You Really Can Save Money With Solar Panels
Solar panels can seem like an ideal energy solution. Once the system is in place, you may be able to kiss your electric bill goodbye. In some cases, you can even send excess energy back to the grid, allowing you to make money from your solar panel system. However, installing solar panels is expensive. On average, homeowners pay about $23,500 to install a system.
Even with the federal investment tax credit (ITC) – which is worth 26 percent of the installation cost in 2020 and 22 percent in 2021 – and various state or local rebates, there’s usually still a big deficit. If you are wondering, do solar panels really save you money, the answer is often yes. Here’s how.
Accounting for the Tax Credits and Rebates
The value of the tax credit does alter the financial deficit you have to overcome, so it needs to be factored into this equation. Suggesting you pay the average of $23,500 for an installation, you would receive a tax credit of $6,110. That means you are effectively out of pocket $17,390 instead.
In some cases, you can also deduct a state or local credit. You could be eligible for rebates worth several hundred or several thousand dollars, reductions in your state income taxes, or both, depending on where you live.
You’ll have to research solar incentives in your area to determine their value, as they vary dramatically from one area to the next. If you have trouble finding information, you may want to check with state agencies, municipal offices, or your electricity utility to see if they can point you in the right direction.
The Average Electric Bill
In the United States, the average electric bill is just shy of $118 per month, or $1,416 a year. Suggesting that your solar panel installation covers 100 percent of your electricity needs, causing your energy bill to fall to $0, you would recoup the remaining cost of your solar system in a little over 12 years ($17,390 / $1,416 ≈ 12.28).
However, it’s important to note that you could get your money back sooner. First, utility rates generally rise. For example, between 2020 and 2021, residential electricity prices are expected to go up by 2.8 percent on average. If the cost continues to increase at a similar rate, you could cover the cost of your solar system in less than 11 years.
It’s also important to note that some areas have electricity bills far above the average. For example, Connecticut comes in near $153 per month, while Alabama is just above $150. In Hawaii, $168 per month is the average, which is a full $50 a month above the national average. People living in those areas may recoup their costs faster, allowing them to benefit from their solar system relatively quickly.
Like most home systems, you do have some costs to shoulder for maintaining your solar panels. Typically, an annual inspection and professional cleaning will run you about $300 total. Initially, these costs slow down how fast you’ll recoup the amount you spent on the system, as $300 represents between two-and-a-half months of energy bills savings, on average.
However, even taking that into account, that doesn’t mean you don’t come out ahead. Solar panel systems can last 25 to 30 years in many cases. At times, they’ll be functional far beyond that. Even if you factor in the maintenance costs into the equation, you’d still pay off the system in a bit more than 15 years, suggesting that the cost of electricity remains unchanged (which isn’t likely). Since the energy rates tend to go up, paying it off in about 14 years is plausible.
In that case, you’d get at least ten years where you’re coming out ahead. At today’s energy rates, that means you’d pay $11,160 less than you would otherwise, suggesting you pay $300 a year for maintenance.
Profiting from Your Solar Panels
At times, the answer to do solar panels really save you money isn’t just “yes.” Why? Because it is actually possible for solar panels to make you money.
This goes beyond basic net metering programs. With traditional net metering, excess electricity that you send back to the grid generates utility bill credits. You can use those credits to pay for electricity should you use any provided by your utility, such as if there’s a particularly cloudy month or your needs happen to exceed your production.
However, some utilities will actually pay you for the excess instead of just issuing credits. This is relatively rare, so it may not be available in your area. Additionally, most utilities buy power at the wholesale rate, which is less than the retail rate. That can actually make bill credits more valuable, suggesting that you could potentially need them.
Conditions Relating to Credit
It is important to note that there can be a variety of other conditions relating to any credits. For example, they may not build up indefinitely. Some states, cities, or power companies require that the credits reset annually, or that they only be stored for a rolling 12-month period, with the newest month’s credits replacing the oldest month’s credits on a revolving basis.
If you are potentially producing more energy than you’ll use, speak with your local power company. They will be able to discuss any available programs, ensuring you can take advantage of what’s available or, if you have more than one option, you can choose the approach that’s best for you.
Have you installed solar panels? If so, have you experienced a savings? If not, have you considered adding solar panels to your home or business property to save money? Share your thoughts in the comments below.
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