

For example, if your rooftop solar panels add 5% to your home’s rebuild cost, your building coverage premiums should increase proportionally. But home insurance policies contain several coverages (each with their own premium), so it wouldn’t necessarily be a 5% increase in total premiums. Every provider has their own rating methodology.

You would have to speak with your insurer directly to get a clear idea.

Does Canada subsidize solar panels?

With the end of the Greener Homes Grant, the Canadian government no longer directly offers grants for homeowners to add solar panels. However, the Greener Homes Loan is still available. This is a loan of up to $40,000 (interest-free for 10 years) to finance eligible retrofits, including solar panels.

There are also many subsidies available from provincial and municipal governments. Make sure to check your local options.

Do solar panels need a lot of maintenance?

Solar panels require very little maintenance, due mainly to their lack of moving parts. Unless they get unusually grimy, it’s not even necessary to clean them (at least not very often). Routine dust and grime have only a minor effect on the panels’ efficiency.¹⁴ Nevertheless, you may want to spray them down (or hire someone to do so) once or twice per year.

The professionals who install your system will recommend a maintenance routine. If you suspect any issues, request an inspection from a pro.

How do you stop snow from accumulating on solar panels?

Snow buildup is one of the main headaches of solar panels in Canada. Fortunately, most snow should melt on its own; solar panels generate and retain heat, and their smooth surface encourages snow to slide off. In fact, experts do not recommend clearing snow from your solar panels at all.¹⁵ Their power output during the winter isn’t that high anyway.

Depending on your roof, you may be able to remove some snow with a long-handled brush or a leaf blower. Just make sure whatever you use is soft enough that it won’t scratch the panels. If you can’t reach from the ground, hire professionals to clear the snow. The small gain in electricity generation isn’t worth the risk of climbing onto an icy roof.

What is the payback period for solar panels in Canada?

The payback period for solar panels varies depending on the system’s cost and output, as well as local electricity prices. It also requires one to make assumptions about future electricity prices.

For example, a 7.5 kW system in Ontario with a year-over-year electricity price increase of 2% would have an estimated payback period of 20 to 22 years. That drops to 18 to 19 years with a 4% annual increase.⁷

The payback period would be shorter in Alberta, where energy prices are high. It would also be lower if the homeowner could secure even a modest subsidy.

Sources

1. Chung, Emily. “Is it worth it to put solar panels on your home?” CBC News, 28 Aug. 2024, cbc.ca/news/science/rooftop-solar-cost-benefits-1.7303406.
2. Binns, Rob. “The world’s largest solar farms and their global power contribution.” Independent, 6 Nov. 2023, independent.co.uk/advisor/solar-panels/largest-solar-farms.
3. Hoffs, Charlie. “How Are Solar Panels Made?” The Equation, 19 Oct. 2022, ucsusa.org/charlie-hoffs/how-are-solar-panels-made.
4. Mikhitarian, Sarah. “Homes With Solar Panels Sell for 4.1% More.” Zillow, 16 Apr. 2019, zillow.com/research/solar-panels-house-sell-more-23798.
5. Bruckner, Thomas, et al. “Technology-specific Cost and Performance Parameters.” Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, 2014, pp. 1329–1356. ipcc.ch/pdf/assessment-report/ar5/wg3/ipcc_wg3_ar5_annex-iii.pdf.
6. Canada Energy Regulator. “Provincial and Territorial Energy Profiles – Compare.” neb.gc.ca, 18 Sept. 2024, gc.ca/en/data-analysis/energy-markets/provincial-territorial-energy-profiles/provincial-territorial-energy-profiles-compare.html.
7. McDiarmid, Heather. “An Analysis of the Climate and Financial Benefits of Rooftop Solar Arrays on Ontario’s Single-Family Homes and the Barriers to Adoption.” Ontario Clean Air Alliance, 12 Aug. 2024, cleanairalliance.org/wp-content/uploads/2024/08/Solar-Report-aug-2024-aug-11-digital.pdf.
8. BC Hydro. “Solar panels.” bchydro.com, www.bchydro.com/powersmart/residential/tips-technologies/solar-panels.html. Accessed 26 Nov. 2024.
9. Natural Resources Canada. “Photovoltaic potential and solar resource maps of Canada.” arcgis.com, nrcan-rncan.maps.arcgis.com/apps/webappviewer/index.html?id=0de6c7c412ca4f6cbd399efedafa4af4. Accessed 26 Nov. 2024.
10. Hydro-Québec. “2023 Comparison of Electricity Prices in Major North American Cities.” Hydro-Québec, hydroquebec.com/data/documents-donnees/pdf/comparison-electricity-prices.pdf. Accessed 26 Nov. 2024.
11. Sodhi, Manbir, et al. “Economic Lifetimes of Solar Panels.” Procedia CIRP, vol. 105, 2022, pp. 782–787. https://doi.org/10.1016/j.procir.2022.02.130.
12. Kim, Jaeun, et al. “A Review of the Degradation of Photovoltaic Modules for Life Expectancy.” Energies, vol. 14, no. 14, 4278. https://doi.org/10.3390/en14144278.
13. Le, Kathy. “Coverage denied: Canadians hitting roadblocks with insurers after installing solar panels on their homes.” CTV News, 24 Sept. 2024, ctvnews.ca/canada/coverage-denied-canadians-hitting-roadblocks-with-insurers-after-installing-solar-panels-on-their-homes-1.7050340.
14. Patringenaru, Ioana. “Cleaning Solar Panels Often Not Worth the Cost, Engineers at UC San Diego Find.” UC San Diego Today, 1 Aug. 2013, ucsd.edu/story/cleaning_solar_panels_often_not_worth_the_cost_engineers_at_uc_san_diego_fi.
15. Wolf, Sara. “Expert Tips for Dealing with Snow on Solar Panels.” paradisesolarenergy.com, www.paradisesolarenergy.com/blog/how-to-take-care-of-snow-on-your-solar-panels. Accessed Dec. 12, 2024.

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