Is Solar Worth It in Alaska? (2024 Homeowner's Guide)

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How to Figure Out if Solar Panels are Worth It in Alaska

Solar panels will be worth the upfront investment for most Alaska homeowners, but this clean energy solution isn’t ideal for everyone. There are some things you’ll need to think about before you can determine if solar will benefit you and your home. We’ll discuss some of the most crucial factors below.

What’s Your Home Electricity Consumption?

First, you’ll need to consider how much energy you consume on a monthly basis. You can check your electricity usage on your electric bills to see the average over the past few months. Solar panels are more valuable in areas where electricity is expensive or where homeowners have high energy needs. Generally speaking, a monthly usage of over 500 kWh will mean solar is likely a good option for you.

The average energy consumption in Alaska is lower than in most states, second only to Hawaii. The typical monthly energy usage is 552 kWh, meaning many homeowners would be close to the tipping point where solar isn’t worth the investment. However, electric rates are also the third-highest in the country after Hawaii and Connecticut, so most homeowners will benefit from going solar, even if their average usage is a bit below the 500 kWh mark.

How Much Is It To Go Solar in Alaska?

The price of installing solar panels in Alaska depends largely on the size of the system you need to offset your electric bills. The average Alaska homeowner needs a 6-kW system, which is around half the size needed throughout the rest of the United States. At a standard per-watt price of just $3.13, most residents pay around $18,780 to install solar panels or $13,146 after the federal tax credit is considered.

As mentioned above, solar is more valuable in areas where energy is expensive. The high electricity rates in Alaska, combined with the low price of solar equipment, make installing photovoltaic (PV) systems a great investment for most homeowners in the Last Frontier.

What’s the Payback Period for Solar in Alaska?

A relatively reliable way to estimate if solar is worth it for your home is to calculate how long it will take your panels to pay for themselves, which most do if you use a cash purchase or solar loan to acquire them. The time it takes this payoff to occur and your system to become profitable is called the solar panel payback period.

Most Alaskans will find that the energy savings afforded by their solar project will pay off the system in 5 to 11 years, or an average of around 8 years. This is well below the national average of 12 years, meaning solar panels are generally a good investment in Alaska and provide a better return on investment (ROI) than in most other states. With that being said, if your estimated solar panel payback period is longer than 8 years — based on a solar calculator or estimate from a reputable solar installer — your ROI will be lower than the state average but likely still much higher than the national average.

What Are Average Buy-Back Rates in Alaska?

Most states now have a net metering program or energy buy-back policy, which allows you to produce more energy than you use with your panels and get credited by your electric company for the excess. Alaska not only mandates net metering but also sets the buy-back rate at the retail rate, meaning your utility bill will be credited for each kilowatt-hour at the same price you’d pay if you pull a kilowatt-hour from the electrical grid. Of course, this will not work for off-grid systems.

This policy is massively beneficial to Alaska homeowners who pay high rates for electricity, as it greatly improves the opportunity to eliminate electric bills in the state. The net metering policy in Alaska makes solar power a much better investment for most residents.

How Much Sun Does Your Roof Receive?

Solar panels only produce energy when they receive sunlight, so the more sun your roof gets, the more energy you’ll generate and the more valuable your panels will be. Alaska as a whole receives an average of just 126 sunny days per year, which is well below the national average of 205. Some areas of Alaska also experience weeks or even months of total darkness, but the low energy needs of Alaskans and the net metering policy still make solar worth it for most homeowners.

With that being said, there are some individual factors to consider as well. In the United States, south-facing roofs and west-facing roofs receive the most sunlight, so solar conversion might not be right for you if your roof only faces north or east. Additionally, shading on your roof can play a part in how valuable solar panels are for your home, as any obstruction of sunlight from trees or buildings will decrease your access to energy production.

What’s the Outlook on Solar in Alaska?

Alaska isn’t the most eco-friendly state by any means, and the adoption of solar power has been slower than nearly every other state. However, residential solar installations have increased quite a bit in popularity over the past decade, in large part due to advancements in solar technology that have made solar energy a viable option in such a northern area.

Alaska’s solar policies have led the solar market to grow quite a bit in the recent past, and it’s expected to continue to expand in the coming years. The likelihood is that solar conversions will increase in prevalence in the near future, making solar more accessible and even more affordable than it is now.

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Benefits of Solar Energy in Alaska

Solar energy is a wonderful option for many Alaskans because of the myriad of benefits converting to renewable energy can bring. We’ll discuss the most significant benefits below and how each could affect your decision to go solar.

Electricity Bill Savings

One of the most substantial benefits of going solar is the  savings you’ll enjoy on your electric bills. This upside is particularly important in Alaska, where residents pay more for electricity than in nearly every other state. Solar panels in Alaska typically provide savings that pay back the your solar panel expenses within just 8 years — well below the national average of 12 years — and save an average of $41,943 over the remaining lifespan of the equipment.

By converting to solar, you’ll not only save an average of nearly $42,000 on your utility bills, but you’ll also improve your energy independence and be able to avoid the electricity rate spikes that are expected to continue in the future.

Lower Taxes & Access to Other Incentives

Alaska is a relatively solar-friendly state, despite the fact that solar adoption is among the least impressive in the country. There are solar incentives afforded to Alaskans by the state and federal government that make converting more affordable and appealing. One of the most significant incentives is the federal solar tax credit (ITC), which is a credit to your federal tax liability in the amount of 26% of your total system expense. In Alaska, the ITC averages around $5,634.

