Are solar panels worth it in Alaska?

7 factors to consider before getting solar panels in Alaska

ConsumerAffairs has heard from thousands of solar customers who have already gone through the installation process. Here’s what to consider before making the switch.

1. Solar panel installation costs
2. Your energy consumption
3. Alaska solar incentives
4. Net metering buyback rates
5. How long you stay in your house
6. How you pay
7. The solar company you hire

1. Solar panel installation costs: $10,000 to $30,000

Average solar panel costs in Alaska are comparable to the national average. Before the federal solar investment tax credit (ITC), a typical residential system ranges from $12,050 to $24,100. That price drops to $8,435 to $16,870 after the full 30% tax credit.

Most installers set the price according to the system's wattage, with a typical cost between $2.50 and $5 per watt. “Cost per watt” is a little like looking at the price per square foot when you buy a house. It helps you compare the value of solar energy systems in different sizes. In Alaska, the average cost per watt is $2.41.

Average solar panel installation cost by system size in Alaska

2. Your current energy consumption

It’s smart to get your electrical loads as low as possible before going solar. That way, you can get a smaller system, which will be cheaper overall. If you have electrical appliances, upgrade those before investing in solar panels.

You get the most out of solar if most of your appliances are electric. If you also have an electric vehicle, solar panels will save you even more. (This may seem obvious, but solar panels only generate electricity; they won’t save you money on gas bills.)

Homeowners with solar panels typically save $20,000 to $90,000 over 25 years.

A typical Alaska household needs a 9.58 kW system to offset its electricity needs with solar energy. You might need a larger or smaller system, depending on your current energy consumption. Once you know your energy consumption, you can calculate your potential savings and the time it should take for your solar installation to pay for itself.

3. Alaska solar incentives: federal and state

The federal solar investment tax credit (ITC) is the most significant incentive for most homeowners going solar. The ITC provides a 30% tax credit on your total system costs, including equipment, labor and permits. It will drop to 26% in 2033 and 22% in 2034.

Compared with some other states, there are relatively few solar incentives in Alaska. Rural communities in Alaska are pioneering different approaches to generating electricity, including installing solar panels, even with little or no help or incentives from government agencies or large utility companies. However, the Alaska Housing Finance Corporation and the state’s Energy Authority have applied for a combined $100 million in federal Solar For All grant funds.

4. Net metering in Alaska: retail rate buyback rate

Sometimes, your solar panels might generate more electricity than your household can use. Net metering lets you sell that extra to the local power grid. In Alaska, you’re compensated at the full retail price of electricity.

The Golden Valley Electric Association (GVEA) provides incentive payments to eligible participants calculated on a dollars-per-kilowatt-hour basis. The incentive rate is determined by the aggregate input from all GVEA customers, subject to a maximum rate of $1.50 per kilowatt-hour.

Two program structures are offered. The basic Sustainable Natural Alternative Power (SNAP) plan, under which residential participants do not directly consume the electricity they generate. SNAP Plus functions similarly to traditional net energy metering arrangements.

» GREENEST STATES: Alaska ranked 30th in 2024

5. How long you plan to stay in your house

It takes years for electric bill savings to make up for the initial cost — about 9.5 years on average in Alaska. If you sell your house and move before then, you might not fully realize the financial benefits of your solar investment.

Solar panels last 25 to 30 years.

A Zillow study found that, on average, houses with solar panels sell for 4.1% more. Let’s say you spend $25,000 putting solar panels on a house that costs $400,000. It might sell for $16,400 more in a few years, according to Zillow. But you miss out on some of that $54,668 in total avoided utility costs over 25 years.

In other words, don't get solar panels just because you want to sell your house soon. Consider a home improvement project with a better return on investment, like remodeling the bathroom or kitchen, instead.

6. How you pay

It’s great if you can pay for the whole thing upfront. You own the system from day one and receive the benefits of available tax credits; plus, you don’t have to pay interest on a loan. Of course, cash isn’t always an option. That’s when loans, leases and other agreements come into play.

• Loans: Solar loans work like any other type of loan. They have relatively low fixed interest rates. Once you pay it off, you own your system outright.
• Leases: Leasing panels is one way to get the benefits of solar energy without the high upfront cost. A solar lease works like a car lease — you get to use the panels but don’t own them. Leasing can be good if you have limited savings. Solar lease agreements typically last 20 to 25 years.
• Home equity loans or lines of credit (HELOC): Eligible homeowners can borrow against equity in their house to finance a solar panel system. These often have variable interest rates, meaning monthly payments can increase over time.

