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With the federal ITC dead, is solar still a good investment in Texas? TX has lower rates than the Northeast but higher sun hours. No state incentive. We compare a $28,000 solar system to putting that same cash in the S&P 500 — with honest numbers, not sales projections.
6-9%
Solar Annual Return
~10%
S&P 500 Avg Return
11-13 yr
TX Solar Payback
+4.1%
Home Value Increase
Federal 25D ITC: $0 in 2026. All calculations in this analysis assume zero federal tax credit. The 30% residential ITC expired December 31, 2025. This significantly changes the solar ROI calculation compared to pre-2026 analyses you may have seen elsewhere.
You have $28,000 in cash. You live in Texas. Two options: install a 10 kW solar system on your roof, or invest the money in a low-cost S&P 500 index fund. We model both over 25 years using TX-specific data.
Important: The stock market investor still pays their electric bill ($2,100+ in Year 1, growing at 3%/year). The solar investor eliminates that bill. This is the key difference often missed in simple comparisons. Over 25 years, the stock investor pays ~$95,000 in electricity that the solar investor does not.
Solar value = cumulative electricity savings + remaining system value. S&P 500 value = investment growth after 15% capital gains tax. Stock investor still pays electricity.
| Year | Solar: Cumulative Savings | Solar: System Value | S&P 500 (Pre-Tax) | S&P 500 (After Tax) |
|---|---|---|---|---|
| Year 1 | $2,100 | $26,600 | $30,800 | $30,240 |
| Year 5 | $11,400 | $25,000 | $45,100 | $41,390 |
| Year 10 | $24,800 | $22,000 | $72,700 | $61,540 |
| Year 15 | $40,500 | $18,000 | $117,200 | $90,960 |
| Year 20 | $59,200 | $14,000 | $188,900 | $134,040 |
| Year 25 | $81,500 | $8,000 | $304,500 | $191,600 |
Solar 25-Year Total Value
$89,500
$81,500 savings + $8,000 system value
S&P 500 25-Year (After Tax)
$191,600
But still paid ~$95K in electricity
The S&P 500 investor earned $191,600 but paid ~$95,000 in electricity over 25 years, netting ~$96,600 in true gains. The solar investor saved $81,500 in electricity + $8,000 system value + ~$14,000 property value increase = ~$103,500 total benefit with zero market risk. Adjusted result: Solar slightly wins on a risk-adjusted basis.
Solar wins on risk, tax treatment, and tangible benefits. Stocks win on raw returns and liquidity.
| Factor | Solar | S&P 500 | Winner |
|---|---|---|---|
| Year 1 Return | 6.4-8.6% | ~10% avg (varies wildly) | Stocks |
| Volatility | 0% (guaranteed savings) | -20% to +30% annual swings | Solar |
| Tax Treatment | Tax-free savings | 15-20% capital gains tax | Solar |
| Liquidity | Illiquid (tied to home) | Sell any day | Stocks |
| Inflation Hedge | Auto-adjusts (rates rise) | Partial (earnings growth) | Solar |
| Property Value | +4.1% home value (TX) | No home value impact | Solar |
| 25-Year Total Value | $81,500 savings + $8K value | $191,600 after tax | Stocks |
| Grid Independence | Energy security | No energy benefit | Solar |
| Risk Profile | Near-zero (panel warranty) | Market risk (crashes) | Solar |
| Requires Homeownership | Yes | No | Stocks |
Score: Solar wins 5 factors, Stocks wins 4 factors, 1 context-dependent. Solar advantage is primarily in risk reduction and tangible benefits.
Texas has unique market conditions that affect the solar vs stocks calculation.
Texas has no state income tax, so your S&P 500 gains face only federal capital gains tax (15-20%). In California or New York, state taxes take another 9-13%. This makes stocks relatively more attractive in TX than in high-tax states.
TX average rate is ~$0.14/kWh vs $0.28-$0.35/kWh in MA, CT, or RI. Lower rates mean less savings per kWh of solar production, extending payback from 7-8 years (NE) to 11-13 years (TX). Solar ROI is rate-dependent.
