There are many good reasons to go solar, but everyone wants to save money.
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Getting the most savings from home solar panels and the clean, cheap, renewable energy they provide takes a little planning. Palmetto's solar experts can guide you through the long- and short-term considerations of your potential solar savings, but we'll go over those important factors here.
If you've looked into going solar, you likely know solar panel systems can be relatively expensive. So, you might wonder how investing in a solar panel system will help you save money.
Essentially, the power you get from your home solar panels replaces some or all of the power you buy from your electricity provider. When you break down the monthly cost of your solar panels and compare that to how much power they produce, the cost per kWh for electricity from your solar panels is often lower than that offered by your electric utility.
How you calculate those savings depends on whether you get your solar panels through a loan or by paying upfront. Understanding your financing options is an important step of going solar with Palmetto or any other company.
At first glance, it might seem like you would be paying more if you invest in solar panels, because you still have an electric bill in addition to a monthly payment toward your solar panel loan.
While it's true you will have a second bill when going solar with a loan, the amount of electricity you produce with your solar panels should offset your electricity bill significantly. The combined cost should be less than your original non-solar electricity bill on its own.
The goal is to find a balance where you have enough solar panels to produce the energy you need to power your home, but not so many that it isn't worth the extra cost. (To calculate this for yourself, check out, 'How Many Solar Panels Do I Need On My Roof?') By reducing the amount of power you get from electricity provider, you can lower your electricity bill by an amount that offsets the payments you are making on your solar panel system.
Essentially, you have to look at the payment toward your solar panel system as an electricity payment. You can then compare how much you are paying for electricity from your utility company with what you spend each month paying off your solar system.
Here is an example of how you can save money by installing a solar panel system:
Another option is to buy your solar panel system upfront with cash. This can be beneficial because you know the system is already paid for, and you're not paying any additional amount to finance the system over time.
Unfortunately, it can be harder to see how much you are saving when you don't have a monthly loan payment to compare your electric bill to. However, you can do some calculations ahead of time to estimate how much you are saving each month.
Let's look at an example that can give you an idea of the savings with solar panels you can have if you buy your solar power system outright:
As an added bonus, your savings will typically increase over time, because the cost of electricity generally goes up over time. The amount you paid for the system is fixed, and the amount of electricity you save each month will be about the same, but the value of that saved electricity will increase over time. (And you won't be impacted as much by rising electricity rates.)
The savings you get by installing solar panels aren't limited to what you are saving on your utility bill. There are several other ways to save money when you start using solar panels.
The less electricity you use overall, the more likely it can come from your solar panels and not from your utility, which you have to pay for. To use less electricity, you can go room-by-room through your home and find ways to be more energy efficient. This could mean doing things like:
More efficient appliances, smart devices, and solar power can be part of electrifying your whole home. Home electrification is the process of replacing everything that uses natural gas, oil, propane, or another fossil fuel with electric appliances.
On the surface, using more electricity and little or no other fuels will increase your electric bill even if you have high-efficiency appliances and take steps to save energy. But if your solar panels cover the higher electricity usage, it adds to your savings.
You can also invest in battery storage which stores any excess electricity your panels generate that isn't immediately used by your home. Then, if your panels aren't producing enough electricity at any point, you can use electricity from your battery instead of drawing power from the utility grid.
It increases your upfront cost to get battery storage installed, but if your panels can regularly produce more power than you need, you can save money by not paying your utility for that electricity.
In places without 1-to-1 net metering, where credits are worth less than the retail rate of electricity, batteries are most valuable.
If you want to ensure your solar panels produce enough electricity to run all your appliances and other electrical needs, it is best to use your electricity during hours with plenty of sunlight.
Net metering (if available in your state or locality) allows you to take the extra electricity your solar panels generate and add it to the electric grid. You then receive a credit from your utility company for that extra electricity, which can help lower your monthly electricity payment in the future.
A time-of-use electricity plan means you can get lower rates for your electricity by aligning your energy usage with peak and off-peak hours.
For instance, you can:
Peak and off-peak hours will vary based on your location, the season, and your electric company. However, peak hours are usually when electricity demand is highest, and off-peak hours are when demand is the lowest.
Going solar can be a great way to reduce your electricity bill from your local utility company.
When looking at investing in solar panels, it's important to consider your long-term savings. You may start seeing some savings immediately, but your savings will often increase as the years go by.
If you choose to invest in a solar power system, you can also take additional steps to take full advantage of your potential savings. This includes being as energy efficient as possible by doing things like upgrading to Energy Star appliances when yours need to be replaced or adjusting your HVAC and water heater settings.
Investing in battery storage can let you store solar electricity to use when your panels can meet your homes energy demand. This stored electricity means you can avoid even more utility power.
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You can also maximize the value you get from your panels by shifting your electricity use to daylight hours when your solar panels are making electricity.
Two other ways you can save money are net metering and time-of-use plans. Net metering allows you to send any excess energy your panels produce to the utility company for a credit on your electricity bill. Time-of-use plans give you the chance to get lower rates for shifting your energy usage to off-peak hours with cheaper rates.
If you're ready to install solar panels to save on your electric bills with renewable energy, talk to Palmetto today. You can get started with our Free Solar Design and Savings Estimate Tool to see how much you could save by going solar.
How do solar panels save money?