7. The solar company you hire

There are good and bad solar companies in Alaska. In the best-case scenario, it’s easy to make the switch and you’re happy with your system’s performance. In the worst-case scenario, you end up paying thousands for mid-tier solar equipment from a company with poor customer service and no follow-up or support.

One of the most common complaints is related to pushy sales reps who make promises that can’t be delivered. That’s why it’s so important to thoroughly research and verify claims made by sales teams before making a decision. Use NREL’s PVWatts Calculator to estimate how much electricity a solar panel can produce over a year on your house — just type in your address. Project Sunroof is a free solar savings estimator powered by Google Earth imagery.

Monthly costs: solar payments vs. savings

Think of going solar in terms of your monthly costs. Given rising energy costs in Alaska and elsewhere, financing solar panels makes sense as long as your monthly loan payment is less than what you would be paying the utility company anyway.

Is my house a good candidate for solar panels?

Going solar ends up being worth it for many homeowners as long as their house is a good candidate to support the panel installation. Here’s what to think about before you commit:

• How much sunlight do I get? Solar panels need regular exposure to sunlight to produce the most energy possible. Alaska averages 2 to 3 peak sun hours each day. However, lots of shading — like trees or tall buildings above your roof — could make your solar system less efficient.
• What is the size and angle of my roof? Alaska (and the rest of the United States) is in the Northern Hemisphere, so solar panels perform best on south-facing roofs. The worst place to install would be on north-facing roofs, especially if those roofs have a high pitch. For example, if the only place you can install is a north-facing roof with a 30-degree pitch, your costs will likely go up by 30% to 40%.
• What is the condition of my roof? If you have to replace your roof, do that before you install solar panels. Solar panels are designed to last up to 30 years, so you want your roof to last just as long. Otherwise, it could cost thousands to remove the panels, fix your roof and reinstall the panels again.

Pros and cons of solar panels in Alaska

It’s a common misconception that solar panels will completely eliminate your monthly power bill — this is not always the case. Still, you’ll likely be paying much less than you would for traditional utility bills.

Benefits of solar panels in Alaska

• Cheaper energy bills: The average homeowner in Alaska uses a lot of power, which adds up to a lot of savings when you switch to solar. Going solar now means that your monthly energy expenses will be more predictable (and very often significantly lower). Solar panels also protect you from future energy cost increases.
• Better for the environment: Traditional energy sources like coal and natural gas release carbon dioxide and other harmful pollutants into the air. Solar panels generate electricity from sunlight, a clean and renewable energy source. Installing solar panels on your roof helps the environment primarily by reducing greenhouse gas emissions and dependence on fossil fuels.
• Higher home resale value: Installing solar panels can significantly increase a home's value. According to the study mentioned above, houses with solar panels sell for 4.1% more on average. The exact increase in value varies by location, with homes in active solar markets sometimes seeing even higher boosts.

Drawbacks of solar panels in Alaska

• Solar equipment is expensive: Even with rebates and other financial incentives, the price typically starts between $10,000 and $30,000. It’s even more expensive if you want a solar battery for energy storage. Solar battery costs are generally between $7,000 and $18,000. Getting a solar battery might be strategic if net billing rates continue to decline in Alaska. That way, you can store energy at home instead of tapping into the local grid when you need to.
• Potential roof leaks: The installation process involves drilling holes into the roof to anchor the panel mounting systems. If not done correctly, this can lead to leaks or structural damage.
• Energy production varies: Solar panels are dependent on weather conditions and seasonality. Solar panels still work on cloudy days, but less available sunlight does affect how efficiently they produce energy. Snow cover may also temporarily reduce efficiency until it's removed or melts off.

» MORE: Solar energy pros and cons

Find solar companies in Alaska

A good solar company helps you navigate local incentives, permitting and net metering policies. Compare our picks for Alaska’s top solar companies to learn more.

Bottom line: Is going solar in Alaska worth it for you?

Going solar in Last Frontier isn’t just a green move; it's often a smart money move. With electricity costs continuing to rise, more homeowners find solar power is financially worth it in the long run.

The main obstacle to going solar is the high upfront cost of purchasing and installing solar panels, inverters and other equipment. For a lot of homeowners, it ends up being worth it as long as their cost savings over time outweigh the initial investment. Others are happy to go solar for the environmental benefits alone.