Do Solar Panels Really Save You Money?
If recent electricity bills have you exploring new ways to lower your home’s energy expenses, the idea of saving money with solar panels may seem too good to be true.
By reducing long-term electricity costs with emission-free renewable power generation, installing solar panels allows you to save money and the environment. So why doesn’t everyone go solar?
Well, for first-time buyers looking at potential contracts with various system capacities, payment options, and financial savings projections, going solar is often intimidating and difficult to understand.
To prove how solar panels really save you money, we will explain exactly how a renewable energy system can reduce your monthly utility electricity costs, before demonstrating the most effective ways to maximize your investment.
How Solar Panels Reduce Electricity Expenses
As a mandatory billing policy in 41 states, Washington D.C., and several American territories, solar panels can help offset the costs of utility electricity with net metering (also known as net energy metering or NEM) programs.
Within net metering agreements, home and business owners are compensated for the power their solar panels generate and send it to the grid in the form of an electricity bill credit. While credit values vary across the country with different utilities, net metering allows solar energy systems to generate excess electricity each day in order to “cancel out” or “make up for” any grid power consumption overnight.
As NEM credits usually roll over from month to month, solar systems with net metering are typically designed to generate roughly the same amount of electricity that the property consumes each year.
How to Pay For Your Solar Energy
Of course, there is no such thing as a free lunch, and installing solar panels requires a significant amount of capital to cover the costs of equipment, labor, permitting, and other project expenses. Although there are plenty of “no money down” options available, home and business owners must be prepared to pay for their solar energy in one form or another.
Today, most homeowners and commercial businesses go solar by either purchasing and owning their systems or entering into a lease or power purchase agreement (PPA).
Purchasing a solar energy system: Buying your solar energy system outright will enable you to save the most on your long-term electricity expenses. To help make solar power more accessible in the US, there are many solar financing programs and incentives available to minimize adoption costs for potential system owners.
Entering into a solar PPA or lease: As an alternative to purchasing a system, home and business owners may be able to sign a lease or purchase power agreement (PPA) to instantly save money on their electricity expenses with solar.
While leases and PPAs differ slightly in structure, the key idea in both of these agreements is that the solar installation company maintains ownership of the system. By leasing out your roof space to the solar company, you can then sign an agreement to purchase the power produced by your rooftop panels at a price lower than local utility rates.
How to Save the Most Money with Solar in 3 Steps
So although entering into a lease or purchase power agreement is a good way to instantly reduce your monthly electric bills, owning a solar system will enable you to save the most money on your property’s long-term energy expenses. To help you know what to expect when you invest in a system, here are the three key steps in the journey to solar savings.
1. Pay to Own Your System
As owning your system can save you the most money over time, home and business owners purchasing solar may either pay in cash or finance their projects. While paying for everything upfront helps minimize interest payments, there are many solar financing options available to those who cannot immediately write a check to cover the investment costs for multiple decades of renewable energy production.
To encourage clean energy development in the United States, photovoltaic (PV) solar systems may be eligible for several federal and local tax credits, rebates, and special financing programs. Through 2032, all residential and commercial PV systems can qualify home and business owners for a federal income tax credit of up to 30% on the total costs of the installation.
2. Live with Lower Electricity Bills
Once your panels are installed and interconnected to the utility grid, then you may sit back and let solar power lower your monthly electricity bills through green electricity production and net metering with the utility.
While you may now have an additional monthly payment towards your system’s financing, solar panels generating enough electricity to offset your home’s consumption will minimize your ordinary energy bill spending outside of any unavoidable, fixed utility costs.
By replacing one ongoing expense with another that builds equity, financing solar panels can help you break the cycle of never-ending utility electricity payments with an investment in your home’s energy production.
3. Break Even and Continue to Save
Eventually, your solar energy investment will hit a break-even point. This point is reached when the cost of your system has completely offset the price of utility energy that you have avoided by generating solar power.
To illustrate a quick example, let’s say that you finance a solar system for a total of $14,000 to generate 900 kWh of electricity on average each month. By offsetting 10,800 kilowatt hours (kWh) annually at a residential electricity rate of about $0.14, your panels could replace roughly $1,512 (10,800 x $0.16) in grid power expenses every year.
Dividing your total investment ($14,000) by your annual savings ($1,512), your system would then be projected to pay for itself in about 9 years and 3 months. Nationally, the average payback period for a residential PV system varies by state or utility coverage area, and most homeowners can expect to break even between 8 and 12 years after an installation.
With professional systems warrantied for 25 years and more, solar panels can continue to generate electricity long after they have equaled their avoided energy costs. After breaking even with offset utility expenses, your solar panels may be able to pay for themselves a second or even third time, potentially saving you tens of thousands of dollars through decades of energy production.
In conclusion, yes. Solar panels really save you money.
Whether you are buying a system outright, financing your installation, or signing a power purchase agreement, there are many ways in which solar panels can replace grid-supplied electricity to save you money on your ongoing energy expenses.
Want to see how much you can save by going solar? Get started today with a free quote from Infinity Energy.
This article is brought to you by Sunnova & Infinity Energy