How Much Can You Really Save With a Home Solar Power System?

According to Pew ResearchCenter, About 46% of U.S. homeowners were considering setting up solar panels in 2019. This was a significant 6% rise from the previously reported 40% in 2016, showing that interestin solar energy continues unabated. 

Apart from the desire of many to contribute towards a more sustainable future through reduction of their carbon emissions, significant motivation comes from trying to reduce costs by dodging ridiculously high electricity bills. However, before the system installment of a residential solar system, all homeowners must find clarity on potential savings.

Do solar panels really save you money?

The installation of a Photovoltaic system is usually expensive. Therefore, when those who develop an interest in switching realize this, a question comes up —  “do solar panels pay for themselves?” The straight response is a resounding yes! Solar panels pay for themselves and lower your bills too. This is achieved through the following:

• Long-term returns: Though installment can be expensive, the long-term savings from switching to Photovoltaics can be more than double the initial amount in some states. A study revealed that if the homeowners in one-fifth of the largest cities pay for installation in full, they will receive a "better than stock market investment" during 25-years of use.

• Tax Credit: Presently, a 30 percent tax incentive on the installation of residential PV systems is possible in America.

• Vending electricity: When using solar panels with a connection to the grid, you get paid by your electricity provider for the excess amount of electricity produced by your system through net metering. 

• Low maintenance costs: The maintenance costs of a residential PV system are almost insignificant. As such, the biggest expenditure will be for the installment of the facility.

• Incentive programs: Each state/country has incentive facilities. Find out the facilities available in your state and make use of them..

In addition, the NC Clean Energy Technology Center discovered that those who invested in 5kW P.V. systems in the top 50 U.S. cities made $44 to $187 per month as average savings using solar panels during their first year of ownership before any loan, leasing solar panel, or PPA payment.

The U.S. Map showing 50 top cities, with savings each month when switching to PVs

So, adding photovoltaics to your home can effectively help you save money, cover the full cost of installation and potentially create a passive income flow. 

However, before purchase and installation, the output of a solar panel is a key factor affecting how much your system will produce. Therefore, be sure to select those with the highest possible output and greater endurance. 

Savings with solar panels — estimates by state

As revealed earlier, PV cells can save you money on power cost, but how much you save depends on several elements. Among other factors, average solar panel savings for homeowners also depends on their location. The effectiveness of cells could be dampened by where one lives and if their home's roof has adequate exposure to the sun during the day. Additionally, the utility tariffs in one’s area will affect the amount of savings. Here are some estimates by state:

How do solar panels work to conserve money and generate a positive cashflow?

Harnessing the sun’s energy is a lifesaver for many homeowners as the cost of electricity supplied by the usual sources continues to rise. As such, the low solar costs make setting up cells a go-to energy alternative. Saving money with solar panels can be achieved in various ways. Therefore, it is important to familiarize yourself with how one’s accounts, location, and incentives will affect your portfolio over time before making the decision. We are going to answer the question  “How do solar panels save money?” through an explanation of a few of the ways in which many cut expenses by embracing such an environment-friendly alternative. 

Reduced energy bill

Perhaps the most apparent advantage is that it reduces one's energy bill as one is generating their own electricity. The more electricity you can generate, the higher the savings on your energy bill with an average household electricity bill cut by up to 40% by even the simplest of systems. 

Protection against rising utility rates

The constant rise in the cost of energy is a challenge with statistics showing a general increase in retail electricity prices over the last decade. It is projected that the residential electricity price in the United States will increase by 1.3%  by 2022. Individuals with a solar system have the chance to eliminate their energy costs. You can drastically reduce your electricity bill, saving yourself a lump sum. Today, solar power savings are a high priority on the government's list of solutions to cope with surging electricity prices.

Supply the grid and earn

The concept of net metering is the most common way of profiteering from setting up PVs as it allows utility customers who generate their own electricity to feed some of their excess energy back to the grid.  The more cells one has, the more electricity they will produce and the more they can supply the grid in exchange for money.

Tax incentives and refunds

As briefly mentioned earlier, most state governments offer subsidies or rebates to encourage solar energy use. There are federal incentives such as Investment Tax Credit ( ITC), a 30 percent federal tax credit for photovoltaics installed on residential and commercial land that meets the requirements. Some states also offer their own rebates and these vary from state to state

Increased home value

It is no surprise setting up a photovoltaic system is a home improvement that will increase the value of your home by making your home more attractive to potential tenants or buyers. The benefits of installation are that they are very reliable and have a long life. Installation of solar systems is relatively easy and they have very low maintenance costs.