TX gets 5.0-6.0 peak sun hours vs 3.5-4.5 in the Northeast. A 10 kW system produces ~15,000 kWh/year in TX vs ~12,000 in MA. More production partially offsets the lower rate, generating ~$2,100/year in TX vs ~$3,300 in MA.
TX exempts solar from property tax assessment. In states without this exemption, a $28,000 solar system could add $500-$800/year in property taxes. This gives TX solar a hidden advantage.
The deregulated TX grid has shown vulnerability (Winter Storm Uri, summer conservation appeals). Solar + battery provides energy security that has real dollar value for TX homeowners who have experienced multi-day outages.
Unlike NJ (ADI $85.90/MWh), MA (SMART $0.03/kWh), or CT (LREC), Texas has zero state solar incentives. This removes an advantage that solar has in incentive-rich states.
For many TX homeowners, the best approach combines both investments.
Finance solar at 5-7% APR (no ITC needed)
Monthly payment ~$180-$220 replaces your electric bill (~$175-$250/mo). Net cash flow impact: near zero.
Invest the $28,000 cash in S&P 500
Your cash earns 10%/year in the market while solar pays for itself through bill elimination.
After solar loan payoff (10-15 years), pocket the savings
You now own the solar system free and clear, AND have a $72,000+ stock portfolio. Best of both worlds.
It depends on your electricity rate and investment timeline. A $28,000 solar system in TX with no federal ITC generates approximately $1,800-$2,400/year in electricity savings (at $0.12-$0.16/kWh). That is a 6.4-8.6% annual return on investment — comparable to the historical S&P 500 average of ~10% nominal (7% inflation-adjusted). Solar has advantages: tax-free returns, zero market volatility, and property value increase. But it is illiquid and depends on your utility rate.
Without the federal tax credit, the payback period for solar in Texas is 10-14 years for cash purchases. At $2.50-$3.10/W for a 10 kW system ($25,000-$31,000), savings of $1,800-$2,400/year at TX rates, payback is approximately 11-13 years. After payback, you get 12-15 years of essentially free electricity (panels warranted for 25 years). If you finance, the payback extends depending on your loan rate.
Significantly. Before the ITC expired, a $28,000 system cost the homeowner ~$19,600 after the 30% credit — payback in 7-9 years with a 14%+ Year 1 return. Without the ITC (2026), the full $28,000 cost means payback in 11-13 years and a Year 1 return of 6-9%. The S&P 500 becomes more competitive at these lower solar return rates. Solar still wins on risk-adjusted basis (no volatility, tax-free).
Yes. Zillow data shows homes with solar sell for approximately 4.1% more in Texas, which translates to ~$12,000-$16,000 on a median TX home ($300,000-$400,000). Lawrence Berkeley National Lab found buyers pay ~$15,000 more for solar homes in sunny states. Texas property tax exemption (Section 11.27) ensures the added value is NOT taxed. This property value increase is not captured in simple ROI calculations.
ERCOT wholesale prices spiked to $9,000/MWh during Winter Storm Uri (2021) and regularly hit $0.50-$1.00/kWh during summer peaks. While most homeowners are on fixed-rate plans, solar provides permanent hedge against rate increases. If TX rates increase by 3%/year (historical trend), a 25-year solar system saves an additional $15,000-$25,000 vs the stock market comparison because electricity savings grow with inflation automatically.
Solar if: you plan to stay in your home 10+ years, want guaranteed tax-free returns, value grid independence, and your electricity rate is $0.12+/kWh. Index fund if: you may move within 5 years, want liquidity, or your rate is below $0.10/kWh. The optimal strategy for many TX homeowners is a combination: finance solar at low interest (5-7% APR) and invest the cash you would have spent. Solar payments replace your electric bill.
If TX rates drop, solar ROI decreases because your savings shrink. However, the structural trend is upward: TX rates have increased 3.2% annually over the past decade despite deregulation. Grid infrastructure investment, renewable integration costs, and population growth (TX added 4M people in 10 years) all push rates higher. Solar locks in your energy cost at $0 for 25 years regardless of market direction.
We calculate your real solar return based on your specific REP rate, roof orientation, and energy usage. Honest numbers with zero federal tax credit assumptions.