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How Much Money Can You Save With Solar Panels?


A man installing solar panels

When talking about energy savings, solar panels stand as a formidable solution for homeowners. A typical 6 kilowatt (kW) solar system, generating approximately 9,000 kilowatt-hours (kWh) of energy annually, can lead to an estimated reduction of $1,432 in yearly energy bills. This calculation is based on the current national average electricity price of 15.91 cents per kWh.


Now, you're probably thinking, "What's the real deal with my electric bill once I go solar?" Well, prior to solar installation, homeowners are subject to fluctuating and often high electricity costs. Post-installation, however, a marked decrease in monthly electric bills is commonly observed. 


In this article, we aim to provide a detailed analysis of how solar panels achieve these cost reductions, offering homeowners a clear understanding of the financial benefits of solar energy.


How Much Are Solar Panels?

Typically, an 8 kilowatt (kW) solar system might set you back around $23,600, averaging $2.95 per watt. However, don't let that number scare you off. Thanks to the federal solar tax credit, you can knock off 30% from your solar system's cost. That's a hefty chunk of change, bringing your cost down to a more palatable $16,520. And hey, if you're in a state with extra incentives, you're in for even more savings. So, you've got your solar panels up and shining. But when will they start paying for themselves?


The Payback Period for Solar Panels

Given you a ballpark figure for a 6 kW system costing $17,100, with federal tax credits, you're looking at a net cost of $11,970. With the right sunny conditions, this system can generate between 8,000 and 10,000 kWh yearly. At an electricity rate of 16 cents per kWh, your annual savings could be between $1,280 and $1,600. Simple math tells us the payback period ranges from 7.5 to 9.4 years. But remember, this can vary based on your location and local electricity rates.


How To Calculate Your Payback Period

The PVWatts Calculator from the National Renewable Energy Laboratory (NREL) is your go-to tool. Just input your location and solar system details, and voilà – you'll see your system's estimated electricity output. Multiply this by your current electricity rate, and you've got your annual savings. Divide your initial solar investment by these savings, and you'll see how quickly your solar panels will start to pay you back. It's not just about the savings; it's about making a smart, informed investment in your home and the planet.


Your Electric Bill Before and After Solar Panels

Even after installing solar panels, you'll still receive an electric bill, but here's the twist – it's likely to be significantly lower, or even negative. Why? Because solar panels change the game in how you consume and pay for electricity.

How Solar Panels Transform Your Electricity Bill

Solar panels impact your bill in two key ways:


  1. Direct Power Usage: When your solar panels are basking in the sun, they're not just soaking up rays – they're powering your home. For instance, if your daily electricity usage is 19 kWh and your solar system provides 6 kWh, you only need to draw 13 kWh from the grid. This direct usage of solar energy reduces your dependence on grid electricity, thereby lowering your bill.

  2. Net Metering Credits: Solar panels often produce more energy than your home can use at the moment. This excess energy isn't wasted; it's sent back to the grid. In return, you receive credits through net metering. These credits offset the cost of grid electricity you use when your panels aren't producing, like at night. Imagine your electricity meter spinning backwards – that's essentially what's happening with net metering.


Calculating Your Electric Bill with Solar

Calculating your post-solar electric bill is simpler than you might think, especially with 1:1 net metering. Here's the formula:


Monthly Electric Bill = Cost of Grid Electricity Imports – Value of Solar Exports


For instance, if you consume 260 kWh in a month at a rate of 17 cents per kWh, your bill would typically be around $44. But with solar, you might only import 130 kWh from the grid, costing $22. Meanwhile, if your system exports 480 kWh back to the grid, at 17 cents per kWh, you get a credit of $82. Subtract the two, and you end up with a -$60 bill – a significant swing from a $44 bill to a credit balance, thanks to solar panels.


Curious about how much you could save? Contact us today for a personalized assessment of your solar potential. 


FAQ

How much money do solar panels save per month?

The monthly savings from solar panels vary based on your energy usage, system size, and local electricity rates. On average, homeowners can save between $100 to $200 per month. These savings are influenced by how much electricity your solar system generates and your home's energy consumption.

How much money do solar panels save per year?

Why am I not saving money with solar panels?


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