How Much Do Solar Panels Save?
Homeowners interested in solar constantly hear that going solar saves money — but how much? Whether it’s worth it to go solar depends on how much money your solar installation will save you over its lifetime. The savings depend on several factors, such as your current energy use and the efficiency of your solar panels. To help you determine solar savings and whether going solar is worth it, we’ve put together an overview of the factors that play into going solar.
Why Energy Use Matters for Saving With Solar
Let’s cover the first, and perhaps the most important, factor in whether solar panels will save you money.
Energy use is the biggest determinant of solar savings. Many solar-curious homeowners think that the size of their house and how many people live in it are the main factors. While the number of people living in a home can play into total energy consumption, there isn't a strict correlation between the two.
The main reason why there isn’t a correlation is that energy use can vary from person to person. Three low-energy-use individuals living in a single home may use less electricity than a single individual who uses the AC, a computer, a washer and a dryer every day. Therefore, while the number of people living in your home is a preliminary factor, it’s relatively unimportant.
Calculating Your Home’s Electricity Usage
Now that we’ve covered why energy consumption matters more than the number of people living in your home, it’s time to go over how to determine the amount of power you use. There are a couple of ways you can do this.
Your Energy Bill Can Help You Know How Much Power You Use
The first step is perhaps the most obvious — look at your power bill. Many power bills only tell you how much they’re charging without the price breakdown. Contacting your utility company and checking your electric meter are good ways to determine how much energy your home uses monthly.
Using Energy Calculators Online
Another way to determine how much energy you use per month is through online calculators. These calculators ask for your appliances and how often you use them, after which they calculate how much energy you use based on the average electricity usage of those appliances.
The Department of Energy provides a calculator that any homeowner can use. While it may be tedious to catalog all of your appliances and their wattage, it is valuable information to have on hand for future reference.
Know Your Utility’s Electricity Rate
The final step for determining your home’s energy use is discovering how much your utility company charges for electricity. Most utility companies charge by kilowatt-hour (kWh), which is generally how solar panels are priced as well. Knowing your utility’s rates is essential, as going solar might not be worth it if your utility has cheap electrical rates.
The Energy Information Administration, an agency of the DOE, tracks electricity rates across the country and breaks the information down state by state. For example, when looking at the 2021 data, we can see that Hawaii has the most expensive energy rate at 32.81 cents per kWh, whereas Utah has the cheapest at 10.12 cents per kWh. Hawaiians, therefore, have much higher savings compared to Utahns when it comes to going solar.
While the average state rate isn’t necessarily the same as your rate, they will likely be similar.
Calculating the Cost of Solar Panels
Once you know how much energy you use and its cost, it's time to turn to the solar installation itself. The solar cost compared to its energy production is a necessary step to figuring out whether you’ll save with solar.
Solar Installation Pricing — Cost Per Watt
Going solar usually has four categories of costs:
- Soft costs, like paperwork and fees paid to the government.
- Installation fees.
- Hardware costs, which include things like an inverter and racking system.
- The solar panels themselves
These categories are usually combined into one big sum, then divided by generated watts of electricity. The watts are calculated from the wattage of each panel that you install, which are then multiplied by the average sun hours of your area to determine how much electricity is produced by your system. Let’s look at a quick example.
A Hypothetical Solar Panel Cost Exercise
Go Solar Group’s main solar panel option is the Axitec: AC-315MH/120SB, which is rated for 315 watts. If you purchase 30 solar panels, you get 9,450 watts or 9.45 kWh. Compare that to the total cost of your system. If, for example, the amount quoted to you for a solar installation is around $15,000, then you would divide that $15,000 by 9,450 (the capacity of your system) would cost about $1.59 per watt. Keep in mind that this number is low — most systems are around $2.50 per watt.
Cost Per Watt: How To Use It To Calculate Your Solar Savings
Now that we’ve covered what cost per watt is, we can use it to discuss how you can use it to discover solar savings.
A common myth about solar is that it’s an expensive form of electricity generation. Some say that the only reason people are going solar is because of the environmental benefits of solar. However, this couldn’t be more wrong.
Solar, among other renewable sources like wind and hydroelectric, has a low cost per watt. Meaning renewable energy sources are among the cheapest to produce. Oil and coal, along with all other forms of fossil fuels, are among the more expensive ways to generate electricity.
Levelized Cost of Energy
The levelized cost of energy (LCOE) is a metric used to measure the costs associated with a particular type of electricity generation over its entire life cycle. The formula is tweaked in such a way that different types of electricity generation, which may have different upfront costs and differing lifespans, can be compared to each other.
The LCOE of Solar
The LCOE of solar has been decreasing steadily over the past decade. The costs have declined so significantly and so quickly that it shocked the Department of Energy. In 2017, the solar industry hit the 2020 goal, and prices have continued to fall. Falling prices are good news for homeowners interested in solar, as solar power will continue expanding in the US.
The Price of Fossil Fuels — Rising Costs
On the opposite side, we have the costs of fossil fuels. Establishing new fossil fuel plants is getting more and more expensive, on top of rising fuel prices. When adjusted for inflation, the real price of crude oil spiked in 2000 and has remained more expensive than in the 90s. Coal prices have a more erratic history, but in 2021, they rose to their highest point since 2008.
