Installation of Solar Panel Systems for homes has been growing at a record pace, and the
cost to install solar power has decreased by 70% over the last decade. Everyone loves
the idea of clean electricity and self sufficiency, but we all know, most homeowners primary concern
is lowering their electricity bill to save money.
In the last decade, solar has had an annual growth rate of 48% and right now, the price
to add solar panels to your home is the lowest it’s ever been.
The big question everyone wants to know is, how much will I save on my electricity bills
if I install solar panels? The exact numbers vary depending on the details of your installation.
If you live in a mobile home in Texas, or a mansion in California with 3 tesla’s in
the garage, your electricity requirements and solar savings potential are obviously
going to be very different.
But what you should know is that the federal government provides a 26% tax credit on all
residential solar installations until December 31st 2020.
A solar installation can also be looked at as an investment, and can provide a 6%-13%
ROI.
The key things to note are that
Solar panels cost money upfront, but will save you money in the long term
The average home can save between $10,000 and $30,000 over the lifetime of your solar
panel system
The simple answer to the question “do solar panels really save you money?” is yes. That
being said, how much you’ll save depends on a number of factors. Direct hours of daily
sunlight and the size and angle of your roof are very important, but local electricity
rates play the largest role in determining how much solar can save you.
Equipment makes up the majority of the upfront cost of solar but permits and labor are also
factored in. The Solar panel costs for an average sized installation works out to around
$2.96 per watt.
To help your form a clearer picture of what this looks like in the real world, a 2KW system,
which is small system that would be appropriate for say…a modest 1500 square foot house
with low electricity requirements would cost on average $5920, and after federal tex credits
$4381
A large 25 kw system that you’d put on a much larger home, maybe something like our
aforementioned California mansion, would cost on average $74,000 or $54,600 after tax credits.
The first step to understanding how much solar can save you is to calculate how much you
are currently spending on electricity every year. For example, the average annual electricity
use required for a U.S. household is 10,972 kilowatt-hours. Now you take that average
usage, and Multiply it by the national average electricity rate which is a about $0.1284
per kWh and you’ll find that the typical American family is spending just over $1,408
a year on electricity.
When you compare the cost of utility electricity with home solar, you should keep in mind that
electricity rates are constantly changing, and will probably continue to increase annually.
Over the past decade, national electricity costs have increased at a rate of approximately
2.2% per year. Utility rate inflation is an added incentive for solar: when you generate
your own energy with a rooftop Photovoltaic system, you’re locking in energy costs
at a constant rate so that you no longer have to consider variable utility rates.
Because of the nature of solar as an up-front investment, the only costs associated with
a solar system will be the cost of your installation and any added electricity costs in the event that
your panels do not completely offset 100% of your electricity use. Whether or not your
system will completely offset your electricity needs is primarily determined by how accurately
you size your system. To provide a snapshot for typical bill savings
from a solar installation, here are 20-year solar savings estimates from an average American
home that’s about 2000 square feet. The price includes the federal solar tax credit
which currently allows you to deduct 26 percent of the cost of installing a solar energy system
from your federal taxes. Now for the specs on our Average American
Home, we’re using a system size of 6 kilowatts the electricity demand is 10,972 kilowatt-hours
per year which is the national average We're assuming a utility rate inflation of 2.2%
and also that the percent needs met by the solar panels is 94% and we're using the Electricity
rate that's the state average.
Now we’re going to run through the solar panel savings estimates over a 20 year period
for the 10 most popular states for solar:
In Arizona you can expect to save $12,595 dollars over a 20 year period.
In California $11,795 Colorado: $10,730
Florida: $11,307 Massachusetts: $10,552
Maryland: $12,239 New Jersey: $12,062
New York: $11,085 Texas: $12,461
Some people aren’t sure if you still even get an electric bill with solar panels, but
you do, unless you went completely off grid, which is not a normal home installation and
a topic to cover in an entirely different video.
A common misconception about installing solar panels is that your electric bill will go
away entirely. Even if you install enough solar to completely offset your electricity
use, you'll still receive an electric bill from your utility as long as your property
remains grid-connected, but you can use net metering.
With net metering, your monthly electricity bill is calculated both ways, based on the
net of your overall energy consumption and the monthly output from your solar panels.
If you are producing more energy than you’re using the utility company will actually pay
you! For example, if your solar panels have overproduced 3,000
kWh on sunny days and you have consumed 4,000 kWh from the grid on dark nights, you will
get billed only for only 1000 kwh. In some cases, net metering policies actually pay
a higher rate for the electricity that is produced from your solar panel system than
what you pay to purchase electricity from the grid.
You still receive an electric bill when you install solar panels, but In the case where
you provide more electricity to the grid than you pull, your utility will usually roll over
your unused bill credits to the next month for you to take advantage of. Regardless,
installing solar panels will almost certainly lead to lower average monthly electric bill
charges, and may eliminate your monthly electric bill totally in some cases.
There are tools that can quickly estimate your solar potential and savings, you just
input your address, and it will provide you detailed estimates based on your geographic
location, roof size, and monthly electricity bill. I linked to a good solar calculator
in the description below . Solar panels are a great addition to any home
They're a a true renewable energy source Reduce your electricity bill and provides
insurance against rising power prices Low maintenance cost
Financial incentives from the government They operate quietly, with no moving parts
and emit zero pollution. They have a long service life and reliability
in operation. The guarantees given by the manufacturers for the solar panels are generally
for more than 25 years of good operation.
The main barrier for most people is the initial cost, but marginal cost drops to zero once
the price of installation is paid off.
As with any large purchase, you should do your research. A recent report by the U.S.
Department of Energy’s National Renewable Energy Laboratory recommended that consumers
compare as many solar options as possible to avoid paying inflated prices offered by
the large installers in the solar industry.
Using an online installer network, you can register your property and basically have
contractors compete to give you the best price. I included a link in the description to get
competing solar quotes.
Outside of lower electricity bills, solar power systems also lower the carbon footprint
of your home, and can lead to potentially higher home values.
Of course you don’t need to always purchase a solar power system upfront in cash, there
are number financing options available such as solar loans and solar leases, that might
be a good option for you.
Overall a solar power installation is a decision homeowners rarely regret, and if you live
in a location with the right conditions to save to you money, it’s kind of a no brainer.
Have you installed solar or are you planning on installing a system in the future? Let
us know in the comments below.
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