Home solar panels can save you money by allowing you letting you avoid buying all your electricity from your electricity provider. In areas with net metering or net billing plans, you can also earn bill credits for electricity your system sends to the grid.
What is the solar payback period?
A solar payback period is the time it takes for your savings from going solar to match your costs. Installing solar panels can cost you thousands of dollars, but can save you more over their lifespan which should be 25 or more years.
How do I calculate my solar payback period?
The simplest version of the payback period calculation is total costs divided by annual savings, which will give you the approximate time in years.
Where should I start?
Solar energy can feel complex, especially if you're researching providers, technologies, incentives, municipal requirements, permits, and more. From financing and design to installation, tracking, and maintenance, Palmetto's dedicated customer service team is here to answer questions, address concerns, and guide you through every step of going solar.
About the AuthorAndrew GiermakWriter and EditorAndrew joined Palmetto in Charlotte in August . He's been a writer in journalism, then in business, going back to almost the 20th century. He's lived in Indiana, Virginia, Pennsylvania, Virginia again, and now North Carolina for the last 12 years. He likes golf. Is he good at it? Not so much.
Lowering electricity bills is one of the main reasons why consumers may decide to install rooftop solar panels. Every household is different'from the size of the home, to the number of people living in it, to the electricity needs of those people, to where the buy their electricity'so calculating an average amount of savings from going solar is nearly impossible. This U.S. Department of Energy (DOE) Solar Energy Technologies Office (SETO) blog post will walk you through calculating the solar payback period, or how long it takes for a rooftop solar system to pay for itself. When calculating the amount of potential savings, there are several factors to consider.
First, assess your home's solar rooftop potential. If there are trees near your home that create excessive shade on your roof, rooftop panels may not be an option. The size, shape, and slope of your roof are also important factors to consider. Typically, solar panels perform best on south-facing roofs (anything between southeast and southwest) with a slope between 15 and 40 degrees, though other roofs may be suitable, too.
Check your utility bill to find out how much electricity you consume on average every month. The Utility Rate Database maintained by the DOE Energy Information Administration shows current electricity rates in your area. Your solar savings will also depend on how much the utility will compensate you for the excess solar energy you send back to the grid. This is different for every utility.
The Lawrence Berkeley National Laboratory's Tracking the Sun report contains residential solar installation costs around the country, which can help you expect how much to pay. There are several options for how to finance your system.
If you pay cash for your solar system, the payback period refers to the length of time required before the system has paid for itself and all future power produced is free. You can get a personal loan with fixed interest rates and monthly payments. Another option is to use a power purchase agreement, or PPA, which means you do not own the solar panels on your roof but still benefit from the clean power it produces. In both of those cases, you may have immediate savings on what you pay for electricity.
If you buy or take out a loan for a solar system, you may be eligible for the federal residential solar energy credit, which is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system. If you financed your system through a power purchase agreement, the owners of the system would be eligible for tax credits, which they could pass along to you in the form of a cheaper bill. In some instances, these third-party system owners can receive additional credits not available to homeowners, which can lower your bill even further.
Many states also have incentives for rooftop solar customers. The Database of State Incentives for Renewables & Efficiency, known as DSIRE, is the most comprehensive source of information on incentives and policies that support renewable energy in the United States. By entering your zip code, DSIRE provides you with a comprehensive list of financial incentives and regulatory policies that apply to your home. The database is operated by the N.C. Clean Energy Technology Center at N.C. State University and was funded by DOE.
Companies like EnergySage'a former SETO awardee'can help you figure out how much you will spend and ultimately save by going solar. According to EnergySage, 'you can calculate your break-even point, or solar payback period, by dividing the final cost (the total cost of your solar panel system minus any upfront incentives) by your annual financial benefit (the amount you save on electricity combined with annual incentives). The faster the cost of electricity increases, the shorter your payback period and the greater your savings will be.'
Any solar installer should be able to help you with these three steps:
Step 1. Subtract any upfront incentives from the total cost of your solar panel system.
Step 2. To calculate the amount you save on electricity, multiply the average monthly cost on your utility bills by 12 to get your annual savings. Subtract any annual incentives according to your solar installer.
Step 3. Divide your answer from Step 1 by your answer from Step 2 for your solar payback time in years.
While payback time is a good indicator of savings potential, for a complete picture you need to compare your solar savings to other low-risk ways you could have invested your money over the time horizon that is important to you. The following table shows the annual after-tax rate of return you would need to earn on the alternate investment for it to match your solar savings, for three typical payback times:
*2.5% annual inflation, no cost for maintenance, no effect on insurance, no increase in resale value.
When the payback time is less than 10 years, most homeowners find that an investment in solar power is financially more attractive than any other low-risk investment they could make over the time horizon that's important to them. And this does not even include any increase in the resale value of the house due to the solar panels, which a DOE study found to be significant.
Community solar allows customers to either buy or lease a portion of the solar panels in a large solar array located in their community. Community solar customers typically receive an electric bill credit for electricity generated by their share of the community solar system'similar to someone who has rooftop panels installed on their home, but without the upfront costs or the need to own your roof.
While it's impossible to articulate every scenario where someone would save money going solar, we've put together some examples that illustrate savings based on their location and type of purchase:
Are you interested in learning more about Integrated Solar Metal Roofing? Contact us today to secure an expert consultation!