How Much Money Can I Save With Solar Panels?
There are two major factors that influence people to switch to solar power: reducing their reliance on fossil fuels and saving money on their electric bills. Powering your home or business with solar uses far fewer fossil fuels than electricity generated by coal or gas, which means a smaller carbon footprint. The financial savings are similarly significant, although there are several variables when it comes to determining your actual costs.
Regarding both the financial and environmental benefits of solar panels, it’s important to understand that solar power is a long-term venture. There are short-term benefits as well — such as lower payments in your monthly billing cycle, and the immediate impact of moving away from fossil fuels — but the major advantages come over time. Solar panels are manufactured to last for decades and many people find that the greatest cost savings are felt several years down the line.
How much money do solar panels save? The most significant variables are the amount of electricity you need to power your home or business, how much sunlight your panels receive, how much you typically pay for electricity, and whether there are any incentives available in your region.
Let’s start by discussing how much power you need from your solar system. The main factor in this area is how large of a space you’re trying to power. Obviously, the larger your home or business is, the more electricity you’ll likely need. In addition, the quality of insulation in the building can make a difference, so make sure your windows and doors seal tightly, and that you’re not losing too much hot or cold air through your walls or ceiling.
The amount of sunlight your panels receive depends first and foremost on how much direct sunlight hits your solar cells on an average day. To figure out how much sunlight you can expect, examine the solar maps available through the National Renewable Energy Library. In some parts of the country (like the Pacific Northwest), solar panels only receive a few hours of daily direct sunlight, while some parts of the Southwest get twice as much.
It’s also important to analyze how much you typically spend on electricity. As you can see with this resource from the Energy Information Administration, the average price of electricity varies widely in different parts of the country. For example, people in Connecticut often pay three times more for their electricity than they would in Louisiana. Therefore, if you live in a location that has cheap electricity and not much direct sunlight, solar installation might not be the answer you’re looking for.
The other major determining factor in how much money you can save with solar is whether you have access to energy rebates or tax credits. There is a nationwide incentive called the solar investment tax credit, but it’s in the process of being phased out. You used to receive a 30% tax credit for installing solar panels, but that decreased to 26% in 2020, and it will drop further to 22% in 2021.
After that, residential customers will receive no federal credits, while commercial applications will receive just 10%. However, there are many region-specific incentives you may qualify for. We suggest checking out the Database of State Incentives for Renewables and Efficiency to see which incentives are in effect in your state.
The biggest difference between a solar bill and a typical electric bill is the way your solar bill is far more predictable than the energy bills you’re used to. The two most common forms of pricing for solar are net metering and tiered pricing. With tiered pricing, the more electricity you pull in from the grid rather than generating with your solar panels, the more you’ll pay per kilowatt-hour. The more you’re able to rely solely on your solar system, the less you’ll pay when you do need additional power from the grid.
With net metering, you can receive billing credits when you send extra power back from your solar system into the grid. Depending on the size and capabilities of your system, you can save even more money with net metering compared to tiered pricing. Either way, many of the variables of a standard electric bill are eliminated when you switch to solar.
How you acquire your solar panels can also make a difference in your overall costs. Will you lease your panels from a solar provider? Will you purchase them through a solar loan? Or will you choose a solar power purchase agreement, in which you pay a set rate per kWh to your solar provider?
If you need help answering these or other questions, contact LGCY Power today to speak with one of our expert Energy Consultants.