Check the savings: the utility bill explained

A good number of people pay their bills without a comprehensive appreciation of what they are being charged for and why. In this section, we aim to demystify the components of your electricity bill without a PV system and the average electric bill with solar panels with the aim of highlighting the solar panel's electricity savings.

Utility bill before solar

The general utility bill usually contains the billing cycle, annual consumption, monthly installment payments, labor, and introductory prices.

• Basic account information

This section shows information such as the account name, address, and account number.

•  Billing summary

Most people focus on this part. This is where you typically find information on the previous month’s balance and payment, and the current month’s unpaid balance and its due date, as well as the meter reading date. 

• Electric usage profile

The most important section to pay attention to on your bill is the electric usage profile as it breaks down your monthly usage for the current billing cycle. This helps you assess how your energy consumption compares year-to-year, and what you used the month prior to this billing period. Here you can spot trends that are used to determine the size of the solar system required for your home.

Utility bill after solar

The main difference after solar installation will be kWh use by meter, kWh Received from Customer, and the Net Metering Summary. These new sections focus on showing you the amount of energy you are using and how much of it is coming from the grid. It also shows Kilowatt hours produced by the customer and added to the grid. Therefore, this will clearly highlight your electric bill savings with solar panels.

Here is a sample electricity bill:

Solar panels cost vs savings: how much can you save on your energy bills?

One of the most frequently asked questions when people are considering setting up solar systems is, “solar panels cost vs savings.” Conducting a cost-benefit analysis helps you decide if the investment is worthwhile and also to determine when you will get a Return on Investment.

The average annual electricity consumption for residential utility customers in the US was 10,649-kilowatt hours (kWh) in 2019.  This adds up to an average of about 877 kWh per month. As of July 2021, the average cost of energy in the US was 13.90 cents per KWH. This amounts to an average of $114.01 per month in energy costs.

The cost of solar installation varies according to size. However, the average size of residential installations in the US is 5KW. In July 2021 setting up a 5kW solar system would cost, on average,  $10,212 after the federal photovoltaic tax credit.  The resulting monthly electric bill savings are approximately $130-150, creating immediate positive cash flow.

Each installation is unique and must meet specific energy needs. Calculating the cost savings of solar panels may turn out to be a mammoth task when you do it on your own. This process includes calculating the costs as follows:

Materials —  the major cost associated with these systems is the overall cost of materials. The price of installation includes the cost of cells which is about 30%, the balance of the system which contributes approximately 20%, and inverters which contribute about 10% of the total cost.

Installation —  15% of residential cell installation costs go towards the actual process of setting up the equipment done by professionals. 

Maintenance — Operational costs to keep it well maintained contribute about 20% of the total cost. Note that some installation companies include maintenance costs in the installation service. 

Savings — Projected savings in 20 years - total costs of installation and maintenance over the same time period.

Due to variations in location and the enormity of the desired systems, accurate figures can be attained by calculating with the Innovate solar calculator. This calculator has got you covered in terms of coming up with cost estimations, helping you analyze your data, and learning about the convenience of a solar system in your home. One of the advantages of Innovate solar calculator is the accurate and up-to-date installation costs, which you will get directly from the partner installers. Besides this, you will also be able to calculate the solar panel savings per year and the solar panels cost savings.

How to find out how many solar panels cost and if they’re worth it where you live

Photovoltaic cell costs vary from place to place and also depend on the cell type. When it comes to location, the most important factor to consider is the average amount of sunlight your region receives yearly as well as the peak sun hours. 

To see if photovoltaic cells near you are worthy of your investment, check out the estimated lifetime savings in the Innovate solar calculation report.

Conclusion

When done right and timely, PV module installation will save an average American household between $10,000 and $40,000 over a period of 20 years. In addition, for those who would consider net metering, their electric bill with solar panels would potentially turn into a sizable paycheck.

Though expensive, the initial investment can be paid back over five to ten years, but this varies depending on your electricity use, location, and the final price of installation. In addition, there are government incentives put in place to make it easier and more profitable to install a home PV system. Buy residential solar panels today while these incentives are still in place and save money with Innovate Solar.