September 19, 2023

Do Solar Panels Really Save You Money?

Key takeaways

Solar panels can potentially save the average homeowner $130 per month on their electricity bills depending on where they live, their utility company, and their energy needs.

Solar panels lower energy bills by generating electricity for your home to use, reducing the amount of power you need to buy from your utility company.

With net metering and solar buyback programs, the electric company will purchase excess solar energy, which lowers electricity costs even more.

Installing a solar power system costs between $12,600 and $14,000 including tax incentives.

Solar batteries can potentially provide additional utility bill savings, but they won’t make up for the high upfront costs of installing one.

How much money do solar panels save you?

Homeowners can save about $130 per month by switching to solar on average. That’s over $1,500 per year - almost $40,000 over the solar panel’s 25-year lifespan! Keep in mind, these are average numbers. The actual solar savings you can get depends on many factors, including where you live, how much electricity you use, how many solar panels you install, and your utility company.

How do solar panels save money?

Solar panels save you money by lowering the amount of electricity you have to buy from your utility. When you install solar panels on your roof, they generate electricity. That electricity flows from the solar panels to an inverter. Then, it’s sent to your home to power your appliances. By using the solar energy generated on your roof, you avoid taking power from the grid, which reduces your overall utility bill.

If you live in an area where net metering is available, solar panels can save you money even after the sun goes down. Solar panels generate the most electricity during the day, sometimes producing more electricity than your home needs. When this happens, the excess solar energy is sent back to the grid and is used to power your neighbor’s home.

With net metering, your utility will pay you for that extra energy sent to the grid, usually in the form of a bill credit. The credit covers the cost of electricity your home uses from the grid later in the day when your solar panels aren’t producing enough energy to run all of your appliances. This means you can install enough solar panels to cover the entirety of your energy usage and lower your electricity bill even more. In some cases, net metering can eliminate your bill entirely!

Not all net metering policies are created equal. True net metering values extra solar energy at the same rate you purchase energy for, AKA the full retail rate. Some utilities credit your excess solar energy at a value lower than the retail rate of electricity, which reduces how much solar panels can save you. Make sure to check with your local utility company to see if it offers net metering, or contact a local solar installer for more information.

Will you still have an electricity bill after installing solar panels?

The truth is you probably will still have an electricity bill even when you have solar. There are a few different reasons for this. For example, you might end up using more energy than you anticipated when planning how many solar panels to install, like during a heat wave. Your system might not produce enough electricity to cover all of your energy usage during these times, and you’ll have to take some electricity from the utility.

Some utilities have minimum bill requirements that cannot be covered by solar energy production. These minimum bill amounts can range anywhere from $15 to $30, and no matter how much solar electricity your panels generate, you can’t get rid of these charges. While this can be a bummer, having a $30 electricity bill is still better than a $130 one. There may be other additional taxes and fees that can’t be reduced by solar, as well.

Overall, you can eliminate most of your energy bill, so long as your utility offers a decent net metering or solar buyback program.

How much do solar panels cost?

Solar panels typically cost between $18,000 and $20,000 to install before any incentives are applied. The biggest incentive available for homeowners who install solar is the 30% federal solar tax credit, which lowers average system costs to between $12,600 and $14,000. Your state, local government, or utility may offer additional rebates, solar incentives, and tax breaks that help drop installation costs.

The total cost of installing solar panels will vary depending on the size of your solar panel system, measured in kilowatts (kW). Because of this, you’ll usually see the price of solar listed as the “cost per watt”. Using cost per watt, you can easily compare the prices of different solar panel systems without worrying about the system size. The national average cost per watt of solar installed in the U.S. typically falls in the range of $2.75 and $3.35 per watt.

These prices are nearly 70% lower than what solar cost just 10 years ago - but don’t get us wrong, we know it’s still a substantial investment. The good news is there are financing options available to help you with the upfront costs, like zero-down solar loans.

Can a solar battery save you more money on your bills?

Solar batteries store the extra solar power your panels produce during the day for you to use later on instead of sending it to the grid. This can save you more money on your electricity bills if your utility company uses Time of Use rates, where electricity is more expensive during times of high demand. Instead of using grid power when it’s expensive, you would use your stored solar power and avoid paying peak rates.

Using stored energy can also save you a little extra money if your utility purchases excess solar energy at a very low rate. Batteries won’t save you any additional money on your electricity bills if your utility has net metering and uses fixed rates, where pricing remains the same throughout the day.

Even if batteries save you more money, installing one is very expensive. At a minimum, energy storage will add $12,000 on top of the cost of solar panels. The slight additional savings the battery offers by letting you use stored solar energy to avoid peak pricing won’t recover the costs of installing the battery. So, while a battery can technically save you more money, it won’t be enough to see a return on your investment.

Overall, batteries aren’t usually a great financial investment. But, because batteries act as a source of backup power and keep your lights on during a power outage, they can be worthwhile for homeowners that experience frequent blackouts. They also maximize the amount of renewable energy your home uses, so if lowering your carbon footprint and reducing your independence on the utility is important to you, a battery may be something to consider!

Are solar panels worth it for everyone?

To be frank, residential solar panels aren’t going to work for everyone! You probably won’t be racing to get a home solar panel installation if your energy costs are relatively low, your electric company doesn’t have a solar buyback program, or your roof isn’t right for it. In these situations, the savings the solar panels would provide you wouldn’t be high enough to recover your initial investment.

Solar energy systems are best suited for homes with high energy consumption and have south-facing, unshaded roofs that are serviced by a utility company that offers some form of net metering and has high electricity prices. That’s a lot of boxes to check - but believe it or not, a lot of homes meet these standards (or at least most of them).

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