There are some additional solar incentives available in Alaska:

• Net Metering: As mentioned above, Alaska mandates net metering at the full retail rate, which allows most solar customers to offset their electric bills, increase their return on investment and decrease the payoff period of their system.
• Local Property Tax Exemption for Renewable Energy Systems: The State of Alaska allows individual municipalities to decide to waive state sales tax on all green energy solutions, including solar power equipment. Depending on where you live, you might be able to save quite a bit on the upfront purchase of your system.

Home Resale Value Increase

One benefit of installing solar panels that many homeowners fail to realize is the bump in property value that is expected. A research study completed by Zillow suggests that solar panels increase home value by an average of 4.1%.⁴ In Alaska, where the average property value is $349,231, that’s a typical bump of approximately $14,318.⁵ Notably, this jump in value is higher than the average price of a solar system in Alaska, and it could be even higher in more expensive areas like Anchorage and Fairbanks than in rural Alaska.

It’s important to note that this value increase will not be a benefit you’ll enjoy if you choose to sign a solar lease or power purchase agreement (PPA). Only panels acquired with a cash purchase or solar loan will receive this benefit.

Clean, Renewable Energy

There are some non-financial benefits as well that you’ll enjoy when going solar in Alaska. Most notably, installing panels will reduce your reliance on fossil fuels, helping you reduce pollution and your carbon footprint to help fight global warming. You’ll also become less dependent on your utility company, meaning you won’t be subject to the energy price increases that are expected in the future.

What to Look Out For When Considering Solar in Alaska

Deciding if solar is right for your home is really just the first step to going solar. Throughout the entire installation process, there are some additional things to keep in mind for the best experience possible. We’ll discuss these considerations below.

Upfront Fees

The upfront fees of going solar in Alaska are lower than in most states, but it’s still an expensive home improvement. The price of conversion will be an important factor for any homeowner. You can keep your initial investment down by choosing a no-money-down loan option, opting for more affordable solar panels and avoiding add-on equipment like electric vehicle chargers and solar batteries.

Payback Period

The time it takes for your panels to pay for themselves is an important thing to consider, as this will help determine their overall value and your ROI. Most Alaska solar panel systems pay for themselves in 8 years or between 5 and 11 years. If your payback period is longer than 11 years, you’ll still likely see savings, but they will be lower than the average in the state.

Net Metering Policies in Alaska

Alaska’s net metering policy is outstanding, as it not only mandates that utility companies buy excess energy from solar customers but also that they do so at the full retail rate. Your energy credits will also roll over indefinitely, making it easier for homeowners to maintain $0 energy bills even through the winter when sunlight is less abundant. The specific policy available to you could vary a bit, so be sure to check with your electricity provider before committing.

Pending Policies & Changes to Incentives

The solar industry is relatively young, and adoption is increasing in just about every state. That leaves plenty of room for growth and improvement, especially in areas like Alaska, where solar installations are less prevalent. Policies and incentives could change and improve, so while it’s not beneficial to wait for better incentives or rebates to come along, you should check for updates before you sign any contracts.

Weather & Climate in Alaska

Advancements in solar technology in the recent past have made solar more worthwhile in Alaska, but many homeowners still understandably worry that the excessive snowfall, cloudy days and periods of darkness in some areas will make solar less beneficial in the long run.

While it’s true that the state receives well below the average number of sunny days per year, the high energy rates and net metering policies still allow homeowners to eliminate electric bills even through the winter with energy produced in the summer months. Snowfall and cloudy days will certainly reduce your panels’ efficiency, but snow will keep them clean to maximize production during the sunny weather, and the net metering policies make it possible to offset electricity usage during the cloudy weather.

Solar is also more effective in most cases nearer the equator, but the cold weather in Alaska allows electricity to flow more efficiently, so panels are still considered worth the investment in such a northern state.

Companies Pushing Solar Leases or PPAs

Finally, you should be aware that there are some solar panel installation companies out there that are disingenuous and even try to scam customers out of money. Generally speaking, you should stay away from solar installers that push solar leases or power purchase agreements (PPAs). Often, these companies will advertise “free panels,” but this is really just a marketing tactic to get you to sign a much less beneficial solar lease. Leases don’t boost your home value, don’t let you take advantage of the federal solar tax credit and provide a much smaller ROI than solar loans and cash purchases.

With solar power growing in popularity in Alaska, the risk of running into a company that uses shady business practices will likely increase in the future. It’s best to work only with vetted, reputable solar companies to ensure you have the best experience possible.

Wrap Up: Is Solar Worth it in Alaska?

Alaska is far from the sunniest state in the country, but the high electricity rates and the outstanding net metering policies throughout the state make solar conversion a worthwhile endeavor for most residents. However, installing solar panels isn’t right for every homeowner. Before you commit to this renewable energy source, you’ll want to assess your payback period, the total price of your solar array, your monthly energy bill, shading on your roof and more to ensure your home is a good fit for solar.

We recommend contacting a reputable solar company to help determine if solar is a good option for you. The right installer will not only assess your ROI but will also walk you through the installation process and provide a smooth transition to clean energy.

See also:  Find out how much solar power your roof can produce with our solar calculator

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Related Topics

• What Are the Best Alaska Solar Companies?
• What Solar Incentives Are Available in Alaska?
• Find Cost Savings on Solar in Alaska

The cost information presented in this article is derived from a comprehensive analysis, incorporating data from multiple industry sources. The average cost per watt per state was calculated based on figures from Consumer Affairs, Energy Sage, and Berkeley Lab’s Electricity Markets & Policy Department. Additionally, monthly energy consumption and the average monthly cost of electricity were sourced from the U.S. Energy Information Administration, ensuring a well-rounded and accurate representation of the information presented.