Year after year, electricity prices have continued to increase across the nation. Whereas over the last 10 years, the price of residential solar installations in the US has dropped considerably. Solar installations are now more affordable than ever! Many homeowners are now turning to solar power not only as a clean energy source, but for relief from their utility’s ever increasing rates.
So how does going solar save you money?
When you install solar panels on your roof, you are essentially turning your home into its own mini power plant. You generate renewable energy, reducing or eliminating your electricity costs altogether.
The savings you may see by going solar are dependent on two simple factors:
- The price you currently pay to buy electricity from the grid
- The price you’ll pay to generate your own electricity with solar
Generally, the rule of thumb is if your electricity costs are higher than your solar costs, you’re going to see savings by switching to solar.
Let’s look at how much you are currently paying for your electricity.
Traditional Energy Costs
Per the US Energy Administration, the current average cost of electricity from the traditional grid is 12.75 cents per kilowatt hour (kWh). This is a nationwide average. Some states see even higher averages. In California for example, the average price is 17.97 cents per kWh.
Check this video to find out what is a kilowatt hour.
Keep in mind, these prices continue to rise each year. Historically utilities display an upward cost trend. On average, prices have risen about 2.5% every year in the US, and they’re only getting higher!
In California, utility companies are raising their rates by at least 5% annually. It’s not unusual for these rates to fluctuate suddenly leaving customers subject to insanely high electricity prices. Just recently electricity rates increased 13% in northern California one month alone! Check it out here.
You can check out this link to see where your state falls with electricity costs in comparison to the rest of the U.S. using EIA’S electricity data here.
Cost of Solar
The average price you’ll pay for electricity through solar in the US varies by state, installer, manufacturer, your home’s specific installation, and many other factors.
For example, in California where the cost of grid electricity averages about 17.97 cents per kWh, the average price you’ll be paying for your electricity with solar is about 7 cents per kilowatt hour! The differential between these two numbers is significant.
If you live in a state like California where the solar costs are considerably lower than electricity costs, you can most definitely save money with solar!
Even if your electricity rates aren't as high as California prices, going solar can still save you money. There are two types of savings you'll find with solar.
- Short term savings are savings you'll see pretty much at the start of having your solar system turned on. If your loan or lease payments are lower than your costs now, you have day one savings.
- Long term savings are savings you may not see right away, but you'll see either once your solar loan is paid off, or when your electricity bill rises higher than your solar payments. If you have a 12-year loan, after year 12 the loan is paid off and you'll have no electricity costs. You’ll end up saving thousands more over the lifetime of having your solar system than you would have without going solar at all!
Depending on your goals, the savings you’ll see with solar may be a long term but high yield reward. If you’re just looking for some financial relief from high bills and short term savings, you have the options to do so as well. Everyone’s situation is different, but if you’d like to learn more about how solar is a low risk high reward investment read more about it here.
Beyond various solar incentives such as the Solar Investment Tax Credit, state tax credits, and any available rebates in your area there are also special programs in place with utility companies that allow solar to make economic sense for a homeowner.
Net Energy Metering
When you go solar, you’ll still be connected with your utility company (the grid). Net energy metering allows you to earn energy credits at the retail value for the energy your solar panels produce.
Your panels will produce power during the day by converting sunlight into energy that you can use to power your home. They will produce a full day’s worth of power during this time.
At work? Kids at school? You probably will not be using ALL this energy during the day, so you’ll have extra left over. This excess energy will be sent back to the grid and your meter will run backwards. Thus, your utility company will convert the excess energy into the form of credits.
When you need to pull energy from the grid at night when your solar panels aren’t producing energy, your utility company will send you those credits back. Your meter will keep track of the energy you sent back to the grid as well as the energy you took back.
At the end of the year, if you’ve used about as much energy as your panels have produced - you could potentially have a net zero electricity bill. Therefore, solar paired with net metering can effectively reduce your electricity costs completely.
Financing a Solar System
Though buying a system outright with cash is the simplest method and provides the quickest payback period, not everyone is interested in an upfront purchase. There are plenty of zero down financing options that will allow you to go solar, and pay it off at your own pace. In fact, many homeowners will choose to finance a system through a solar loan provider or credit union rather than pay for it upfront.
There are many affordable solar loan options with low interest rates and fairly short terms that allow you to see savings while paying off the loan. Since homeowners can take advantage of net energy metering, they have the power to eliminate their electricity costs completely and replace it with a monthly solar loan payment. If your loan payment is lower than your current electricity bill, you’ll start saving money from day one of your solar system generating energy.
With a loan option, you’ll have the control and predictability over your finances with a fixed payment until the loan is paid off. You’ll no longer be subject to fluctuations in the energy grid such as seasonal spikes in electricity costs or hikes in prices annually. Even better, once your loan term is up you’ll effectively have no electricity costs for the remainder of your solar system’s lifetime!
If a loan isn’t the best option for you, then a solar lease may be the way to go. Homeowners without a tax liability may not be able to take advantage of the solar tax credit, but can still lease their solar panels to generate clean energy. With a lease, you will have fixed monthly payments typically over a 20-year period. These payments will probably be lower than your electricity bill now. This means you can start saving money right away! You won’t be able to save quite as much over the system’s lifetime as a loan, but you’ll still see savings! Either way, going solar is a great option.
The Bottom Line
Regardless of going solar or not, you will continue to make an electricity payment every single month for as long as you require electricity – or until your solar purchased solar system is paid off. In turn, utility companies will continue to raise their rates year after year, and your costs will continue to increase. The grid will continue to fluctuate and electricity costs will peak at unexpected moments over the course of a year.
With solar, you avoid these issues by taking control of your costs. Instead you’ll pay a fixed monthly loan payment with an end date and eliminate your electricity bill completely! Once your loan payment is over, you’ll be generating your own renewable energy for free. Wouldn’t you rather put your money towards paying off an investment that’s adding value to your house at the same time as reducing or eliminating your electric bill and netting you savings right away?
Seems like a no brainer.
Of course, there are other factors included in the equation of how much you’ll be able to save with solar such as your roof’s sun exposure and structural limitations, how much energy you use, and your zip code. If you’d like to find out more about your home’s savings potentials with solar, feel free to check out our solar savings calculator here. If you’d like to chat with one of our solar experts, we're happy to help you determine if going solar is going to be the right option for you as well as how much money you can save!
Please call (888) 454-9979 or click the button below to get started!