The Costs of Fossil Fuels Versus Solar: Locking in a Set Price
The cost-per-watt of solar has consistently dropped, whereas the cost-per-watt of fossil fuels is rising. The EIA predicts that the price of coal will continue to climb each year through 2050. With these rising prices, one can expect higher power bills from their utility.
With the prices of fossil fuels constantly changing and generally increasing over time, locking in a low price with solar is attractive. When you install residential solar on your home, you are no longer beholden to the whims of the global energy market. While fossil fuel prices rise as they get harder to extract, solar becomes cheaper as the technology standardizes.
Solidifying Your Cost Per Watt With Residential Solar
How does solar lock in your cost per watt? It puts electricity generation into your own hands. As the price of fossil fuels rises, utility companies spend more money to purchase them. Because they have to spend more money, they will charge their customers more to keep their profits. This cycle is why your power bill goes up year after year.
When you purchase a solar installation, you set that price in stone. You are no longer paying for electricity generation itself. Instead, you are paying for the hardware, installation costs, and other factors that go into the total price of a solar array.
The price won't change. You will still have a monthly payment for some amount of time until you pay off that installation, but the price will not rise or fall based on market trends. Residential solar insulates you against rising costs per watt in the future. Furthermore, once you pay for solar installation, you no longer have to worry about paying for your electricity as long as your panels keep producing.
What Are Some Other Savings That Come From Going Solar?
We have covered the profits from no longer worrying about fossil fuel prices or your local utility, but what are some of the other savings that come from solar? Are there ways to save money with solar besides getting rid of your power bill? There are, ranging from net metering to passive solar and beyond.
How Solar Net Metering Can Save You Money
Net metering is a phrase that solar homeowners are likely to hear often. It's confusing for newcomers, but it's an important part of solar savings. Going solar wouldn’t be nearly as efficient, monetarily speaking, without net metering.
A Brief Overview of Net Metering
Most solar PV installations will generate excess power throughout the day. Some of this power may be stored in solar batteries, but if your batteries are full, then there’s nowhere for it to go. This energy would go to waste if not for net metering.
Net metering is the practice of taking the excess energy and exporting it back to the grid. The energy put back on the grid is measured by your utility company, which then credits you on your power bill for the amount of electricity you provided. The rate of this credit ranges from the avoided cost, which is usually less than you pay for electricity, to the full retail value.
Using Net Metering To Save Money
Net metering is the chief way to offset your electricity usage at night or during bad weather when your solar panels are not producing power. A good net metering policy and solar panels can eliminate your power bill.
The best net metering policies are those which roll over and payout at the retail rate. When you have a retail rate policy, you can produce enough energy to offset the amount you use. When you have a net metering policy that credits for a lesser amount, such as the avoided cost rate, then you may find yourself with a small power bill at the end of the year — unless you have battery backup.
Solar Panels and Battery Backup: The Perfect Combination
Battery backup complements net metering. Solar batteries, such as the Tesla Powerwall 2, store the excess electricity generated by your panels. Then, once the battery is full, you can begin exporting extra electricity to the grid for net metering. You can then use the power in your batteries at night, so you don’t need to rely on the grid as much.
Additionally, battery backup can make up for a bad net metering policy. If your area only pays the avoided cost for energy exported to the grid, you can utilize your battery to compensate. The electricity that you store in your battery and draw upon at night is comparable to exporting the same amount of electricity with a full retail net metering rate.
If you live in an area serviced by a utility company with a below-par net metering policy, adding battery backup can close the gap. Two Tesla Powerwalls are usually enough to power an entire home, though your unique living situation and energy use may change that.
How Passive Solar Is the Next Big Solar Idea
Passive solar architecture is the final facet of solar that we will cover in this article. It is the ultimate form of solar, where we go beyond simply adding solar installations or batteries and, instead, construct the entire home around solar principles.
Passive solar is a building technique used to maximize the benefits of solar. Solar panels are an obvious factor, but it goes beyond that. The home is constructed with a sheet of glass installed in front of a wall of absorbent material, which is painted black. The small amount of space between the glass and the wall (usually an inch or so) acts as insulation to stop heat from escaping. This insulated wall is called a Trombe wall.
A Trombe wall helps store heat during the day and radiates it at night, keeping the home cool during summer days and warm during winter nights. With some fans and solar panels, your home is essentially climate-controlled without needing cumbersome, power-guzzling machinery. When that’s combined with solar-friendly building, like facing the equator and having a roof of the right size and pitch, you can build an energy-efficient, environmentally friendly home.
Putting It All Together: Saving Money With Solar Panels
Now that we’ve covered all the main factors, it becomes clear that solar can help save money. Electricity is a huge expense for most Americans, sometimes taking up a tenth or more of their annual spending. By utilizing solar, homeowners can cut down on their electricity bills.
If you live in an area with good net metering or use battery backup, you can eliminate your solar bill. When solar panels, net metering and battery backup combine with passive solar, you can build (or renovate) a home that becomes a beacon of clean energy.
Finally, many states and utilities offer other incentives that make going solar easier and cheaper. Taking advantage of these incentives before they expire ensures that you get the most value out of your dollar.